Coffee with Samso: Pan Asia Metals banks on a lithium project with a low cost structure strategy

Pan Asia Metals Ltd’s (ASX: PAM) strategy 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 Please let Samso know your thoughts and send any comments to info@Samso.com.au. Remember to Subscribe to the YouTube Channel, Samso Media and the mail list to stay informed and make comments where appropriate. Other than that, also feel free to provide a Review on Google. For further information about Coffee with Samso and Rooster Talks visit: www.samso.com.au About Samso Samso is a renowned resource among the investment community for keen market analysis and insights into the companies and business trends that matter. Investors seek out Samso for knowledgeable evaluations of current industry developments across a variety of business sectors and considered forecasts of future performances. With a compelling format of relaxed online video interviews, Samso provides clear answers to questions they may not have the opportunity to ask and lays out the big picture to help them complete their investment research. And in doing so, Samso also enables companies featured in interviews to build valuable engagement with their investment communities and customers. Headed by industry veteran Noel Ong and based in Perth, Western Australia, Samso’s Coffee with Samso and Rooster Talk interviews both feature friendly conversations with business figures that give insights into Australian Stock Exchange (ASX) companies, related concepts and industry trends. Noel Ong is a geologist with nearly 30 years of industry experience and a strong background in capital markets, corporate finance and the mineral resource sector. He was founder and managing director of ASX-listed company Siburan Resources Limited from 2009-2017 and has also been involved in several other ASX listings, providing advice, procuring projects and helping to raise capital. He brings all this experience and expertise to the Samso interviews, where his engaging conversation style creates a relaxed dialogue, revealing insights that can pique investor interest. Noel Ong travels across Australia to record the interviews, only requiring a coffee shop environment where they can be set up. The interviews are posted on Samso’s website and podcasts, YouTube and other relevant online environments where they can be shared among investment communities. Samso also has a track record of developing successful business concepts in the Australasia region and provides bespoke research and counsel to businesses seeking to raise capital and procuring projects for ASX listings. Disclaimer The information contained in this article is the writer’s personal opinion and is provided for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. Read full disclaimer.