Northern Graphite Announces Second Quarter 2023 Results
Northern Graphite Announces Second Quarter
2023 Results
Ottawa, Ontario--(Newsfile Corp. - August 30, 2023) - Northern Graphite Corporation
(TSXV: NGC)
(OTCQB: NGPHF) (FSE: 0NG) (XSTU: 0NG)
(the "
Company
" or "
Northern
") is pleased to provide
an operating and financial summary of results for the three- and six-month periods ended June 30, 2023.
The Company's Financial Statements and Management's Discussion and Analysis are available on
SEDAR+ and on our website.
Operational Summary for the second quarter:
Graphite Sales:
Graphite sales were weak over the first half of 2023 which adversely affected the
Company's financial performance.
This was largely due to destocking by customers and increased
competition from Chinese suppliers after EV subsidies were removed in that country.
These
factors also affected the Company's ability to monetize inventories and improve liquidity.
Sales
rose each month over the course of the second quarter as global market conditions improved,
however, and the Company believes this trend will continue going forward as China has
reintroduced subsidies on electric vehicles which will lead to increased consumption of domestic
graphite production.
Mine-to-Market Strategy:
The Company advanced its mine-to-market strategy in the second
quarter by signing a letter of intent with the city of Baie-Comeau to purchase land for a planned
200,000 tonne per year Battery Anode Material ("
BAM
") plant. The Baie-Comeau plant will
upgrade graphite that Northern produces into high-value products critical to the green economy,
including anode material for Lithium-Ion batteries, fuel cells and graphene. The Company also
continued to engage with leading technology companies on partnerships to support development
of the Baie-Comeau facility.
Downstream integration in non-BAM applications
: The Company is pursuing opportunities to
move downstream into non-EV applications in the electronics, construction, graphene and
hydrogen fuel cell markets. These markets provide the opportunity to increase revenues and profits
through further processing of the Company's graphite mine concentrates.
The Company has
entered into an agreement with Edgewater Capital Partners to extend Northern's option to acquire
an ownership interest in NeoGraf Solutions, LLC for six months until February, 2024.
Lac des Iles:
The Company launched a new drilling program designed to extend the life of its
cornerstone, Lac des Iles graphite mine in Quebec ("
LDI
"), with preliminary results showing
promise that the mine will continue to be a critical supplier of natural graphite to the growing EV
battery markets.
Okanjande:
The Company announced results of a new preliminary economic assessment
("
PEA
") on its Namibian operations that indicated attractive economics under a plan to move the
processing plant previously located at Okorusu to the Okanjande mine rather than rehabilitating the
mill in its current location.
CEO Hugues Jacquemin commented, "Traditional graphite markets were weak in the first half of 2023
which adversely affected our financial position and performance.
This is being addressed through
aggressive cost reductions and efforts to reduce/finance inventories.
We see some signs conditions are
improving as battery markets grow and Chinese supply is increasingly focused on their domestic
markets.
The Company has made good strides toward our mine-to-market strategy, advancing across
our key growth catalysts including increased graphite production and laying the groundwork to start
producing BAM at Baie-Comeau in 2026. Conversations are advancing with key technology partners to
better serve our downstream customers and to be able to make Baie-Comeau into one of the largest,
cleanest BAM plants in the world.
Final results aren't in yet, but we are optimistic that our cornerstone
Lac des Iles mine will be producing for a lot longer than initially expected when we bought it a year ago."
Financial Summary for the second quarter:
Revenue of $3.963 million generated based on 2,016 tonnes of graphite concentrate sold at an
average realized sales price of $1,966 /tonne (US$1,464/tonne) (1)
Cash costs $1,333 (US$993) per tonne of graphite concentrate sold (1)
Income from mine operations of $613,000
An operating loss of $1.915 million
The LDI mine and plant were temporarily shut down for the second quarter of 2023 while the
Company sold inventory which it acquired with LDI to allow it to serve customers while preserving
cash.
Although there was no mining or production during the quarter, costs of $2.791 million were
incurred for care and maintenance
A net loss of $4.633 million ($0.04 per share) after care and maintenance and financing costs and
net of a foreign exchange gain
On April 27, 2023 the Company closed a non-brokered private placement financing of 3,000,000
units issued on a charity flow-through basis at a price of $0.75 per unit for proceeds of $2,250,000.
Each unit consisted of one common share and one-half of one common share purchase warrant,
with each whole warrant entitling the holder to purchase one common share at an exercise price of
$0.75 for a period of two years
(1)
The Company reports the non-IFRS financial measures of average realized sales price per tonne of graphite concentrate sold and cash
costs per tonne of graphite concentrate sold to manage and evaluate its operating performance. See "Cautionary Note Regarding Non-IFRS
Performance Measures" below.
Selected Interim Financial Information (Unaudited)
Three months ended June 30,
Six months ended June 30,
2023
2022
2023
2022
Revenue
$3,963
$
3,693
$7,956
$
3,693
Cost of Sales
Production costs
2,688
2,263
5,575
2,263
Depletion and depreciation
662
110
1,316
110
Total cost of sales
3,350
2,373
6,891
2,373
Income from mine operations
613
1,320
1,065
1,320
Expenses
General and administrative
2,160
1,009
4,434
1,631
Share-based compensation
204
153
949
1,244
Project evaluation, acquisition, and integration
16
1,386
45
1,691
Foreign exchange (gain) loss
148
(29)
103
(60)
Total expenses
2,528
2,519
5,531
4,506
Operating loss
(1,915)
(1,199)
(4,466)
(3,186)
Loss (gain) on marketable securities
10
230
(70)
300
Foreign exchange (gain) loss on financing instruments
(1,148)
318
(1,195)
318
Finance cost
1,397
1,081
2,605
1,086
Interest income
(26)
(39)
(35)
(44)
Impairment loss
-
-
209
-
Care and maintenance
2,791
-
2,791
-
Okorusu moving costs
237
-
432
-
Loss before taxes
(5,176)
(2,789)
(9,203)
(4,846)
Current tax expense
46
253
320
253
Deferred tax recovery
(589)
(79)
(671)
(79)
Net loss
(4,633)
(2,963)
(8,852)
(5,020)
Other comprehensive loss
Foreign currency translation
(2,097)
(672)
(3,148)
(672)
Other comprehensive loss
$(6,730)
$
(3,635)
(12,000)
$
(5,692)
Loss per share - basic and diluted
(0.04)
(0.03)
(0.07)
(0.05)
Weighted average shares outstanding
129,116,923
107,770,249
127,087,609
107,162,053
- basic and diluted
Lac des Iles Mine
The LDI mine and plant were temporarily shut down for the second quarter of 2023 while the Company
sold inventory to allow it to serve customers while preserving cash.
Although there was no mining or
production during the quarter, costs of $2.791 million were incurred for care and maintenance.
The plant
is expected to restart in the fourth quarter of 2023 and the mine is expected to recommence operations
in the first half of 2024.
The Company produced 2,966 tonnes of graphite concentrate and sold 3,829 tonnes of graphite
concentrate in the first half of 2023. The Company realized an average sales price of $2,078 per tonne,
cash costs were $1,456 per tonne sold and mine operating income of $1,065,000 was generated.
After a detailed review of historical studies and mine plans and the results of an airborne geophysical
survey, the Company launched a new drill program during the second quarter of 2023 at LDI that is
designed to explore previously untested areas with the objective of extending the life of the mine. The
program consists of 8,000 meters of drilling and is being financed from the proceeds of the Company's
$2.25 million charity flow-through private placement completed on April 27, 2023. On August 2, 2023, the
Company announced that initial drill results from the first 43 holes (4,081 meters) are encouraging with
respect to extending the life of the mine for a lot longer than indicated when Northern acquired it in 2022.
Namibia
On August 28, 2023, the Company released the results of a new PEA that evaluated moving the
processing plant for its Namibian operations currently located at Okorusu to the Okanjande mine site
rather than rehabilitating the mill in its current location.
The PEA indicates that economics remain
attractive under the new plan, with higher capital costs but lower operating costs. In addition, greenhouse
gas ("
GHG
") emissions are reduced, sustainability is improved, and the expansion potential of the
project is substantially enhanced.
The PEA, issued July 31, 2023, was prepared by CREO Engineering Solutions and confirms the viability
of moving milling operations directly to the Okanjande mine site, eliminating the need to truck
mineralized material from the Okorusu processing site 70 kilometers away, reducing operating costs
and allowing for a more sustainable operation that includes the use of solar power and reduced water
consumption.
Key results include an average annual production of 31,000 tonnes of graphite concentrate to be sold to
the American and European markets, production costs of US$666 per tonne, a Post Tax IRR of 36%, a
Post Tax NPV of US$70 million and a payback of under four years. Results were based on a 10-year
mine life and a weighted average graphite price of US$1,550/tonne.
A technical report in respect of the
PEA was prepared in accordance with NI43-101 and was filed under the Company's profile on SEDAR+
on August 28, 2023.
Mine to Market Strategy
On June 29, 2023, the Company announced that it had signed a letter of intent ("
LOI
") with the city of
Baie-Comeau to purchase land for a 200,000 tonne per year BAM plant as it advances
plans
to supply
anode material to lithium-ion battery manufacturing plants throughout North America. The LOI, which is
subject to financing and receipt of regulatory approvals, gives Northern the right to purchase, for US$1.2
million, a 1.2 million m
2
property, or approximately 300 acres, in the Baie-Comeau port industrial zone
which has access to municipal services and infrastructure. There is effectively no capacity in the West to
convert graphite mine concentrates into anode material and the EV manufacturers are depending on
project proponents such as Northern to fill the void and supply existing and planned lithium-ion battery
manufacturing plants throughout North America. The Baie-Comeau BAM plant will be one of the world's
largest such conversion facilities and will process concentrates from Northern's mines as well as from
other producers that will be coming online. The plant will have one of the lowest CO
2
footprints in the
industry due to its access to green, hydroelectric power with pricing that is among the most competitive
in the world.
On February 13, 2023, Northern announced the signing of an agreement with Edgewater Capital
Partners providing the Company with a six-month option to acquire a 33.33% ownership interest and the
majority of voting rights (50.1%) in NeoGraf, a US based company focused on the manufacture of
specialty value added products from natural graphite, as the Company pursues its strategy of
downstream integration into non-BAM markets. In August 2023, the Company reached agreement with
Edgewater Capital Partners to extend the Company's option to acquire a stake in NeoGraf for six
months.
Graphite Markets Commentary
Graphite demand and sales from the LDI mine have been weak in the first half of 2023 due to two main
factors: destocking by customers who ended 2022 with high inventory levels and lower-than-anticipated
global graphite demand after China halted incentives for the purchase of EV's which lead to more
Chinese manufacturers exporting graphite concentrate at low prices. The Chinese government recently
reintroduced rebates on electric vehicles, which the Company believes will refocus their graphite
production on supplying battery markets.
LDI sales have picked up in the second quarter, however, and
forecasts for the second half of the year are favorable.
Liquidity and Capital Resources
As at June 30, 2023 the Company held cash of $724,000 (December 31, 2022 - $5,076,000),
$2,051,000 of restricted cash (December 31, 2022 - $2,083,000) and had working capital of
$18,184,000 (December 31, 2022 - $19,412,000).
Working capital includes $22,224,000 (December
31, 2022 - $18,265,000) in inventory consisting of 7,895 tonnes of graphite concentrate (December 31,
2022 - 8,743) and 83,487 tonnes of ore stockpiles (December 31, 2022 - 38,267) as well as materials
and supplies. The ore stockpile contains approximately 4,911 tonnes of recoverable graphite
(December 31, 2022 - 2,251).
The Company is pursuing opportunities to aggressively finance and/or
reduce inventories to improve liquidity. In addition to the above the Company also has $4,277,000
(December 31, 2022 - $6,331,000) of ore stockpiles consisting of 64,185 tonnes (December 31, 2022 -
107,082) available for processing which is classified as non-current in the financial statements.
Northern has been implementing strict measures during the second quarter to preserve cash, including
the temporary shutdown of the LDI mine, and selling from inventories, as well as the downsizing to
project mode of its Namibian operations. While additional capital will be required to restart operations in
Namibia and advance the Bissett Creek, Mousseau West and South Okak projects, as well as for
construction of the Baie-Comeau BAM facility, the Company's capital investment programs are
discretionary and flexible and will be managed in a manner that minimizes the need to raise financing at
current share prices.
Numerous, active discussions are ongoing with respect to strategic partnerships
and offtake agreements and there continue to be many positive developments in the EV/battery/critical
minerals space.
About Northern Graphite
Northern is a Canadian, TSX Venture Exchange listed company that is focused on becoming a world
leader in producing natural graphite and upgrading it into high value products critical to the green
economy including anode material for lithium-ion batteries/EVs, fuel cells and graphene, as well as
advanced industrial technologies.
Northern is the only significant graphite producing company in North America and expects to become the
third largest producer outside of China when its Namibian operations come back online. The Company
also has two large scale development projects, Bissett Creek in Ontario and Okanjande in Namibia, that
will be a source of continued production growth in the future.
All projects have "battery quality" graphite
and are located close to infrastructure in politically stable jurisdictions.
For media inquiries contact
Pav Jordan, VP of Communications
Email:
For further information contact
Guillaume Jacq, CFO
Telephone: (613) 271-2124
Email:
Qualified Person
Gregory Bowes, B.Sc. MBA P.Geo, the Chairman of Northern, is a "qualified person" as defined under
NI 43-101 and has reviewed and approved the content of this news release.
For additional information
Please visit the Company's website at
http://www.northerngraphite.com/investors/presentation/,
the
Company's profile on
www.sedarplus.ca,
our
Social Channels
listed below or contact the Company at
(613) 271-2124.
YouTube
Cautionary Note Regarding Non-IFRS Performance Measures
This news release includes certain non-IFRS performance measures that do not have a standardized
meaning prescribed by International Financial Reporting Standards ("IFRS"). The Company believes
that these measures, in addition to measures prepared in accordance with IFRS, provide investors with
an improved ability to evaluate the underlying performance of the Company and to compare it to
information reported by other companies. The non-IFRS measures are intended to provide additional
information and should not be considered in isolation or as a substitute for measures of performance
prepared in accordance with IFRS. These measures do not have any standardized meaning prescribed
under IFRS, and therefore may not be comparable to other issuers. The calculation and an explanation of
these measures is provided in the Company's Management's Discussion and Analysis and such
measures should be read in conjunction with the Company's Management's Discussion and Analysis
and financial statements.
Cautionary Note Regarding Forward-Looking Statements
This news release contains certain "forward-looking statements" within the meaning of applicable
Canadian securities laws. Forward- looking statements and information are frequently characterized
by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "potential",
"possible" and other similar words, or statements that certain events or conditions "may", "will",
"could", or "should" occur. Forward-looking statements in this release include statements regarding,
among others, plans for bringing the Company's Namibian operations back online, advancing other
developments projects to production, developing the capacity to manufacture value added products
and raising the financing to complete all or any of these initiatives. All such forward-looking
statements are based on assumptions and analyses made by management based on their
experience and perception of historical trends, current conditions and expected future developments,
as well as other factors they believe are appropriate in the circumstances. However, these statements
are subject to a variety of risks and uncertainties and other factors that could cause actual events or
results to differ materially from those projected including, but not limited to unexpected changes in
laws, rules or regulations, or their enforcement by applicable authorities; the failure of other parties to
perform as agreed; social or labour unrest; changes in commodity prices; unexpected failure or
inadequacy of infrastructure and the failure of ongoing and contemplated studies to deliver
anticipated results or results that would justify and support continued studies, development or
operations. Readers are cautioned not to place undue reliance on forward-looking information or
statements.
Although the forward-looking statements contained in this news release are based on what
management believes are reasonable assumptions, the Company cannot assure investors that
actual results will be consistent with them. These forward-looking statements are made as of the date
of this news release and are expressly qualified in their entirety by this cautionary statement. Subject
to applicable securities laws, the Company does not assume any obligation to update or revise the
forward-looking statements contained herein to reflect events or circumstances occurring after the
date of this news release.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this
release
To view the source version of this press release, please visit
https://www.newsfilecorp.com/release/178989