Northern Graphite Announces Third Quarter 2024 Results Record sales volume amid push to meet demand, raise cash and reduce operating expenses Increased plant output following move to seven-days-a-week schedule Permitting started for new pit at Lac des Iles, new drill program launched
Northern Graphite Announces Third Quarter
2024 Results
Record sales volume amid push to meet demand, raise cash and reduce operating
expenses
Increased plant output following move to seven-days-a-week schedule
Permitting started for new pit at Lac des Iles, new drill program launched
Ottawa, Ontario--(Newsfile Corp. - November 28, 2024) - Northern Graphite Corporation
(TSXV: NGC)
(OTCQB: NGPHF) (FSE: 0NG) (XSTU: 0NG)
(the "
Company
" or "
Northern
") is pleased to provide
an operating summary and financial highlights for the three and nine month periods ending September
30, 2024. The Company's Financial Statements and Management's Discussion and Analysis for the
period have been filed on SEDAR+ and posted on the Company's website.
"In the third quarter we continued strict cost controls to manage our cash position, while selling record
volumes of our graphite to industrial customers, albeit at lower average realized prices. We operated the
mill on a seven-days-a-week basis and are selling inventory to generate more cash," said Northern Chief
Executive Officer Hugues Jacquemin. "While we are also moving forward to open a new pit at LDI and
restart the plant at a higher throughput in January to meet rising demand, unless we can see our way
through to higher prices, long-term supply agreements with battery makers and support from
governments in Ontario, Quebec, Canada and/or the United States, the Company will continue to
struggle whilst these challenging market conditions prevail for ourselves and the rest of the industry."
Operational Highlights: Driving Our Growth Catalysts
To meet increasing customer demand, the Company
saw continued strong production
volume
from the plant at its Lac des Iles ("
LDI
") mine for a third consecutive quarter and
achieved record sales
from June 30 through September 30 after moving to a four shifts, seven-
days-a-week schedule. During the first nine months of 2024, sales volumes and revenues from LDI
are up by 53 percent and 37 percent respectively compared to the first nine months of 2023;
During the fourth quarter, management made the decision to put the LDI plant under a
two-month
maintenance shutdown
to complete repairs and maintenance and plans to
increase throughput
to nameplate capacity when it reopens in January. This will enable the Company to meet growing
demand for natural graphite sourced outside of China;
After a successful 2023 drilling campaign and a new resource estimate showed potential to
significantly extend the life of LDI, the Company
started
permitting in the fourth quarter
to
open a new pit
in the new year.
A second drilling program
has also been launched with the
goal of further increasing production through successful exploration;
In June, the Company received support from Québec's Ministère des Ressources Naturelles et
des Forêts ("
MRNF
") in the form of a grant for a total of $0.4 million to pay 50 percent of eligible
expenses for geo-metallurgical and geo-environmental drilling to be carried out this year on the LDI
mining lease;
In preparation to supply coming demand from North American battery markets, Northern
signed a
Joint Development Agreement ("JDA") with Rain Carbon Inc. ("Rain")
to develop and
commercialize advanced, natural graphite battery anode material ("
BAM
") products used in
lithium-ion batteries for electric vehicles ("
EVs
");
The Company continued development of its battery materials portfolio and
advanced
discussions with Original Equipment Manufacturers ("OEMs") and battery makers, and
Northern's patented Porocarb® product is currently being evaluated by leading global battery
manufacturers with very positive results.
Financial Highlights: Focus on Cash Management
Revenue of $6.7 million based on 4,080 tonnes of graphite concentrate sold at an average
realized sales price of $1,644 per tonne (US$1,205 per tonne). The average realized price in the
third quarter was 17% below the second quarter of 2024, mainly due to commercial efforts to sell
additional volumes to customers, which included inventory spot sales for cash management
purposes, which have negatively impacted average sales prices and margins;
Cash costs of $1,413 (US$1,035) per tonne of graphite concentrate sold represented a 9%
improvement compared to second quarter costs of $1,560 per tonne (US$1,035). Production
costs have been negatively impacted by inefficiencies and unexpected breakdowns which have
impacted the ability of the LDI plant to ramp up operations;
Loss from mine operations was $0.6 million, compared to income from mine operations of $0.1
million during the second quarter;
General and administrative expenses during the third quarter were in line with the second quarter
of 2024, which were 13% lower than the first quarter of 2024 as a result of the implementation of
strict overhead cost control measures;
The LDI plant was in full production during the third quarter with production volumes of 3,630
tonnes. Mining operations were stopped on July 15, 2024 and restarted on September 3, 2024 to
preserve cash while the plant continued to operate;
Finance costs were $2.9 million, almost all of which were non-cash items;
An impairment expense of $0.4 million was recorded due to the identification of variances
following a physical count of finished goods inventories;
A net loss of $4.8 million ($0.04 per share) which included significant non-cash charges relating to
depletion and depreciation, share-based compensation, capitalized finance expenses, impairment
expenses and drawdown of inventories. Cash used in operating activities was $nil and slightly
deteriorated compared to the second quarter when cash provided by operating activities of $0.1
million was reported, mostly as an effect of lower average sales prices;
As of September 30, 2024, and in line with June 30, 2024, the Company continued to report its
senior secured loan ($22.7 million) and its royalty financing ($9.0 million) as current liabilities as a
result of the lack of performance by the Company on the following covenants related to these
instruments:
Senior secured loan - The Company had not met some of the covenants relating to the
amended and restated credit agreement dated November 29, 2023, including:
The payment of accrued interest of $1.6 million (US$1.2 million) on the semi-annual
cash interest payment date as of September 30, 2024;
Maintaining, at all times, on a consolidated basis, positive working capital, and
Maintaining, at all times, on a consolidated basis, a minimum cash balance of
$750,000.
Royalty financing - The Company had not met certain covenants related to the amended and
restated royalty agreement dated November 29, 2023 and has not made royalty payments to
the royalty holder totaling
$1.9 million (US$1.4 million) for 2024.
All defaults have been waived by the lender and royalty holder as at September 30, 2024 and
as at November 27, 2024, and the Company is currently in discussions with the lender and
royalty holder relating to the revision of existing agreements.
Cash and working capital:
Cash and equivalents of $0.3 million as at September 30, 2024 (June 30, 2024 : $0.7
million);
Accounts receivable increased by $0.4 million compared to September 30, 2024, as a result
of increased sales during the quarter, with days of sales outstanding at 38 days of sales.
Inventories decreased by $0.7 million compared to the second quarter. Accounts payable
remained stable compared to the end of the previous quarter.
The Company's working capital optimization efforts on inventories and receivables offset by
the above noted senior debt and royalty classifications to current liabilities ($31.7 million in
total), resulting in a negative working capital balance of $27.6 million as at September 30,
2024.
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Northern is continuing to work towards its goal of becoming a vertically integrated, mine-to-market
supplier to traditional downstream customers and to the emerging market for battery anode material as
well as for next generation All Solid State battery chemistries. The main catalysts of the Company's
strategy include growing graphite production from our cornerstone LDI mine, restarting the Okanjande
mine in Namibia, developing the Bissett Creek Project in Ontario, developing downstream capacity to
produce advanced BAM for use in lithium-ion batteries and EVs in North America and Europe, and
upgrading graphite mine concentrate into value added industrial products.
Mining Operations
As the only producer of natural flake graphite in North America, Northern has a first mover, competitive
advantage in supplying Western markets with graphite for the EV revolution. The Company's projects in
Canada and Namibia are all battery grade, and can be scaled in a relatively quick, low-cost manner by
leveraging existing permitting and infrastructure at both LDI and at its Okanjande mine in Namibia and
the advanced state of the Bissett Creek Project in Ontario.
Lac des Iles Mine - Quebec
Northern is boosting output from the LDI mine and processing plant to meet growing demand from
industrial customers and coming demand from North American battery makers. During the first nine
months of 2024, sales volume and revenue from LDI have increased significantly, and continuously, up
by 53 percent and 37 percent respectively compared to the first nine months of 2023. Following the
announcement of a temporary shutdown for maintenance during November and December 2024, the
Company is continuing to serve its customers from existing inventory and from third parties to avoid
disruptions as demand remains significantly higher in the fourth quarter of 2024 compared to the fourth
quarter of 2023. The LDI mill is forecast to reopen on or around January 6, 2025.
After a new resource estimate in January 2024 showed potential to extend the life of LDI by
approximately eight years (to be confirmed and quantified through an updated mineral reserve estimate
and life-of-mine plan), the Company has begun permitting to open a new pit in 2025. Northern has also
launched an additional drilling program with the objectives of further expanding resources, identifying
resources with a lower strip ratio and spending $1.85 million to meet the Company's obligations under
its 2023 flow through share financing. According to the mineral resource estimate, prepared in the first
quarter by SLR Consulting (Canada) Ltd. and based on the results of a 2023 drilling campaign, Indicated
Mineral Resources now total approximately 3.29 million tonnes ("
Mt
") at an average grade of 6.4%
graphitic carbon ("
Cg
"), containing approximately 213,000 tonnes of Cg. Inferred Mineral Resources
total approximately 1.43 Mt at an average grade of 7.4% Cg, containing approximately 106,000 tonnes
of Cg. Existing stockpiles at the mine site are not included in the updated mineral resource estimate.
The updated mineral resource estimate assumes an open pit mining scenario and a long-term average
flake graphite concentrate market price of US$1,550 per tonne. Mineral resources are constrained
within an optimized pit shell at a cut-off grade of 2.3% Cg. A technical report in respect of the mineral
resource estimate prepared in accordance with National Instrument 43-101 -
Standards of Disclosure
for Mineral Projects
("
NI 43-101
") was filed under the Company's profile on SEDAR+
(
www.sedarplus.ca
) on March 1, 2024.
Okanjande Project - Namibia
The Company continues to evaluate options to fund the Okanjande project through the use of a
royalty/stream/debt structure and equity contributed by a strategic partner without having to go to the
market at current share prices. During the third quarter of 2023, Northern placed Okanjande on care and
maintenance except for engineering and activities relating to moving the plant from its site at Okorusu to
Okanjande. The timing of the restart is subject to the availability of project financing. A technical report in
respect of a preliminary economic assessment ("
PEA
") for the Okanjande project prepared in
accordance with NI 43-101 was filed under the Company's profile on SEDAR+ (
www.sedarplus.ca
) on
August 28, 2023. The PEA indicated that the economics are attractive under a plan to move the
processing plant from Okorusu to the mine site 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.
Advancing Mine-to-Market Strategy -Partnering for Progress
Northern is advancing its mine-to-market-to-battery strategy and in October reached a milestone
partnership agreement with Rain Carbon Inc. , a leading supplier of carbon precursor and carbon
products, to develop advanced natural graphite Battery Anode Material that improves the performance
and reduces the costs and carbon footprint of lithium-ion batteries in EVs. Under the terms of the JDA,
Northern and RAIN will jointly develop and commercialize natural graphite BAM products that are
engineered to address critical market demands for extended cycle life, enhanced charging speed and
reduced electrode swelling in lithium-ion battery cells. The JDA will answer a market need for higher-
quality natural graphite anode material that is also lower cost and more environmentally friendly than
synthetic graphite, underscoring Northern's commitment to delivering innovative, sustainable solutions
that align with the EV industry's evolving requirements and global decarbonization goals.
Northern Graphite JDA with RAIN Process and Product Chart
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The JDA with RAIN complements Northern's broader strategy to become a fully integrated mine-to-
battery producer and processor of graphite for lithium-ion batteries, employing advanced milling and
shaping, purification and coating technologies to produce BAM at scale from a planned 200,000 tpy
facility at the deepwater port of Baie-Comeau, Quebec. The plant is planned to be built in modules to de-
risk investment and tailor construction to demand growth in EV markets, and is subject to financing,
regulatory approvals and certain other conditions. The facility is eligible for assistance under programs
offered by the province of Québec, the Canadian and U.S. governments, as well as other assistance by
the Manicouagan region and potential Plan Nord incentives. Northern has been actively involved in
discussions and negotiations with technology and OEM partners in both the U.S. and Europe who want
to collaborate with a quality supplier of graphite that has current production, immediately available
inventory and the capacity to support future growth.
Discussions center on volume requirements and the
timing thereof and plans for downstream conversion facilities in both North America and Europe.
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. In addition, the Company is working closely with federal and provincial government organizations
to gain support to accelerate the development of the battery anode supply chain, with a particular focus
on Ontario and Québec.
Northern's battery materials division ("
NGCBM
"), launched in February 2024 to drive the Company's
mine-to-battery strategy, is also advancing in its efforts to commercialize Porocarb®, its patented, high-
performance microporous hard carbon material used to boost performance in next generation battery
chemistries for electric vehicles, including both lithium-ion and solid-state batteries. The product is
currently being evaluated with very positive results by top tier battery manufacturers from South Korea,
China and several Western countries. Porocarb® has the potential to provide significant revenue to the
Company sooner than natural graphite lithium-ion BAM products.
Market Commentary
Global graphite markets face rising supply pressures amid geopolitical tensions with China, driving
consumers to establish secure future supply chains in the West that are less reliant on the world's largest
producer and processor of this leading component in lithium-ion batteries. Northern has already seen
sustained demand growth and near-record sales to industrial customers since the second half of last
year, and those trends are seen continuing into 2025. During the third quarter of 2024 the Company sold
4,080 tonnes of graphite concentrate, 58% higher than last year, with an average realized sales price of
$1,644 per tonne, 14% lower than the previous year's period amid inventory spot sales for cash
management purposes. Sales in the fourth quarter of 2024 are also expected to be favorable as a result
of efforts to sell additional volumes to customers, including further inventory spot sales for cash
management purposes. Management has been aggressively pursuing new markets/customer
opportunities in North America and Europe in order to balance liquidity with the amount of working
capital tied up in inventories, and to create a market for future expected Namibian production. While we
are still awaiting greater clarity on U.S. trade policy under a second Trump presidency, as a member of
the North American Graphite Alliance, which represents North American and Canadian producers of
battery-grade natural and synthetic graphite, Northern continues to engage with the White House, OEMs
and other producers to find ways to protect and stimulate the graphite industry. To date, Canada, the
United States and Europe have all announced tariffs on EV imports to support their automotive
industries and better compete with China.
Balance Sheet Commentary
Northern implemented strict cost control measures during the second and third quarters of 2024 to better
manage its cash position, bolster its balance sheet and optimize its working capital, including sales of
inventory, optimization of accounts receivable and operating the LDI mill on a seven-days-a-week
schedule. The level of production at LDI since its acquisition has not been sufficient to sustain the
Company on a cash flow basis, and operational deficits have been financed by external financings and
the sale of inventories. In order to make the Company self-sustaining and meet growing demand
stimulated by EV sales, Chinese export controls and US tariffs on Chinese graphite, Northern is working
to ramp up output at LDI to nameplate capacity of 25,000 tpy. While the expansion is expected to
increase operating income, it also requires an additional investment in a new pit and working capital that
is straining resources, and discussions continue around amending the Company's existing loan and
royalty agreements, including in particular the senior debt interest which was capitalized in 2023.
The Company continues to report as current liabilities its senior secured loan ($22.7 million) and its
royalty financing ($9.0 million) as a result of the Company not meeting the following covenants related to
these instruments:
Senior secured loan - as at September 30, 2024, the Company had not met some of the
covenants in the amended and restated credit agreement dated November 29, 2023, including the
payment of accrued interest of $1.6 million (US$1.2 million) due on the semi-annual cash interest
payment date; maintaining, at all times, on a consolidated basis, positive working capital; and
maintaining, at all times, on a consolidated basis, a minimum cash balance of $750,000.
Royalty financing - As at September 30, 2024, the Company had not met some of the covenants in
the amended and restated royalty agreement dated November 29, 2023, including the payment of
royalties
due during 2024 for a total amount of $1.9 million (US$1.4 million).
The lender and royalty holder have waived all defaults as of September 30, 2024 and as of November,
27 2024.
The Company is currently in discussions with the lender and royalty holder relating to amending
the terms of its senior secured loan and royalty financing to better align with project timelines that have
shifted with markets that are evolving at a slower pace than forecast. While these discussions are
ongoing, the lender and royalty holder is supportive of Northern's growth plans and is keen to work with
the Company to find ways to capitalize on the new resource and extended mine life potential at LDI and
allow the Company to benefit from a strong industrial market for graphite in North America as well as
coming demand from EV markets.
Going forward, the Company intends to continue to reduce inventories to generate liquidity and maintain
strict overhead cost controls that were implemented during the last two quarters of 2024, as well as
consider a number of other strategies until support for the only operating graphite mine in North America
materializes or markets improve. The Company also continues to seek support from federal, provincial
and US government agencies as well as EV and battery manufacturers.
Corporate Update
On October 11, 2024, the Company announced the
resignation of Guillaume Jacq as Chief
Financial Officer
("
CFO
"), effective November 30, 2024, to pursue other career opportunities. Niall
Moore, Northern's Group Controller and a Chartered Professional Accountant with over 35 years of
experience, will assume the responsibilities of the CFO role on an interim basis.
In closing, Mr. Jacquemin commented:
"While the current situation is challenging, the long term outlook for our strategy to sell to the EV battery
space remains strong and we continue to implement
measures to enable the Company to weather the
prevailing environment and carry us through until graphite markets recover. We are putting the pieces in
place to be ready when markets improve to supply North American battery makers with graphite from our
mines, tailored into battery anode material that fits their needs and is sourced close to their end
markets."
About Northern Graphite
Northern, the only flake 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 one of the largest natural graphite producers 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 development projects to production, developing
the capacity to manufacture value added products and raising the financing to complete any or all 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
press release.
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