Best Stocks for 2022: Arianne Phosphate Will Soar On Agriculture And EV Demand – Investorplace.com

A Clean, Safe Place 

Adding to geopolitical concerns are safety issues — that is, known contaminants in the phosphates produced in many of these countries. Roughly 90 percent of the world’s phosphate is located in sedimentary rock deposits, which are relatively “dirty” (due to the presence of elements like uranium, cadmium and thorium) and rarely contain more than a 28% concentrate grade of phosphate. In contrast, Arianne’s Lac à Paul project is based around igneous deposits confirmed to produce a 39% concentrate.

As a Quebec supplier, Arianne is well-situated in a friendly government more aligned with Canadian and U.S. farming interests. The company has also been proven to meet higher ESG (Environmental, Social, and Corporate Governance) mandates for industrial companies and miners, which require adherence to standards on safety, carbon dioxide emissions, chemical use and pollutants in each step of the supply chain.

Finally, the company is also one of the most advanced (shovel-ready) high-quality projects, with two long-term off-take agreements in place. Taking all of this into consideration, it’s easy to see why having a reliable, long-term domestic phosphate producer is important to agricultural producers. 

The LFP Opportunity

Arianne’s agriculture opportunity is fairly straightforward, although at first glance, it may not be sexy enough for growth investors. But, if you look closer, you’ll see that the company’s very high quality phosphate concentrate is getting attention for another, sexier reason: its potential use in electric vehicle LFP batteries. Not all phosphates are battery-grade, but Arianne has one of the largest, cleanest, highest grade phosphate projects in the world. 

I don’t need to convince you when it comes to the growth trajectory of the EV market. What’s important is this: supply disruptions are the primary stumbling block for ramping up electric vehicle production. The pandemic also exposed the overdependence of the world on China for key raw materials. And while solid-state batteries are definitely cool, they aren’t really being manufactured cost-effectively at scale (yet).

As a result, EV manufacturers are increasingly turning to phosphate (LFP) batteries for their cost and performance characteristics. And they’re turning to new suppliers outside of China to support their lofty growth projections. Tesla (NASDAQ:TSLA), the father of LFP chemistry, has already designed an LFP battery in China for smaller, entry-level vehicles. But in October, Tesla announced it would change the battery chemistry to LFPs for all of its standard-range vehicles (Tesla will still use nickel-cobalt-aluminum batteries in its longer-range vehicles). This shift means that LFP batteries could grow from around 15% global penetration to over 30% by 2030. 

For Arianne Phosphate, this shift could represent another leg-up for the company’s long-term growth. Even though phosphate demand for LFPs will remain a small percentage of the total market, Arianne is in an excellent position to sell a meaningful portion of its concentrate to battery makers. 

The Bottom Line

Arianne Phosphate offers investors a stable, discounted play on a phosphate project in a reliable and politically stable country. Notably, agricultural suppliers like Mosaic (NYSE:MOS), CF Industries (NYSE:CF) and Intrepid Potash (NYSE:IPI) have experienced strong moves on a tightening world food supply. Most importantly, shares aren’t pricing at all for the option on a growing market for LFP batteries.

Your comments and feedback are always welcome. Let’s continue the discussion. Email me at jmakris@investorplace.com.

Disclosure: On the date of publication, Joanna Makris did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Joanna Makris is a Market Analyst at InvestorPlace.com. A strategic thinker and fundamental public equity investor, Joanna leverages over 20 years of experience on Wall Street covering various segments of the Technology, Media, and Telecom sectors at several global investment banks, including Mizuho Securities and Canaccord Genuity.

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