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FCLI: Rapid Sales Ramp Ahead

What you need to know:
• Full Circle has developed FCL-X, a proprietary fire-extinguishing agent for lithium-ion battery (LIB) fires. The product has shown strong performance in independent testing and is now being commercialized.
• FCLI is building out various sales channels, including fire departments, OEMs, and energy storage systems, and we expect it to start hitting its stride in FY26, offering rapid sales growth.
• LIB fires are becoming more common due to the global growth of LIBs, a market that is expected to grow 3-5x over the next decade.

Full Circle Lithium Corp. (FCLI:TSXV, FCLIF:OTCQB, K0Q:FSE) manufactures a proprietary, non-hazardous, water-based fire-extinguishing agent designed specifically to combat the growing threat of lithium-ion battery fires. The product has very little competition and serves a market growing at 20% annually. We forecast FCLI to have explosive growth over the coming years as it makes inroads into various sales channels, starting with US fire departments. We are initiating coverage on FCLI with a BUY rating and a $0.60/share target price.

Investment Thesis Summary
Impressive Testing Results. FCL-X has delivered strong performance in rigorous independent testing, extinguishing LIB fires much faster than its peers while using considerably less solution and is environmentally safe. FCL-X is the only product in the industry that extinguishes the fires, rather than smothering or suppressing it. As such, the product appears to be a game-changer in its field.

Building Out Sales Channels. FCLI is rapidly building a robust, multi-channel sales network for FCL-X, including fire departments, EV and battery manufacturers, energy storage systems, ocean shipping, and retail, amongst others. Full Circle made its first commercial sale in June 2024 and signed 15 distributor agreements in the following quarters. The Company also plans to expand internationally.

Serving a Fast-Growing & Important Market. LIB fires are becoming more prevalent due to the global proliferation of LIBs, where demand is expected to 3-5x over the next decade. This includes electric vehicles, e-bikes, scooters, as well as residential and industrial applications. The fires created in these situations are extremely difficult to extinguish, often creating catastrophic damage.

Rapid Growth Expectations. Given the commercialization of the product and entry into new sales channels, paired with the tailwinds in its end markets, we are expecting rapid sales growth for FCLI. We are modelling $2.9M in sales for FY26E and $7.8M for FY27E, up from the $0.9M in FY25E. The product has an extremely high gross margin (>60%), and as such, we expect breakeven EBITDA by Q4.

Experienced Management. FCLI is backed by a proven leadership with experience in fire safety and lithium chemistry. FCLI is led by Carlos Vicens and Paul Fornazzari, who previously built Neo Lithium and sold it to Zijin Mining for C$960M, demonstrating a track record of value creation in the sector. With a combined ~17% ownership and a broader team from Lithium Americas and Minera Exar, the Company benefits from management with deep sector expertise.

Valuation. The closest peer to Full Circle is Perimeter Solutions (PRM:NYSE), which trades at 6.8x 2027E sales compared to FCLI at 2.9x. Given that FCLI is still an early stage, we utilize a five-year DCF to derive our $0.60/share target price.