Northern Graphite Announces Third Quarter 2023 Results
Northern Graphite Announces Third Quarter
2023 Results
Ottawa, Ontario--(Newsfile Corp. - November 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 nine-month periods ended September
30, 2023. The Company's Financial Statements and Management's Discussion and Analysis are
available on SEDAR+ and on its website.
Quarter Highlights
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Operational and Financial Highlights for the Third Quarter:
Revenue of $4.9 million generated on 2,587 tonnes of graphite concentrate sold at an average
realized sales price of $1,907 /tonne (US$1,422 /tonne) (1); Sales volumes increased by 28.3
percent in Q3 2023 compared to Q2 2023;
Positive cash flow from operating activities of $1.7 million;
Cash costs of $1,335 (US$995) per tonne of graphite concentrate sold; (1)
Income from mine operations of $0.7 million; operating loss of $2.1 million;
Cash position improved to $2.2 million as at September 30, 2023 compared to $0.7 million as of
June 30, 2023 as a result of working capital management measures, improved sales volumes and
additional financing;
As at September 30, 2023 the Company had working capital of $17.0 million (December 31, 2022
- $19.4 million) including $22.4 million in inventory valued at cost.
Inventory includes 5,476 tonnes
of graphite concentrate and 147,672 tonnes of ore stockpiles containing approximately 9,198
tonnes of recoverable graphite;
A net loss of $6.8 million ($0.05 per share).
(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.
Chief Executive Officer Hugues Jacquemin commented:
"Global graphite markets became more
favorable in the third quarter. Customers who had been on the sidelines for much of the first half of the
year became buyers again as China, the world's leading producer and exporter of graphite, reinstated
EV subsidies and incentivized domestic demand. Global supply dynamics were further impacted after
China announced new export controls for graphite on October 20 and put a spotlight on Northern, the
only natural graphite producer in North America. This added new vigour to our conversations with
existing and prospective graphite customers, from EV battery makers to the industrial clients we have
been supplying for over 20 years. Stronger demand continued into the fourth quarter and while we are
cautious about the state of the global economy, we are hopeful that strong demand continues into next
year."
Graphite Markets
Sales volumes increased by more than 28 percent during the third quarter of 2023 compared to the
second quarter amid tightening global graphite markets after China reinstated subsidies on domestic
EVs and less graphite was available for export. Markets tightened further after China announced that it
would start imposing controls on certain graphite exports for battery-making as of December 1. China is
the world's largest producer of graphite, a key component of batteries for electric vehicles and widely
used in industrial markets.
Lac des Iles Mine
The Lac des Iles ("
LDI")
mine and plant were temporarily shut down for the second and third quarters of
2023 while the Company served customers and preserved cash by selling down inventories.
As of
September 30, 2023, care and maintenance costs of $4.7 million were incurred. Inventories of finished
goods have decreased by 2,419 tonnes to reach a total of 5,476 tonnes as of September 30, 2023, as a
result of increased sales combined with the care and maintenance program at the LDI site. As at
September 30, 2023, the Company had produced 2,966 tonnes of graphite concentrate and sold 6,416
tonnes of graphite concentrate in the first nine months of the year. The Company realized an average
sales price of $2,009 per tonne in the period, with cash costs of $1,407 per tonne sold and mine
operating income of $1.8 million. The plant was restarted on October 30, 2023 and Northern currently
plans to restart the mine in the spring of 2024 in order to meet increasing market demand.
After a detailed review of historical studies and mine plans and the results of an airborne geophysical
survey, the Company carried out a drill program to explore previously untested areas of the LDI property
with the objective of extending the life of the mine. The program was financed from the proceeds of the
Company's $2.25 million charity flow-through private placement completed on April 27, 2023. The
program, which consisted of 7,890 meters of drilling in 88 holes, identified significant, near-surface
graphite mineralization which is still open at depth and confirmed the potential to extend the life of LDI.
New resource and reserve estimates for LDI are expected to be available in the first quarter of 2024.
Namibia
On August 28, 2023, the Company published 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 indicated that economics remain
attractive under the new plan, with higher capital costs but lower operating costs. In addition, greenhouse
gas emissions are reduced, sustainability is improved, and the expansion potential of the project is
substantially enhanced.
Key results of the PEA included average annual production of 31,000 tonnes of graphite concentrate to
be sold in U.S. and European markets, production costs of US$666 per tonne, a Post Tax IRR of 36
percent, 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 NI 43-101 and was filed under the Company's
profile on SEDAR+.
The Company is evaluating options to fund the Okanjande project through the use of a
royalty/stream/debt structure with equity contributed by a strategic partner. In the interim, Namibian
operations have been downsized to project mode, resulting in the retrenchment of 32 employees while
15 employees continue to advance the project. This resulted in care and maintenance expenses of $0.4
million.
A full development schedule can be executed within 12- to 14 months once financing is available,
with the intent to resume production by the end of 2024.
Increasing graphite resources and reserves is a key catalyst for Northern as the Company executes on
its strategy of becoming a long-term, sustainable, integrated, mine-to-market-to-battery supplier to North
America's widescale EV revolution, energy transition and march to Net Zero 2050.
South Okak
The Company elected not to make a payment of cash and shares required under the terms of its option
agreement, which is
therefore no longer in effect.
The Company is currently in the process of negotiating
a new agreement.
Mine-to-Market Strategy
The Company is working toward building a 200,000 tonne-per-year Battery Anode Material ("
BAM")
plant in Baie-Comeau, Quebec, which is a key component of its mine-to-market strategy.
Discussions
are ongoing with automakers and EV Battery manufacturers to secure long-term purchase agreements.
In the third quarter, testing conducted by Heraeus Battery Technology demonstrated that BAM produced
from LDI graphite samples has the potential to perform at or above the standards of commercially
available reference materials.
Improved Cash Position
During the third quarter, the Company improved its cash position, reporting cash and equivalents of $2.2
million as at September 30, 2023, compared to $0.7 million as of June 30, 2023, as a result of working
capital measures, improved sales volumes and additional financing.
The Company is pursuing a number of initiatives to raise financing for working capital and its
development programs without having to go to the market at current share prices.
On September 27,
2023, Northern closed the sale of an additional 0.5 percent gross revenue royalty ("GRR") on the Bissett
Creek project for $0.95 million in cash proceeds. Subsequent to September 30, 2023, the Company
obtained additional financing of US$ 3.0 million from Sprott Resources and Royalties for working capital
purposes and to fund the restart of LDI milling operations in Q4 2023, with mining anticipated to restart in
the second quarter of 2024.
The financing consisted of:
An increase in the amount of the existing Senior Secured loan by US$ 1 million (from US$12
million to US$13 million), and,
An increase in the amount of the current Royalty Financing by US$2 million (from US$4 million to
US$6 million) through an additional 4 percent graphite sales revenue royalty on LDI, reducing to
0.25 percent once the additional royalty has been paid on 45,000 tonnes of sales.
As at September 30, 2023 the Company held cash of $2.2 million (December 31, 2022 - $5.1 million),
$1.9 million of restricted cash (December 31, 2022 - $2.1 million) and had working capital of $17.0
million (December 31, 2022 - $19.4 million).
Working capital includes $22.4 million (December 31, 2022
- $18.3 million) in inventory, consisting of 5,476 tonnes of graphite concentrate (December 31, 2022 -
8,743 tonnes) and 147,672 tonnes of ore stockpiles as well as materials and supplies. The ore stockpile
contains approximately 9,198 tonnes of recoverable graphite (December 31, 2022 - 2,251 tonnes).
Selected Interim Financial Information (Unaudited)
Statement of Profit & Loss as of September 30, 2023
Three months ended Sept 30,
Nine months ended Sept 30,
2023
2022
2023
2022
Revenue
$
4,933
$
4,483
$
12,889
$
$
8,176
Cost of sales
Production costs
3,453
3,357
9,028
5,620
Depletion and depreciation
778
359
2,094
469
Total cost of sales
4,231
3,716
11,122
6,089
Income from mine operations
702
767
1,767
2,087
Expenses
General and administrative
2,177
1,779
6,611
3,410
Share-based compensation
175
80
1,124
1,324
Project evaluation, acquisition, and integration
-
365
45
2,056
Foreign exchange (gain) loss
407
(556)
510
(616)
Total expenses
2,759
1,668
8,290
6,174
Operating loss
(2,057)
(901)
(6,523)
(4,087)
Loss (gain) on marketable securities
200
(70)
130
230
Foreign exchange (gain) loss on financing instruments
1,098
3,057
(97)
3,375
Finance cost
1,188
656
3,793
1,742
Interest income
(17)
(71)
(52)
(115)
Impairment loss
-
-
209
-
Care and maintenance
2,305
-
5,096
-
Okorusu moving costs
83
-
515
-
Loss before taxes
(6,914)
(4,473)
(16,117)
(9,319)
Current tax expense
(20)
282
300
535
Deferred tax expense (recovery)
(67)
68
(738)
(11)
Net loss
(6,827)
(4,823)
(15,679)
(9,843)
Other comprehensive loss
Foreign currency translation
976
(816)
(2,172)
(1,488)
Other comprehensive loss
$
(5,851)
$
(5,639)
$
(17,851)
$
(11,331)
Loss per share - basic and diluted
(0.05)
(0.04)
(0.12)
(0.09)
Weighted average shares outstanding
- basic and diluted
130,032,152
107,770,249
128,081,100
104,060,036
Selected Interim Financial Information (Unaudited)
Statements of Cash Flows as of September 30, 2023
Three months ended Sept 30,
Nine months ended Sept 30,
2023
2022
2023
2022
Operating activities
Net loss
$
(6,827)
$
(4,823)
$
(15,679)
$
(9,843)
Items not affecting cash
Depletion and depreciation
1006
545
2,285
671
Income taxes
(89)
350
(207)
524
Share based payments
228
80
1,147
1,324
Interest expense and accretion
1,041
525
3,398
1,510
Accretion of reclamation provision
22
94
99
169
Impairment loss
-
209
-
Foreign exchange loss
2,882
2,649
1,211
2,967
Loss (gain) on marketable securities
200
(70)
130
230
Loss on derecognition of ROU assets
(143)
-
(85)
-
Expenses settled in shares
-
-
142
Changes in non-cash working capital items
Receivables, prepaids and deposits
822
(1,718)
(343)
(6,452)
Inventories
3,245
(1,342)
2,504
(1,994)
Accounts payable and accrued liabilities
(673)
1,348
1,796
4,618
Net cash provided by (used in) operating activities
1,714
(2,362)
(3,535)
(6,134)
Investing activities
Cash paid in LDI acquisition
-
-
-
(25,636)
Cash paid in Namibia acquisition, net of cash
acquired
-
-
-
(20,003)
Restricted cash and deposits
212
(43)
219
(8,592)
Land and building use lease payments
-
-
-
(2,948)
Exploration and evaluation costs
(607)
(261)
(1,403)
(623)
Cash received on sale of assets
-
-
220
-
Additions to property, plant, equipment, mineral
property and intangibles
(227)
(1,479)
(2,626)
(2,027)
Net cash used in investing activities
(622)
(1,783)
(3,590)
(59,829)
Financing activities
Private placement, net of costs paid
-
-
2,250
21,394
Proceeds from exercise of warrants
-
-
2,093
174
Sale of Bissett Creek royalty
950
-
950
-
Proceeds from exercise of options
-
151
378
151
Proceeds from senior secured debt, net of costs
-
-
-
14,690
Proceeds from deferred revenue stream
-
-
-
25,658
Proceeds from royalty financing, net of costs
-
-
-
4,992
Royalty payments
(326)
-
(1,233)
-
Lease payments
(133)
(113)
(395)
(186)
Net cash provided by financing activities
491
38
4,043
66,873
Effect of exchange rate changes on cash
(65)
237
248
230
Net increase (decrease) in cash and cash equivalents
1,583
(4,107)
(3,082)
910
Cash and cash equivalents, beginning
724
8,588
5,076
3,578
Cash and cash equivalents, ending
$
2,242
$
4,718
$
2,242
$
4,718
About Northern Graphite
Northern, the only graphite producing company in North America, 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 expects to become the third-largest natural graphite producer outside of China when its
Namibian operations come back online. The Company also has the large-scale Bissett Creek project in
Ontario, and substantial additional measured and indicated resources in Namibia and the Mousseau
property in Quebec, which are expected to be sources 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
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 news release include statements
regarding, among others, plans for extending the mine life and output at LDI, 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, and the inability to raise the required financing. 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
news release.
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