Exhibit 99.2
MANAGEMENT
DISCUSSION & ANALYSIS
For
the three-month period ended March 31, 2023
TABLE
OF CONTENTS
| TABLE
OF CONTENTS | |
| 1 | |
| Preamble | |
| 3 | |
| Period
covered | |
| 3 | |
| Forward-looking
statements | |
| 3 | |
| Technical
information and cautionary note to U.S. investors | |
| 5 | |
| Market and industry
data | |
| 5 | |
| The
Company | |
| 6 | |
| Corporate
structure | |
| 6 | |
| Value proposition | |
| 7 | |
| Highlights | |
| 7 | |
| Business
lines | |
| 8 | |
| Battery
Material Plant project | |
| 9 | |
| Battery
Material Demonstration Plants | |
| 9 | |
| Bécancour
Battery Material Plant | |
| 10 | |
| Matawinie
Mine project | |
| 10 | |
| Mineral
Resources and Reserves | |
| 11 | |
| Matawinie
Mine Demonstration Plant (Phase 1) | |
| 12 | |
| Matawinie
Mine (Phase 2) | |
| 12 | |
| UATNAN
MINING project | |
| 14 | |
| Property
and Mineral Resources | |
| 14 | |
| Uatnan
Mining Project (Phase 3) | |
| 15 | |
| Commercial
strategy | |
| 16 | |
| Sales | |
| 16 | |
| Commercial
Agreements | |
| 17 | |
| Business
Development | |
| 18 | |
| Partnerships,
research and development | |
| 18 | |
| Market
update | |
| 19 | |
| Responsibilities | |
| 20 | |
| Human
capital | |
| 21 | |
| Health &
Safety | |
| 21 | |
| Employment,
Diversity, Equity & Inclusion | |
| 21 | |
| Training | |
| 21 | |
| Environment | |
| 21 | |
| Responsible
Mining | |
| 22 | |
| Sustainable
Production | |
| 22 | |
| Carbon
neutrality | |
| 23 | |
| Social | |
| 23 | |
| Indigenous
Relations | |
| 24 | |
| governance | |
| 25 | |
| Leadership | |
| 25 | |
| Risks | |
| 26 | |
| Financing | |
| 26 | |
| ATM
Offering | |
| 27 | |
| Quarterly
results | |
| 28 | |
| First
quarter results | |
| 29 | |
| Exploration
and Evaluation expenses | |
| 29 | |
| Management Discussion and Analysis | 1 |
| Battery
material plant project expenses | |
| 30 | |
| General
and administrative expenses | |
| 31 | |
| Net
financial costs | |
| 31 | |
| Liquidity
and funding | |
| 31 | |
| Operating
activities | |
| 32 | |
| Investing
activities | |
| 33 | |
| Financing
activities | |
| 33 | |
| Additional
information | |
| 33 | |
| Related
party transactions | |
| 33 | |
| Off-balance
sheet transactions | |
| 34 | |
| Critical
accounting estimates, new accounting policies, judgements and assumptions | |
| 34 | |
| Financial
instruments and risk management | |
| 34 | |
| Contractual
obligations and commitments | |
| 34 | |
| Capital
structure | |
| 34 | |
| Subsequent
events to March 31, 2023 | |
| 34 | |
| Additional
information and continuous disclosure | |
| 35 | |
| Management Discussion and Analysis | 2 |
Preamble
This Management
Discussion and Analysis (“MD&A”) dated May 10, 2023, has been prepared according to Regulation 51-102 of the continuous
disclosure requirements and approved by the Board of Directors of Nouveau Monde Graphite Inc. (“the Company” or “NMG”).
This MD&A should
be read in conjunction with the Company’s condensed consolidated interim unaudited financial statements for the three-month period
ended March 31, 2023, and the consolidated audited financial statements for the years ended December 31, 2022, and December 31,
2021, and related notes. The Company’s consolidated financial statements have been prepared in accordance with the International
Financial Reporting Standards (“IFRS”), as published by the International Accounting Standards Board (“IASB”).
All monetary amounts included in this MD&A are expressed in thousands of Canadian dollars (“CAD”), the Company’s
reporting and functional currency, unless otherwise noted.
Period
covered
This MD&A report
is for the three-month period ended March 31, 2023, with additional information up to May 10, 2023.
Forward-looking
statements
This MD&A contains
“forward-looking information” and “forward-looking statements” within the meaning of applicable securities legislation
(collectively, “forward-looking statements”), which relate to future events or future performance and reflect management’s
expectations and assumptions regarding the Company’s growth, results, performance and business prospects and opportunities. Such
forward-looking statements reflect management’s current beliefs and are based on information currently available to it. In some
cases, forward-looking statements can be identified by words such as “may”, “would”, “could”, “will”,
“should”, “expect”, “intend”, “aim”, “attempt”, “anticipate”,
“believe”, “study”, “target”, “estimate”, “forecast”, “predict”,
“outlook”, “mission”, “aspire”, “plan”, “schedule”, “potential”,
“progress” or the negative of these terms or other similar expressions concerning matters that are not historical facts.
In particular, statements regarding the Company’s future results, the intended construction and commissioning timeline of the Matawinie
Mine project, the Bécancour Battery Material Plant Project, the shaping demonstration plant and the coating demonstration plant,
the intended operation and performance of the purification demonstration plant, shaping demonstration plant, coating demonstration plant
and the concentrator demonstration plant, the intended development of the Matawinie Mine property, the intended development of the Uatnan
Mining Project, including the formation of a joint venture, the economic performance and product development efforts, as well as the
Company’s expected achievement of milestones, including the ability to obtain sufficient financing for the development of the Matawinie
Mine Project and the Bécancour Battery Material Plant Project, including the completion of the FID, (as defined herein), the ability
to achieve the Company’s environmental, social and governance (“ESG”) initiatives, the Company’s electrification
strategy and its intended results, market trends, the results of the integrated feasibility study, preliminary economic assessment for
the Uatnan Mining Project and any other feasibility study and preliminary economic assessments and any information as to future plans
and outlook for the Company are or involve forward looking statements.
| Management Discussion and Analysis | 3 |
Forward-looking
statements are based on reasonable assumptions that have been made by the Company as at the date of such statements and are subject to
known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements
of the Company to be materially different from those expressed or implied by such forward-looking statements, including but not limited
to, the actual results of current development, engineering and planning activities, access to capital and future prices of graphite,
new mining operation inherent risks, mineral exploration and development activities inherent risks, the uncertainty of processing the
Company’s technology on a commercial basis and those factors discussed in the section entitled “Risk Factors” in Company’s
most recent annual information form. Forward-looking statements in this MD&A contain, among other things, disclosure regarding: the
Company’s development activities and production plans, including the operation of the shaping demonstration plant, the purification
demonstration plant and the concentrator demonstration plant; the construction and commissioning, as applicable, of the Matawinie Mine
Project, the Bécancour Battery Material Plant Project, the shaping demonstration plant and the coating demonstration plant; the
development of the Uatnan Mining Project, the impact of infectious diseases, global pandemics or any other public health crises, including
COVID-19 pandemic (“COVID-19”), and the ongoing war between Russia and Ukraine on the Company’s operations;
the future outlook, corporate development and strategy of the Company; the Company’s projected capital and operating expenditures;
the estimates of mineral resources and mineral reserves; the Company’s green and sustainable lithium-ion active anode material
initiatives; the government regulation of mining operations, environmental regulation and compliance; the realization of the expected
economics of the construction and operation of the Matawinie Mine Project and the Bécancour Battery Material Plant Project; the
ability to obtain sufficient financing and the permitting required for the development of the Matawinie Mine Project and the Bécancour
Battery Material Plant Project; and business opportunities that become available to, or are pursued by the Company.
Forward-looking
statements are based on assumptions management believes to be reasonable, including but not limited to: general business and economic
conditions; there being no direct operational impacts resulting from infectious diseases or pandemics; the supply and demand for, deliveries
of, and the level and volatility of prices for graphite products; the speculative nature of mineral exploration and development; changes
in mineral production performance and increase in costs, exploitation, exploration and mine new mines’ start-up successes; the
risk that exploration data may be incomplete and additional work may be required to complete further evaluation, including but not limited
to drilling, engineering, and socioeconomic studies and investment; the impact of the inflation of the Company’s planned exploration
and development activities, the timing of the receipt of necessary regulatory and governmental permits and approvals for the Matawinie
Mine Project and Bécancour Battery Material Plant Project; the availability of financing for the Company’s development of
its properties and construction of its facilities and installations on reasonable terms; the possibility that the Company may incur additional
debt; the ability to procure equipment and operating supplies in sufficient quantities and on a timely basis; increased costs, delays,
suspensions and technical challenges associated with the development, construction and commissioning of the Matawinie Mine Project and
the Bécancour Battery Material Plant Project; the good standing of the Company’s title and claims on its properties; the
ability to attract and retain skilled staff and maintain positive relationships with the staff; the risk of relying on consultants; development
and production timetables; competition and market risks; pricing pressures; the accuracy of the Company’s mineral resource and
mineral reserve estimates (including, with respect to size, grade and recoverability) as well as the geological, operational and price
assumptions on which they are based; the volatile nature of the share price of a resources company and public Company obligations, currency
fluctuations, the fact that certain business improvement initiatives are still in the early stages of evaluation, and additional engineering
and other analysis is required to fully assess their impact; the fact that certain of the initiatives described in this MD&A, are
still in the early stages and may not materialize; business continuity and crisis management; and such other assumptions and factors
as set out herein and in this MD&A.
Although the Company
has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking
statements, there may be other factors that may cause results not to be as anticipated, estimated or intended. There can be no assurance
that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to
update or revise any forward-looking statements that are included in this MD&A, whether as a result of new information, future events
or otherwise, except in accordance with applicable securities laws.
| Management Discussion and Analysis | 4 |
Technical
information and cautionary note to U.S. investors
Scientific and
technical information in this MD&A has been reviewed and approved by Antoine Cloutier, géo, Chief Geologist for NMG, a Qualified
Person as defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”).
Further information about the Matawinie Mine Project and the Bécancour Battery Material Plant Project, including a description
of key assumptions, parameters, methods and risks, is available in a technical report following NI 43-101 rules and guidelines,
titled “NI 43-101 Technical Feasibility Study Report for the Matawinie Mine and Bécancour Battery Material Plant Integrated
Graphite Projects”, effective July 6, 2022, and available on SEDAR and EDGAR (the “Feasibility Study”).
Further information about the Uatnan Mining Project, including a description of key assumptions, parameters, methods and risks, is available
in a technical report following NI 43-101 rules and guidelines, titled “NI 43-101 Technical Report – PEA Report for
the Uatnan Mining Project”, effective January 10, 2023, and available on SEDAR and EDGAR (the “PEA”).
Disclosure regarding
Mineral Reserve and Mineral Resource estimates included herein were prepared in accordance with Regulation 43-101 respecting Standards
of Disclosure for Mineral Projects (“NI 43-101”) and applicable mining terms are as defined in accordance with
the CIM Definition Standards on Mineral Resources and Reserves adopted by the Canadian Institute of Mining, Metallurgy and Petroleum
Council (the “CIM Definition Standards”), as required by NI 43-101. Unless otherwise indicated, all reserve and resource
estimates included in this MD&A have been prepared in accordance with the CIM Definition Standards, as required by NI 43-101.
NI 43-101 is a
rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of
scientific and technical information concerning mineral projects. NI 43-101 differs from the disclosure requirements of the United States
Securities and Exchange Commission (the “SEC”) applicable to U.S. companies. Accordingly, information contained herein
may not be comparable to similar information made public by U.S. companies reporting pursuant to SEC reporting and disclosure requirements.
Market
and industry data
Market and industry
data presented throughout this MD&A was obtained from third-party sources and industry reports, publications, websites and other
publicly available information, as well as industry and other data prepared by the Company or on the behalf of the Company on the basis
of the Company’s knowledge of the markets in which the Company operates, including information provided by suppliers, partners,
customers and other industry participants.
The Company believes
that the market and economic data presented throughout this MD&A is accurate as of the date of publication and, with respect to data
prepared by the Company or on behalf of the Company, that estimates and assumptions are currently appropriate and reasonable, but there
can be no assurance as to the accuracy or completeness thereof. The accuracy and completeness of the market and economic data presented
throughout this MD&A are not guaranteed and the Company does not make any representation as to the accuracy of such data. Actual
outcomes may vary materially from those forecasted in such reports or publications, and the prospect for material variation can be expected
to increase as the length of the forecast period increases. Although the Company believes it to be reliable as of the date of publication,
the Company has not independently verified any of the data from third-party sources referred to in this MD&A, analyzed or verified
the underlying studies or surveys relied upon or referred to by such sources, or ascertained the underlying market, economic and other
assumptions relied upon by such sources. Market and economic data are subject to variations and cannot be verified due to limits on the
availability and reliability of data inputs, the voluntary nature of the data gathering process and other limitations and uncertainties
inherent in any statistical survey. In addition, certain of these publications, studies and reports were published before COVID-19 and
therefore do not reflect any impact of COVID-19 on any specific market or globally.
| Management Discussion and Analysis | 5 |
The
Company
Corporate
structure
The Company was
established on December 31, 2012, under the Canada Business Corporations Act. NMG’s registered office is located at
481 Brassard Street, Saint-Michel-des-Saints, Québec, Canada, J0K 3B0.
The Company’s
shares are listed under the symbol NMG on the New York Stock Exchange (“NYSE”), NOU on the TSX Venture Exchange (“TSXV”),
and NM9A on the Frankfurt Stock Exchange.
The Company’s
consolidated financial statements have been prepared using accounting principles applicable to a going concern, which contemplates the
realization of assets and settlement of liabilities in the normal course of business as they come due. In assessing whether the going
concern assumption is appropriate, management considers all available information about the future, which is at least, but not limited
to, the next twelve months.
Management believes
that without additional funding, the Company does not have sufficient liquidity to pursue its planned expenditures. These circumstances indicate the existence of material uncertainties that cast substantial doubt upon the Company’s ability
to continue as a going concern and, accordingly, the appropriateness of the use of IFRS applicable to a going concern.
The Company’s
ability to continue future operations and fund its development and acquisition activities is dependent on management’s ability
to secure additional financing, which may be completed in a number of ways including, but not limited to, the issuance
of debt or equity instruments, expenditure reductions, or a combination of strategic partnerships, joint venture arrangements, project
debt finance, offtake financing, royalty financing and other capital markets alternatives. While management has been successful in securing
financing in the past, there can be no assurance it
will be able to do so in the future or that these sources of funding or initiatives will be available for the Company or that they will
be available on terms which are acceptable to the Company.
Although management
has taken steps to verify the ownership rights in mining properties in which the Company holds an interest in accordance with industry
standards for the current stage of exploration of such properties, these procedures do not guarantee the title property for the Company.
The title may be subject to unregistered prior agreements and may not comply with regulatory requirements.
| Management Discussion and Analysis | 6 |
Value
proposition
NMG is a Québec-based
company striving to become a key contributor to the sustainable energy revolution. The Company is working towards developing a fully
integrated source of carbon-neutral battery anode material in Québec, Canada for the growing lithium-ion battery and fuel cell
markets, and other value-added graphite products. With enviable ESG standards, the Company aspires to become a strategic supplier to
the world’s leading battery and auto manufacturers, providing high-performing and reliable advanced materials while promoting sustainability
and supply chain traceability.
| Vision | Drive
the transition to a green future through sustainable zero-carbon solutions. |
| Mission | Provide
the greenest advanced graphite materials with a carbon-neutral footprint for a sustainable
world. |
| Values | Safety,
responsibility, openness, integrity, and entrepreneurial spirit. |
The Company’s
activities are focused on the planned Matawinie graphite mine (the “Matawinie Mine”) and the planned commercial value-added
graphite products transformation plant (the “Bécancour Battery Material Plant”), both of which are progressing concurrently
towards commercial operations. Underpinning these projects are NMG’s world-class Matawinie graphite deposit, its proprietary technologies,
and clean hydroelectricity powering its operations. The Company is also exploring the potential of developing and operating the Uatnan
mining project (the “Uatnan Mining Project”) that leverages Mason Graphite Inc.’s (“Mason Graphite”) Lac
Guéret graphite deposit.
Highlights
| » | Continued
focus on safe conduct of operational and construction activities with a year-to-date OSHA
rate of 0 at the Company’s facilities and 0 for contractors’ work, with no major
environmental incident. |
| » | Recent
announcements via Canada’s and Québec’s budgets provide new fiscal measures
and levers for investment that strengthen NMG’s Phase-2 project financing structure
in complement to ongoing activities with export credit agencies and governmental branches. |
| » | Signature
of definitive agreements with Caterpillar Inc. (“Caterpillar”) that frame the
deployment of technology, testing collaboration, as well as procurement of zero-exhaust emission
fleet and infrastructure at the Matawinie Mine. |
| » | Offtake
MoU signed to explore opportunities for NMG to supply carbon-neutral graphite materials to
Caterpillar for the development of its secure, resilient, and sustainable battery supply
chain. |
| » | Advancement
of technical and commercial parameters definition for a multi-year offtake agreement with
Panasonic Energy Co., Ltd. (“Panasonic Energy”) and simultaneous
engagement towards potential offtake agreements with other tier-1 customers in the EV and
battery sector. |
| » | Underwritten
public financing generating approximately US$22 million before underwriters’ fees to
bring the development of the Matawinie Mine and the Bécancour Battery Material Plant
to a final investment decision (“FID”) and project financing closed in April 2023. |
| » | Publishing
of a preliminary economic assessment (“PEA”) of the Uatnan Mining Project demonstrating
strong returns for a production of approximately 500,000 tonnes per annum (“tpa”)
of graphite concentrate over a 24-year life of mine, in line with NMG’s Phase-3 plans. |
| » | Securing
of financial leverage of up to CA$3.6 million through Government of Québec’s
programs to support advanced graphite transformation via NMG’s Phase-1 coating unit
and research and development (“R&D”) projects. |
| » | Battery
and EV markets continue their expansion pushed by consumer demand and environmental legislation;
2023 is set to see battery production reach 1 TWh on a global basis for the first time (Benchmark
Mineral Intelligence, Q1-2023). |
| » | Period-end
cash position of $48.8 million. |
| Management Discussion and Analysis | 7 |
Business
lines
Striving to establish
a local, carbon-neutral, and traceable turnkey supply of graphite-based advanced materials for the Western World, the Company is
advancing an integrated business operation, from responsible mining to advanced manufacturing. NMG is developing natural flake graphite
as well as coated spherical purified graphite (“CSPG”), which is an essential component in lithium-ion batteries used
in electric vehicles, energy storage solutions, and consumer technology applications.
The Company is
carrying out a phased-development plan for its Matawinie Mine and Bécancour Battery Material Plant (respectively, with the applicable
demonstration plants, the “Matawinie Mine Project” and “Battery Material Plant Project”) to derisk its projects
and advance toward commercial operations. To support growth and meet customers’ demand beyond its Phase 2, the Company is exploring
the development of the Uatnan Mining Project targeted as NMG’s Phase-3 expansion.
| Battery
Material Plant Project |
|
| |
|
| Phase
1 – Battery Material Demonstration Plants |
| |
| |
Shaping
Demonstration Plant |
The
Company has been operating a commercial-scale shaping unit since 2020. A second unit has been assembled in 2022 and commissioning
was completed in April 2023. |
| |
|
|
| |
Purification
Demonstration Plant |
The
purification demonstration unit is currently in production with a 2,000 tpa nameplate capacity. |
| |
|
|
| |
Coating
Demonstration Plant |
Commissioning
of the coating module is progressing. |
| |
|
|
| Phase
2 – Bécancour Battery Material Plant |
Engineering
of Phase-2, optimization of the Feasibility Study based on Panasonic’s specifications as per the Offtake MoU agreement, and
piloting at Phase-1 facilities support finalization of projected operational parameters. |
| Matawinie
Mine Project |
|
| |
|
| Phase
1 – Matawinie Mine Demonstration Plant |
| |
| |
Concentrator
Demonstration Plant |
Since
September 2018, the Company has been operating a flake concentration demonstration plant. |
| |
|
|
| Phase
2 – Matawinie Mine |
Groundwork
started in 2021 at the construction site while engineering and procurement advance in parallel. |
| Uatnan
Mining Project |
|
| |
|
| Phase
3 – Uatnan Mining Project |
A
PEA was carried out to leverage the Lac Guéret deposit resource and update operational parameters. |
| Management Discussion and Analysis | 8 |
Battery
Material Plant project
The Company continues
to make significant progress with respect to its advanced manufacturing activities via samples production and process refinement at Phase-1
facilities as well as engineering advancement of its Phase-2 development plans. The Company’s latest Feasibility Study reflects
the technological progress of value-added processes and the optimization of production flow within an integrated operational model.
Battery Material
Demonstration Plants
The shaping equipment
(Phase 1) continues to produce spherical graphite; samples have attested to the performance of the secondary transformation process developed
by NMG. The successful results have led NMG to purchase another commercial-scale module, hence tripling its production capability. The
new unit should further elevate the products’ quality and provide customers with a greater variety of specifications.
| » | The
new equipment was successfully installed in 2022 at the Company’s facility and commissioning
was completed in April 2023. |
| » | Detailed
tests being conducted to supplement those already performed at the equipment manufacturer’s
site are informing process development to leverage this new manufacturing technology and
enhance performance in terms of yield and throughput. |
| » | Tests
have generated positive results with samples produced that met various potential client specifications.
Production is set to ramp up in 2023. |
The Company is
also leveraging its proprietary thermochemical purification process to complete its market offering of products with purity greater than
99.95%. On October 27, 2020, NMG announced a five-year agreement with Olin Corporation (“Olin”), which covers the manufacturing
space for operations, site services, and the supply of certain raw materials to support the commercialization of NMG’s advanced
graphite materials.
| » | The
Company’s first two commercial-scale pilot plant purification modules (Phase 1) have
been constructed within existing space at Olin’s facility in Bécancour, Québec.
The scalable furnaces have a nameplate capacity of 2,000 tpa of purified battery-grade graphite. |
| » | Since
the launch of production, NMG has produced spherical purified graphite (“SPG”),
demonstrating the performance of its proprietary purification ecotechnology; samples confirmed
the purity of +99.99%, above the level required for energy applications. |
| » | In
line with specific client specifications, NMG continues to enhance its purification process
for both battery-grade active graphite materials and purified jumbo flakes for niche applications. |
| » | Production
samples continue to demonstrate excellent results both at the Company’s laboratory
and at a leading third-party testing facility, indicating effective process and operational
parameters. |
Determined to develop
the entire value chain from mine to anode material in order to provide a traceable and carbon-neutral source to battery manufacturers,
NMG is advancing with the deployment of its environmentally friendly CPSG for use as anode material. The coating of spherical graphite
is the last process step needed to complete the Company’s graphite-based product range for the EV and renewable energy sectors.
| » | Commissioning
of the coating module is progressing. |
| Management Discussion and Analysis | 9 |
Bécancour
Battery Material Plant
NMG owns a 200,000-m2
land in the Bécancour industrial park in Québec, Canada, adjacent to Olin’s facility, to build an integrated
manufacturing plant with a projected annual production volume of roughly 46,000 tpa of advanced graphite materials (Phase 2). Approximately
150 km northeast of Montréal, close by the Saint Lawrence River, the site provides robust local infrastructure with a direct supply
of required chemicals, affordable hydroelectricity, skilled workforce, and no environmental limitations for construction. Its multi-modal
logistical base includes a major international port, plus rail and highway for both importing raw materials and exporting final products
throughout North America and Europe.
| » | A
study of archaeological potential, comprised of surveys of historical documentation and on-site
work, was completed in 2022 for the land. The study was carried out by the Ndakina Office
of the Conseil de la Nation Waban-Aki, the Indigenous organization overseeing territorial
and environmental protection questions for the Abenaki Councils of Odanak and Wôlinak.
No archaeological discoveries were made. |
Bécancour
is rapidly attracting important industrial players in the battery materials and cell manufacturing space, supported by the Québec
Government’s battery hub strategy. Twenty industrial and commercial projects are planned or under study, including BASF, GM-Posco,
Vale, Nemaska Lithium, and Electra Battery Materials. The Company’s site, at the centre of this development zone, represents a
strategic and operational asset.
The Company mandated
engineering firm BBA, with the support of various technical consultants, to complete the Feasibility Study for its integrated business
operations comprised of the Phase-2 Matawinie Mine and Bécancour Battery Material Plant projects.
Results of the
Study were published on July 6, 2022, demonstrating attractive economics. Regrouping on-site all beneficiation units, the Bécancour
Battery Material Plant is designed to receive approximately 63,775 tpa of graphite concentrate from the Matawinie Mine to be transformed
into 42,616 tpa of CSPG, 3,007 tpa of purified flakes and 18,384 tpa of by-product fines, a valuable graphite material.
| » | The
Feasibility Study is available on SEDAR, EDGAR, and the Company’s website. |
The Company now
actively advances plans for the Phase-2 Bécancour Battery Material Plant in line with commercial discussions.
| » | Piloting
at NMG’s Phase-1 facilities continues to inform final process design criteria. |
| » | BBA
was mandated to advance some engineering, perform trade off studies on equipment and plant
design in order to optimize the commercial plant flowsheet. |
| » | NMG
has finalized the project’s execution and contracting strategy in preparation for construction
once FID is reached. Permit demands as well as long-lead items tendering packages are being
prepared. |
Matawinie
Mine project
The Matawinie graphite
property includes 380 mining claims covering 21,045 hectares as of the date of this MD&A, in which the Company owns a 100% interest.
The Tony Block, or Mining Property, part of the Matawinie graphite property, is composed of 159 claims totaling 8,266 hectares. The Tony
Claim Block is located approximately 120 km as the crow flies north of Montréal, Québec, Canada, in Saint-Michel-des-Saints.
This block is easily accessible via the dedicated access road connecting to the local highway and is close to high-quality infrastructure,
including paved roads and high-voltage power lines, and the community, which counts skilled laborers and contractors. The project is
located close to the Montréal metropolitan area, which also has a considerable pool of nearby labor and suppliers of goods and
services.
| Management Discussion and Analysis | 10 |
As part of the
Feasibility Study for its integrated business model, parameters of the 2018 feasibility study were updated, including mineral resources
and reserves, operational, and financial metrics. Project highlights for the Matawinie Mine now include:
| » | Annual
processing rate: 2.55 million metric tonnes |
| » | Average
annual graphite concentrate production: 103,328 metric tonnes |
| » | Finished
product purity: 97% Cg |
| » | Stripping
ratio (LOM): 1.16:1. |
Mineral Resources
and Reserves
Since the deposit
discovery, a comprehensive exploration program uncovered significant crystalline flake graphite mineralization, ultimately leading to
the identification of Mineral Resources and Reserves.
As part of the
Feasibility Study, Mineral Resources have been updated and estimated for the West Zone of the mining property. These Mineral Resources
are based on 8,274 assay intervals collected from 27,888 m of core drilling and three surface trenches providing 207 channel samples.
Proper quality control measures, including the insertion of duplicate, blank, and standard samples, were used throughout the exploration
programs and returned within acceptable limits.
Current Pit-Constrained
Mineral Resource Estimate for the West Zone1
| | |
| Current
Resource (May 20, 2022) 7 | |
| Mineral
Resource Category2 | |
| Tonnage
(Mt)5,6 | | |
| Grade
(% Cg)3 | | |
| Contained
Graphite (Mt) | |
| Measured | |
| 28.5 | | |
| 4.28 | | |
| 1.22 | |
| Indicated | |
| 101.8 | | |
| 4.26 | | |
| 4.33 | |
| Measured + Indicated | |
| 130.3 | | |
| 4.26 | | |
| 5.55 | |
| Inferred4 | |
| 23.0 | | |
| 4.28 | | |
| 0.98 | |
| 1 | The
Mineral Resources provided in this table were estimated by Yann Camus, P.Eng. SGS of Canada
Inc. - Geological Services (“SGS Geological Services”) using current Canadian
Institute of Mining, Metallurgy and Petroleum (“CIM”) Standards on Mineral Resources
and Reserves, Definitions and Guidelines. |
| 2 | Mineral
Resources that are not Mineral Reserves have not demonstrated economic viability. Additional
trenching and/or drilling will be required to convert Inferred and Indicated Mineral Resources
to Measured Mineral Resources. There is no certainty that any part of a Mineral Resource
will ever be converted into Reserves. |
| 3 | All
analyses used for the Resource Estimates were performed by ALS Minerals Laboratories and
delivered as graphitic carbon (“% Cg”), internal analytical code C-IR18. |
| 4 | Inferred
Mineral Resources represent material that is considered too speculative to be included in
economic evaluations. Additional trenching and/or drilling will be required to convert Inferred
Mineral Resources to Indicated or Measured Mineral Resources. It cannot be assumed that all
or any part of the inferred resources will ever be upgraded to a higher resource category. |
| 5 | Current
Resource effective May 20, 2022. |
| 6 | Mineral
Resources are stated at a cut-off grade of 1.78 % Cg. |
| 7 | Standards
used for this resource update are the same standards produced over the course of the 2018
Feasibility Study (effective as of July 10, 2018, and issued on December 10, 2018)
and the Resource Update (results published March 19, 2020). The difference comes mainly
from a newly accessible land package along the Hydro-Québec power line. |
A combined Mineral
Resource of the South-East and South-West zones is also present on the mining property. While these deposits are part of the mining property,
they have not been studied to be integrated in the Mineral Reserves or the mine plan.
| Management Discussion and Analysis | 11 |
Matawinie Mineral
Reserves for the West Zone
| Category | |
Tonnage
(Mt) | | |
Grade
(% Cg) | | |
Contained
Graphite (Mt) | |
| Proven | |
| 17.3 | | |
| 4.16 | | |
| 0.7 | |
| Probable | |
| 44.3 | | |
| 4.26 | | |
| 1.9 | |
| Proven &
Probable | |
| 61.7 | | |
| 4.23 | | |
| 2.6 | |
The Qualified
Person for the Mineral Reserve Estimate is Jeffrey Cassoff, P.Eng., of BBA Inc.
The effective
date of the estimate is July 6, 2022.
Mineral Reserves
were estimated using a graphite concentrate average selling price of C$2,135/tonne, and considering a 2% royalty, and selling costs of
C$47.92/tonne. An average grade of 97% was considered for the graphite concentrate.
A metallurgical
recovery of 93% was used.
A cut-off grade
of 2.20% Cg was used.
The strip ratio
for the open pit is 1.16 to 1.
The Mineral Reserves
are inclusive of mining dilution and ore loss.
The reference
point for the Mineral Reserves is the primary crusher.
Totals may not
add due to rounding.
Matawinie Mine
Demonstration Plant (Phase 1)
Since 2018, the
Company has been operating a concentrator demonstration plant in Saint-Michel-des-Saints to support its business strategy and notably
to:
| » | qualify
the Company’s graphite products and establish a sales record; |
| » | test
and improve processes for commercial operations; |
| » | test
new innovative technologies of tailings management and site restoration; and |
| » | train
employees and promote future employment opportunities to local labor. |
Several hundred
tonnes of graphite concentrate are being produced on an annual basis with the materials extracted from the West Zone Deposit of the Matawinie
graphite property with grades between 94-98% Cg (as per technical requirements). Production serves as the feedstock for the Company’s
Phase-1 battery material demonstration plants and as samples for potential customers interested in high-purity flake graphite.
Matawinie Mine
(Phase 2)
The ministerial
decree authorizing the project supports the technical feasibility and commercial viability of the Matawinie Mine and provides NMG with
the parameters to build and operate the Phase-2 facilities, subject to additional financing. Through an innovative coordination table
set up by the Québec Government, NMG works collaboratively with various authorities to prepare and ease the permitting process
for the various construction and/operation activities.
The detailed engineering
and procurement activities for the construction of the mine and concentrator continue to progress with the technical team.
| » | Tier-1
supplier Metso Outotec supports procurement of the process equipment chain, drawings review
as well as design and integration efficiencies. |
| » | Detailed
engineering and optimization of systems continue to progress. |
| » | Results
from the experimental co-disposal test cells are positive, validating the co-disposal technology
developed by NMG. |
The project contracting
and execution strategy has now been finalized for the upcoming construction of the mine once FID is reached. NMG is advancing its hiring
plan accordingly and engaging with contractors to select a Construction Manager that will be responsible for the construction site management
and administration of all the construction contracts.
| Management Discussion and Analysis | 12 |
NMG started early
works in 2021 to prepare the site for the mine industrial platform and the access road connecting the project to the local highway.
| » | Initial
tree clearing was completed before the nesting season to limit impacts on avifauna. |
| » | On-site
construction work started in July 2021 to build the 8-km access road and was completed
in December 2021. |
| » | Construction
resumed in 2022 and continued up to January 2023 to build environmental infrastructure
such as water ditches, a water collection basin, as well as organic and overburden stockpiles,
and prepare the site for the next phase of civil works. |
| » | Proactive
sorting and piling of excavated material helped optimize topsoil, overburden, and rock management. |
Wood harvested
as part of tree clearing for preliminary works was transformed by regional sawmills and wood product manufacturers to optimize carbon
sequestration and local economic benefits. Additional proactive environmental management enabled the advancement of initiatives in support
to progressive site reclamation.
| » | Hydroseeding
of the access road borders on a total surface of 4 hectares, enables the testing of 24 native
species in different mixes, soil conditions, and ground relief. In addition to helping vegetate
the site, control potential dust emissions, and minimize erosion, the seeding provides insight
into the ideal parameters for future site restoration. Over the next three to five years,
the zones seeded will be subject to regular monitoring and documentation. |
| » | Through
a plantation of 5,000 willows on its Phase-1 mining site, NMG is establishing a circular
environmental system. Willow’s phytoremediation capabilities are to be leveraged to
complement the Company’s integrated water management system by reducing the volume
of treated water. The project also allows for the capture and sequestration of carbon by
the willows as well as the in-situ production of biomass, organic matter input for vegetation,
to support the progressive restoration of the site. |
| » | NMG
continued its active management of on-site resources with a view for progressive reclamation
with the deposition of windrows resulting from the stripping of the site to create organic
matter. |
As part of its
electrification strategy, the Company is committed to having both its heavy equipment used for mining operations and its ore concentration
and processing activities become fully electric within the first five years of production. This operating model, which would make it
one of the first all-electric open-pit operations in the world, represents a potential reduction of over 300,000 tonnes of CO2
emissions over the mine’s lifespan as well as a significant advantage over peers globally.
On the foundation
of their 2021 collaboration agreement and of technical work achieved together over the past two years, NMG and Caterpillar have signed
definitive agreements to supply NMG’s Matawinie Mine with an integrated solution that covers a zero-exhaust emission fleet, supporting
infrastructure, and service. Caterpillar is set to be NMG’s supplier of heavy mining equipment, supporting the progressive transition
from traditional models to Cat® zero-exhaust emission machines as they become available.
| » | Technical
teams will work in close collaboration to test Caterpillar’s Early Learner models and
pilot units and support technology development. NMG will make use of these machines in actual
mining operations and gather data from on-site utilization in a variety of weather, terrain,
and operational conditions. |
| » | Depending
on the commercialization of Cat® zero-exhaust emission machines, Caterpillar will
reserve production slots, which should enable the Company to benefit from timely deliveries
and technology enhancements throughout the duration of the contract. |
| Management Discussion and Analysis | 13 |
| » | Caterpillar’s
Job Site Solutions will help reduce NMG’s initial capital intensity for the Matawinie
Mine by providing access to equipment through an hourly fee based on usage and includes asset
management support to help improve uptime, predictability, and efficiency. |
NMG has been selected as a premier mining
partner of the Canadian and Québec governments as they roll out their electrification strategy. Through a collaborative endeavor
bringing together research and industry leaders, the Company also supports the development and testing of electric systems and rapid
recharging infrastructure for heavy vehicles adapted to open-pit mining.
| » | The
technological development and conversion of a 40-tonne electric mining service truck are
completed with the project partners; testing has started at the Innovative Vehicle Institute. |
| » | On-site
testing at the Matawinie Mine construction site should start in 2023 and generate a valuable
source of data from the testing of different in situ operational parameters to optimize
the Company’s electrification plan. |
Furthermore, the
Company has mandated Hydro-Québec, the state-owned corporation that produces, transports, and delivers power, to develop, install
and operate a 120-kV electrical line that will supply the mine site and help meet its carbon-neutrality target. A dedicated line will
connect the Matawinie Mine and concentrator to Hydro-Québec’s hydropower network to enable the full electrification of its
operations.
UATNAN
MINING project
On May 15,
2022, NMG entered into an investment agreement with Mason Graphite to explore the potential development of the Lac Guéret graphite
deposit. The transaction, as approved by Mason Graphite’s shareholders, entails:
| » | $5
million equity-investment by NMG in Mason, in two installments; |
| » | Project
development through a preliminary economic assessment with a project capacity of a minimum
of 250,000 tonnes per annum, following NI 43-101 rules and guidelines; |
| » | Upon
completion of technical studies and a $10-million investment in related works (which includes
technical studies work), and at the time of acceptance of such technical studies work by
Mason, NMG shall be deemed to have acquired 51% participation in the Uatnan property and
will be appointed as operator. The joint venture would be funded by each party per its proportionate
share of each of the approved work programs. |
Following the successful
closing of the investment agreement, NMG and Mason initiated a PEA on the Lac Guéret graphite deposit with consultants BBA and
GoldMinds Geoservices Inc. On January 10, 2023, NMG released the results of the assessment and announced a name change to Uatnan
Mining Project considering the significant modifications to Mason Graphite’s original project.
Targeted as NMG’s
Phase-3, the Uatnan Mining Project aligns with the Company’s growth strategy with a view to establishing a large and fully vertically
integrated natural graphite production, from ore to battery materials, at the western markets’ doorstep.
Property and
Mineral Resources
The Uatnan property
presently consists of 74 map-designated claims totalling 3,999.52 hectares (“ha”), wholly owned (100%) by Mason Graphite.
The Uatnan Mining Project is located in the Côte-Nord administrative region, Québec, Canada, approximately 220 km as the
crow flies, north northwest of the closest community, the town of Baie-Comeau. It is accessible year-round by provincial paved road 389
and Class-1 forestry roads.
| Management Discussion and Analysis | 14 |
Exploration work
on the Uatnan property targeted graphite mineralization and consists to date of airborne geophysics, prospecting, ground geophysics,
trenching/channel sampling, and core drilling. Exploration work uncovered significant crystalline flake graphite mineralization, ultimately
leading to the identification of Mineral Resources and Mineral Reserves (see Mason Graphite’s press release dated November 9,
2015). Although parameters to determine reasonable prospects for eventual economic extraction (RPEE) were updated, there are no significant
changes between the current Mineral Resources and the Mineral Resources last published in 2015.
Uatnan
Current Pit-Constrained Mineral Resource Estimate
| IN-PIT CONSTRAINED
MINERAL RESOURCES | |
Tonnes
(Mt) | | |
Grade
(% Cg) | | |
Cg
(Mt) | |
| Measured
5.75% < Cg < 25% | |
15.65 | | |
15.2 | | |
2.38 | |
| Measured
Cg > 25% | |
3.35 | | |
30.6 | | |
1.02 | |
| Total
Measured | |
19.02 | | |
17.9 | | |
3.40 | |
| Indicated
5.75% < Cg < 25% | |
40.29 | | |
14.6 | | |
5.89 | |
| Indicated
Cg > 25% | |
6.33 | | |
31.6 | | |
2.00 | |
| Total
Indicated | |
46.62 | | |
16.9 | | |
7.89 | |
| Indicated
+ Measured 5.75% < Cg < 25% | |
55.94 | | |
14.8 | | |
8.27 | |
| Indicated
+ Measured Cg > 25% | |
9.70 | | |
31.2 | | |
3.03 | |
| Total
Measured + Indicated | |
65.64 | | |
17.2 | | |
11.30 | |
| Inferred
5.75% < Cg < 25% | |
15.35 | | |
14.9 | | |
2.28 | |
| Inferred
Cg > 25% | |
2.47 | | |
31.8 | | |
0.79 | |
| Total
Inferred | |
17.82 | | |
17.2 | | |
3.07 | |
Notes:
| 1. | The
Mineral Resources provided in this table were estimated by M. Rachidi P.Geo., and C. Duplessis,
Eng., (QPs) of GoldMinds Geoservices Inc., using current Canadian Institute of Mining, Metallurgy
and Petroleum (CIM) Standards on Mineral Resources and Reserves, Definitions and Guidelines. |
| 2. | Mineral
Resources which are not Mineral Reserves do not have demonstrated economic viability. The
estimate of Mineral Resources may be materially affected by environmental, permitting, legal,
title, market or other relevant issues. The quantity and grade of reported Inferred Mineral
Resources are uncertain in nature and there has not been sufficient work to define these
Inferred Mineral Resources as indicated or Measured Mineral Resources. There is no certainty
that any part of a Mineral Resource will ever be converted into Mineral Reserves. |
| 3. | The
Mineral Resources presented here were estimated with a block size of 3mE x 3mN x 3mZ. The
blocks were interpolated from equal-length composites (3 m) calculated from the
mineralized intervals. |
| 4. | The
Mineral Resource estimate was completed using the inverse distance to the square methodology
utilizing three runs. For run 1, the number of composites was limited to ten with a maximum
of two composites from the same drillhole. For runs two and three the number of composites
was limited to ten with a maximum of one composite from the same drillhole. |
| 5. | The
Measured Mineral Resources classified using a minimum of four drillholes. Indicated resources
classified using a minimum of two drillholes. The Inferred Mineral Resources were classified
by a minimum of one drillholes. |
| 6. | Tonnage
estimates are based on a fixed density of 2.9 t/m3. |
| 7. | A
pit shell to constrain the Mineral Resources was developed using the parameters presented
in the PEA. The effective date of the current Mineral Resources is January 10, 2023. |
| 8. | Mineral
Resources are stated at a cut-off grade of 5.75% C(g). |
Uatnan Mining
Project (Phase 3)
The
Uatnan Mining Project optimizes the Mineral Resources and expands the original mining project tenfold with a production of approximately
500,000 tpa of graphite concentrate, entirely destined for the anode material manufacturing market.
The
Uatnan Mining Project would be operated as a conventional open-pit with a concentrator near the deposit and electricity to be sourced
from the Manic-5 hydroelectric power station. In line with NMG’s responsible mining approach, plans include progressive site closure
with backfilling of the pit with waste rock as much as possible and assessment of fleet electrification.
| Management Discussion and Analysis | 15 |
Operational Parameters
of the Uatnan Mining Project
| OPERATIONAL PARAMETERS |
|
| LOM | |
24 years |
| Nominal annual processing rate | |
3.4 M tonnes |
| Stripping ratio (LOM) | |
1.3:1 |
| Average grade (LOM) | |
17.5% Cg |
| Average graphite recovery | |
85% |
| Average annual graphite concentrate
production (LOM) | |
500,000 tonnes |
| Finished product purity | |
94% Cg |
Cautionary Note:
The PEA is preliminary in nature and includes Inferred Mineral Resources, considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the PEA will
be realized. Mineral resources that are not mineral reserves have not demonstrated economic viability. Additional trenching
and/or drilling will be required to convert inferred mineral resources to indicated or measured mineral resources. There is no certainty
that the resources development, production, and economic forecasts on which this PEA is based will be realized.
Design
of the Uatnan Mining Project has been tailored to the needs of the battery and EV market, orienting production volumes for beneficiation
in order to produce active anode material. The PEA shows strong economics for NMG’s updated operational parameters and production
volumes.
Economic Highlights
of the Uatnan Mining Project
| ECONOMIC HIGHLIGHTS | |
Uatnan Mining Project |
| Pre-tax NPV (8% discount rate) | |
C$ 3,613 M |
| After-tax NPV (8 % discount rate) | |
C$ 2,173 M |
| Pre-tax IRR | |
32.6% |
| After-tax IRR | |
25.9% |
| Pre-tax payback | |
2.8 years |
| After-tax payback | |
3.2 years |
| Initial CAPEX | |
C$ 1,417 M |
| Sustaining CAPEX | |
C$ 147 M |
| LOM OPEX | |
C$ 3,236 M |
| Annual OPEX | |
C$ 135 M |
| OPEX per tonne of graphite concentrate | |
C$ 268/tonne |
| Concentrate selling price | |
US$ 1,100/tonne |
All
costs are in Canadian dollars with the exception of the graphite sale price which is provided in US dollars.
On
the basis of these positive results, NMG plans to launch an updated feasibility study. The Company intends to leverage the expertise
of its technical team, its Phase-1 facilities, and its knowledge of the graphite-based advanced materials commercial landscape to further
define the economic, technical, and environmental possibilities of developing the Uatnan Mining Project.
Commercial
strategy
Sales
The integrated
material flowsheet developed by NMG is designed to leverage the distribution of graphite concentrate flake sizes to be produced at the
Phase-2 Matawinie Mine by catering to the most profitable market segments. Jumbo to coarse flakes will be destined to high-purity, high-margin
specialty, and traditional markets while fine to intermediate flakes will be transformed into CSPG at the Phase-2 Bécancour Battery
Material Plant for sales as anode material for lithium-ion battery applications. A portion of jumbo flakes will also undergo refinement
at the Bécancour Battery Material Plant to produce purified jumbo flakes for niche applications such as bipolar plates in hydrogen
fuel cells. By-products from this facility will also be sold to optimize the Bécancour basket price.
| Management Discussion and Analysis | 16 |
| » | As
part of the Feasibility Study, Benchmark Mineral Intelligence, an IOSCO-regulated price reporting
agency and market intelligence publisher for the lithium-ion battery to EV supply chain,
provided pricing estimates for the North American market. The Company is expected to have
competitive advantages over international producers, namely its carbon-neutral footprint,
multimodal logistical base, stable political jurisdiction, and exclusion from U.S. import
tariffs on graphite. |
Beyond commercialization
of Phase-2 production, the development of the Uatnan Mining Project supports the Company’s commercial discussions with OEMs and
lithium-ion battery cell makers seeking to secure significant graphite volumes amidst growing market demand and a projected structural
deficit of production (Benchmark Mineral Intelligence, December 2022).
Commercial Agreements
In April 2023,
NMG signed a memorandum of understanding with Caterpillar (“Caterpillar MoU”) to advance commercial discussions targeting
NMG’s active anode material. Through this Caterpillar MoU, a full circular value chain could be established whereas NMG would supply
carbon-neutral graphite materials to Caterpillar for the development of its secure, resilient, and sustainable battery supply chain that
would serve to electrify heavy vehicles, including NMG’s Matawinie fleet.
On October 19,
2022, the Company signed a memorandum of understanding (the “Offtake MoU”) with Panasonic Energy to confirm intentions
for a multi-year offtake agreement for a significant portion of NMG’s active anode material out of NMG’s fully integrated
“ore-to-anode-material” Phase-2 facilities.
| » | NMG
and Panasonic Energy are actively working together to finalize product qualification and
establish a contemplated definitive offtake agreement. Meetings and on-site visits continue
to help advance technical and commercial components. |
| » | NMG’s
industry-leading environmental footprint as established by an independent recent life cycle
assessment and strong ESG credentials are aligned with Panasonic’s vision and support its
decarbonization commitment. |
| » | A
complementary framework agreement was concluded between NMG, Panasonic Energy and Mitsui
for the development and further commercialization of NMG’s integrated anode material
operations. The agreement looks to optimize the Feasibility Study and other important project-related
operational milestones with a view to proceeding with project financing and the final investment
decision on the Phase-2 Matawinie Mine and Bécancour Battery Material Plant. |
| » | Mitsui
rallied behind NMG as a strategic investor and will support NMG’s marketing initiatives
for specific markets. |
On February 14,
2019, the Company entered into a binding offtake and joint marketing agreement with Traxys for flake graphite concentrate to be produced
at the Company’s Saint-Michel-des-Saints facilities.
| » | Traxys
market flake graphite concentrate from the Company’s operating graphite demonstration
plants for customer product prequalification purposes. |
| » | For
each of the first five years of the Company’s commercial production, 25,000 tonnes
of flake graphite product will be sold through Traxys by NMG. |
| » | Traxys
have the exclusive right to market, distribute and resell the flake graphite products to
its customer base. |
| Management Discussion and Analysis | 17 |
Business Development
In line with its
active marketing and commercialization program, NMG continues to qualify anode material samples with leading battery and EV manufacturers,
as well as purified jumbo flakes for niche applications such as hydrogen fuel-cells. The Company’s Phase-1 operations support technical
marketing and product qualification efforts.
| » | Production
at the Phase-1 facilities and testing at NMG’s laboratory enable the supply of graphite
products in a variety of specifications to meet the individual requirements of each manufacturer. |
| » | As
part of sales discussions, samples are produced, tested, and supplied to potential customers.
NMG has advanced into the qualification process with several manufacturers, now providing
A & B samples. |
| » | Sustained
interest from top-tier potential customers across continents is supported by quality checks,
site visits to the Company’s Phase-1 operations, requests for information and environmental
due diligence. |
To validate compliance
with specifications and test NMG materials’ performance, samples are submitted to quality, cycling, and electrochemical tests at
the Company’s battery laboratory as well as at third-party’s and/or potential customers’ laboratories.
NMG is actively
strengthening quality assurance and quality control with the development of an ISO 9001-compliant management system to support the Company’s
certification objectives, the groundwork for which has commenced in Q1-2022. A laboratory information management system to streamline
the flow of samples and associated data for improved lab efficiency is also being deployed. The Company progresses along its quality
roadmap through process definition, documentation, quality control planning, and internal audits.
Partnerships,
research and development
NMG has submitted
a patent application for its proprietary thermochemical purification technology, a greener and more sustainable alternative to that currently
used in traditional anode material production, to the U.S. Patent and Trademark Office as part of its intellectual property strategy.
NMG is operating
a laboratory at its battery material demonstration plants, an addition to the Company’s existing quality testing facilities. This
expansion was triggered by NMG’s commitment to catering to the market’s requirements for high-performing and environmentally
responsible battery materials that can be tailored to a variety of specifications.
In August 2022,
NMG secured a $5.75 million grant from Sustainable Development Technology Canada, a flagship program from the Government of Canada, for
the deployment of its proprietary coating technology. The Québec Government also confirmed on January 13, 2023, a financial
assistance of up to $3 million through its Technoclimat program for that project. The Company’s innovative coating technology could
generate up to 25% energy reduction, optimize production flow, and provide versatility for different precursors as R&D advances.
The Company also
maintains a portfolio of research and development projects to refine its line of specialty products based on market demands and innovations,
among which:
| » | NMG
is working with materials engineering expert Philippe Ouzilleau, a professor at McGill
University, and his research team to develop new types of precursors and coating technologies
to reduce the environmental footprint of its advanced graphite products, optimize production
costs, and improve the properties for existing performance. |
| Management Discussion and Analysis | 18 |
| » | In
collaboration with Professor Lionel Roué from the Énergie Matériaux
Télécommunications Research Centre of the Institut national de la recherche
scientifique and Professor Philippe Ouzilleau from McGill University, NMG intends to develop
a series of high electrochemical performance graphite-based composites by valorizing residual
materials from NMG’s process as well as bio-sourced materials. |
| » | The
Company also collaborates with Professors Gervais Soucy and Jocelyn Veilleux of the University
of Sherbrooke on advanced graphite transformation technologies based on high-performance
ecological thermal processes. |
NMG has signed
a collaboration agreement with Lithion Recycling for the recovery and value-added transformation of recycled graphite for reuse as anode
material for lithium-ion batteries. The partnership aims at leveraging NMG’s and Lithion’s proprietary processes and
expertise to promote graphite circularity and better position both companies in the evolving global market.
NMG has been admitted
as an active member of the Global Battery Alliance, a World Economic Forum’s initiative dedicated to helping establish a sustainable
battery value chain, which makes NMG one of the first battery materials producers to be admitted.
| » | In
January 2023, the Global Battery Alliance launched the Battery Passport proof of
concept, a major leap towards globalized standards for sustainable battery production. NMG
contributed to the endeavour by informing the Global Battery Alliance’s traceability
efforts and engaging as an active member of the association. |
Market
update
While industrial
demand for natural graphite remains stable, lithium-ion batteries continue to drive unprecedented market growth as graphite-based anode
constitutes the standard across all lithium-ion battery chemistries. With China being the only producer of spherical graphite for that
application, the situation has reinforced the need for local and resilient supply chains.
| » | NMG
is set to become the largest fully integrated producer of natural graphite in North America,
benefiting in this respect. |
Technological trends
and new greenhouse gas (“GHG”) policies have pushed the graphite market, mainly with regard to lithium-ion batteries
and fuel-cell technologies, into an accelerated growth curve. Western governments are deploying programs, policies, and business incentives
to support the development of local capacity and reduce overreliance on Chinese supply.
| » | The
European Union, Canada and the U.S. have identified graphite as a strategic mineral for economic
growth and national security. |
| » | Canada
has now outlined partnerships with both the European Union and the U.S. to secure supply
chains and encourage market diversification from China’s raw materials. |
| » | In
2022, both the U.S. and Canadian governments have announced investments in the development
of North American critical minerals production to ensure the domestic supply required to
build a local battery economy. |
| » | In
Q3-2022, the U.S. government adopted the Inflation Reduction Act of 2022 that namely
promotes EV adoption through consumer incentives, North American sourcing and production
for the lithium-ion battery supply chain, and development of charging infrastructure. The
Act has brought even more interest towards NMG as it is projected to be the only fully integrated
source of natural graphite, from mine to anode material, in North America with significant
volume. |
As EVs, renewable
energy solutions and electronics continue to gain market shares, global battery production expands to meet this demand. 2023 will see
battery production reach 1 TWh for the first time. The EV market represents 79% of total lithium-ion battery demand, energy stationary
storage 14% – the fastest growing segment – and portable electronics 7% (Benchmark Mineral Intelligence, Q1-2023).
| Management Discussion and Analysis | 19 |
| » | EV
sales are expected to reach 22.5 million units by 2025 (Rho Motion, Q1-2023). |
| » | With
a projected 8,493 GWh of global lithium-ion battery production capacity by 2030, demand for
advanced materials is set to increase up to fivefold, with graphite outpacing the other battery
metals (Benchmark Mineral Intelligence, April 2023) at 10,809,000 tpa. |
| » | To
meet consumer demand and tap into governmental programs, the world’s top automakers
are now projected to spend nearly $1.2 trillion by 2030 on sourcing batteries and raw materials,
and producing EVs (Reuters, October 2022). |
Indeed, manufacturers
are facing a challenge as raw materials required to produce these battery-powered applications are becoming constrained. OEMs, feeling
this supply chain pressure, are turning their attention upstream to secure supplies and reduce their risks. Through direct development,
joint ventures or strategic alliances, processing and mining are now gaining manufacturers’ attention.
The market is shifting
towards localization. Canada is among the emerging leaders of this new economy, ranking second after China according to BloombergNEF’s
annual global lithium-ion battery supply chain report (November 2022), due to its mineral resources, ESG factors, key infrastructure,
innovation, and industry including Québec’s battery valley in Bécancour. NMG’s site for its Phase-2 Bécancour
Battery Material Plant is indeed located at the center of this fast-developing zone, supported by the Québec Government’s
battery hub strategy.
Concurrently, there
is increased focus on carbon neutrality in the market to cater to consumers’ green expectations and governments’ more stringent
environmental regulations. From the Global Battery Alliance’s effort to develop a Battery Passport to the European Commission’s
proposed updated Battery Directive that would require labelling of batteries to disclose their carbon footprint, the market is shifting
to encourage and eventually potentially require low-carbon products. The European Union, which already set GHG emissions limits for EVs
and industrial batteries, adopted a deadline on combustion engine production by 2035 as it steps up the fight against climate change
through faster adoption of EVs.
NMG is positioning
itself to respond to these market trends. The Company is ideally located to cater to the North American and European markets with its
large graphite deposit, proprietary ecotechnologies, demonstrated production capacity, carbon-neutral profile as well as preferential
jurisdiction advantages including clean hydropower, flexible logistical base and stable fiscal and political environment.
Responsibilities
From mining to
advanced manufacturing, NMG strives to drive greater sustainability along its value chain. The Company embedded leading ESG principles
in its business model alongside carbon-neutral operations and traceability of its value chain. Sustainability guided the development
of the Matawinie Mine Project from day one through extensive stakeholder engagement and pioneering design choices to protect the environment,
and was carried over in the engineering of the Battery Material Plant Project and the development of the Uatnan Mining Project.
On a foundation
of accountability with a view to contributing to global environmental and sustainability goals, NMG publishes an annual ESG Report to
disclose its managerial approach to addressing material topics and highlight significant sustainability milestones and indicators. The
Company is committed to engaging in this transparency exercise yearly to provide its stakeholders with a comprehensive set of data on
its ESG performance; the 2022 ESG Report was issued on May 10, 2023.
| Management Discussion and Analysis | 20 |
In an independent
assessment of the Company’s sustainability performance, Moody’s ESG Solutions has provided a Sustainability Rating of A2
(‘Robust’), the second-highest grade on its rating scale, to NMG. The rating can be consulted on the Company’s website.
Human
capital
Health &
Safety
The Company is
committed to providing a safe work environment to its staff and business partners. For the period ended March 31, 2023, NMG had
an Occupational Safety and Health Administration (“OSHA”) Recordable Incident Rate of 0.
| » | The
Company also tracks the contractors’ health and safety performance on-site; the OSHA
Recordable Incident Rate is at 0, for the period. |
Employment,
Diversity, Equity & Inclusion
As the Company
advances its projects, recruitment of key personnel continues both at the operational and corporate levels. NMG regards diversity as
an important driver of strategy, creative thinking, and business performance. The Company promotes local and Indigenous recruitment opportunities
to maximize benefits within its communities and strive to ensure representation of its milieu.
NMG recognizes
that attraction, hiring, and retention of human capital pose challenges in today’s tight labor market. Hence, NMG is actively working
to position itself as an employer of choice and a purpose-driven company in its communities, industries, and academic circles.
Training
To facilitate employment
and bolster communities’ socioeconomic fabric, NMG has launched initiatives to train and hire local workers in collaboration with
industrial, institutional, and business partners.
| » | Diploma
of Vocational Studies in Production Equipment Operation: Eight cohorts of this on-the-job
training program leading graduates to a position as an operator at the Matawinie Phase-1
demonstration plants have now been launched. |
| » | Mining
and Logging Essentials: This sociovocational integration program destined to members of the
Atikamekw communities aims to reinforce the employability of Indigenous workers. Following
a COVID-19-imposed pause, the program was launched in Q2-2022 and completed in early Q3-2022
with eight graduating students. One graduating student, supported by NMG, has enrolled in
the seventh cohort of the Diploma of Vocational Studies in Production Equipment Operation
to pursue his education and obtain a position within the Company. |
NMG holds two-day,
all-staff Employee Summits once or twice a year to dispense training on key themes (e.g. environment, quality, sustainability, health
and safety, etc.), provide alignment between leadership and operational themes, carry workshops to improve practices, and offer
continuous learning and self-development opportunities.
Environment
The Company is
developing its projects to extract and transform natural graphite while limiting its environmental footprint, preserving ecosystems,
maintaining its carbon-neutral status, and maximizing its products’ contribution to global decarbonization efforts. Dedicated to
stringent sustainable development standards, NMG is committed to adopting a fully electric operating model – both at the mining
and advanced manufacturing facilities – leveraging Québec’s renewable hydropower.
| Management Discussion and Analysis | 21 |
Responsible
Mining
NMG has integrated
innovative environmental initiatives to limit the Matawinie Mine’s potential impact on the natural and human milieu. On April 15,
2019, the Company officially filed its Environmental and Social Impact Assessment (“ESIA”) for the Matawinie Mine
with the Government of Québec. Following its analysis by 25 provincial agencies and ministries, the Québec Ministère
de l’Environnement et de la Lutte contre les changements climatiques gave the Bureau d’audiences publiques sur l’environnement
(“BAPE”) the mandate to launch a public consultation. Public hearings held in January and February 2020
informed the Commission’s report, which was tabled in June 2020.
| » | The
Commission recognized the economic justification, environmental innovations, integration
measures and social benefits associated with the mining project and identified avenues for
enhancement. |
| » | Following
a rigorous environmental review complementary to the BAPE’s analysis, the Québec
Government issued a ministerial decree on February 10, 2021, authorizing NMG’s
Matawinie Mine. |
To protect the
environment and the well-being of the community, NMG has developed an environmental surveillance and monitoring program to oversee the
construction, operation, and closure activities of the Matawinie Mine.
| » | In
2022, NMG maintained its track record with no major environmental incidents as per the Global
Reporting Initiative’s definition. Through its work protocols, continuous monitoring,
and environmental program, it responsibly conducted its operations and worked to diligently
address and mitigate any minor incident at its sites. |
| » | An
artificial intelligence system is being implemented to monitor the sound climate and ensure
compliance with regulation in preparation of our commercial mining activities. |
Mine tailings represent
a significant environmental responsibility. NMG has put forward innovative design criteria by prioritizing the desulphurization of tailings,
the gradual backfilling of the pit, and the co-disposal of waste rock and tailings. Field-scale cells were built in 2020 to demonstrate
in real conditions the performance of this innovative environmental method and calibrate the parameters with respect to the performance
of the tailings co-disposal objectives design including preventing sulfide oxidation and mine water contamination. The field test cells
are instrumented to study their geochemical behavior under real conditions with sensors monitoring oxygen, water, and temperature. The
Company’s Environment team monitors the evolution of these parameters, thus supporting the optimization of tailings deposition
plans of the future commercial mine. Positive results from the cells validate the co-disposal technology developed by NMG.
As detailed under
the Matawinie Mine (Phase 2) subsection, progressive site reclamation planning and site tests are underway as part of the Company’s
proactive environmental management and commitment to no net loss.
Sustainable
Production
NMG is committed
to promoting responsible production across its value chain for responsibly extracted, environmentally transformed, and ethically sourced
materials. The Company mandated a specialized consultant to carry out an independent cradle-to-gate life cycle assessment for its portfolio
of graphite-based materials. On July 18, 2022, the Company published the assessment results that confirmed the minimal and industry-leading
environmental footprint of its planned production. NMG’s full commercial-scale Phase-2 all-electric facilities are forecasted to
produce CSPG – anode material for lithium-ion batteries – with a Global Warming Potential GWP of 1.23 kg CO2 equivalent
per kg, an impact up to 11 times smaller than that of benchmarked production.
| Management Discussion and Analysis | 22 |
| » | The
low environmental impact of NMG’s products supports customers’ search for sources
that reduce their Scope 3 greenhouse gas emissions and complies with increasingly stringent
regulations while also providing insight to strengthen the Company’s environmental
efforts, continuous improvement, and climate action. |
| » | Panasonic
Energy’s decision to partner with NMG is partly attributable to the Company’s
demonstrated green production model as highlighted in Panasonic Energy’s announcement:
“Being able to utilize NMG’s low environmental impact graphite is a major step
toward our goal of halving our carbon footprint by FY2031” (Panasonic, October 2022). |
| » | Integrated
into the life cycle assessment report is a benchmarking exercise conducted by Minviro, a
life cycle assessment and sustainability consultant in the battery material space, comparing
the footprint of CSPG from natural graphite along three production routes. |
NMG continues to
seek opportunities to enhance the properties of its materials, optimize technological solutions, reduce its footprint, improve its products’
life cycle, and develop recycling processes to drive sustainable production across the various industries it caters to.
Carbon
neutrality
Taking responsibility
for its environmental footprint, the Company has taken concrete steps to avoid, reduce, and fully offset its GHG emissions, confirming
its carbon-neutral status and mapping its intended transition to Net Zero by 2030. On February 24, 2022, NMG released its Climate
Action Plan detailing efforts for the Company’s embedded emissions around transparent reporting, reduction of its climate impact,
transition to Net Zero, research and development for low-carbon materials and activities, as well as industry leadership. NMG’s
targets are based on, but not limited to, all Scope 1, Scope 2, and some Scope 3 emissions, including business travel, direct emissions
associated with the facilities' construction and the transportation of goods between sites.
| » | For
2022, the Company reported GHG emissions of 1,229.1 tonnes of CO2 equivalent for
carrying out its operations at its Phase-1 demonstration plants and corporate offices. NMG
has purchased verified carbon credits to offset this balance. |
| » | Detailed
performance and historical data is available via NMG’s annual ESG Report; the 2022
ESG Report was published on May 10, 2023. |
NMG voluntarily
initiated reporting under the Climate Disclosure Project (“CDP”) in 2022 to demonstrate its management of climate risks and
opportunities, environmental performance and GHG reduction efforts, as well as climate action. CDP provides a transparent and recognized
disclosure system that enables investors and stakeholders to access and compare organizations’ environmental stewardship.
Social
NMG strives to
develop business activities that are supported by its communities and by First Nations and contribute to the overall development and
advancement of the areas where the Company operates.
| Management Discussion and Analysis | 23 |
The Matawinie Mine
is located in the municipality of Saint-Michel-des-Saints, approximately 120 km as the crow flies north of Montréal, Québec.
In keeping with its environmental and ethical development goals, the Company has launched many initiatives since the Matawinie graphite
deposit was discovered in 2015 to align the project with the realities, concerns, and values of the local community. Information events,
consultations as part of the ESIA, a community office with a dedicated Community Relations Manager, a Monitoring Committee, public communication
platforms and a social responsibility program ensure local communities are consulted early and often throughout the development process.
| » | A
collaboration and benefit-sharing agreement with the municipality of Saint-Michel-des-Saints
was signed in 2020 to set out a concrete social, economic and environmental development partnership
through financial and participatory mechanisms. |
NMG’s open
and proactive engagement approach also extends to its Bécancour Battery Material Plant in Bécancour, Québec. The
Company’s site is located in one of the largest industrial parks in Canada with access to a deep-water international port on the
St. Lawrence River. The Company initiated outreach activities in early 2022 and intends to continue as it makes progress in terms of
project development.
Upon the publishing
of the Uatnan Mining Project PEA results, NMG’s Management team carried out a series of on-site meetings with stakeholders in the
Baie-Comeau/Manicouagan region. Building on the first visit to the region, the Company representatives reinforced the dialogue with local
organizations, groups, citizens, authorities, and elected officials and presented the new project. NMG is committed to maintaining active
engagement with the milieu as it advances the development of the Uatnan Mining Project.
Indigenous Relations
Respect for the
rights, culture, aspirations, and interests of Indigenous peoples guides the development of NMG’s sustainable business practices.
The Company has
consulted and continues to engage with the Atikamekw First Nation in the Manawan community (85 km North of the Saint-Michel-des-Saints)
and with the Band Council in the development of the Matawinie Mine.
| » | NMG
signed a framework agreement (2018) and a pre-development agreement (2019) with the Atikamekw
First Nation to provide a guideline for negotiating an Impact and Benefit Agreement for the
Matawinie Mine Project. |
| » | NMG
is actively engaged in discussions with the First Nation to advance the Impact and Benefit
Agreement with a view to maximize opportunities. |
| » | In
parallel, initiatives support training, employment, and business opportunities in line with
the spirit of the contemplated Impact and Benefit Agreement. |
NMG is engaged
in an open dialogue with the Abenakis First Nation (Wôlinak community is 5 km South of Bécancour) as part of the development
of the Bécancour Battery Material Plant.
| » | An
archeological potential study was carried out by the Grand Conseil de la Nation Waban-Aki
in 2022 for NMG’s industrial land; no presence of archeological artifacts were confirmed. |
| » | Continued
dialogue and collaboration with the Ndakina Office which is responsible for consultation
and environmental protection are helping define interests, concerns, and opportunities for
cooperation. |
As part of the
Uatnan Mining Project, the Company has initiated a relationship with the Innu First Nation of Pessamit (315 km South of the property)
to understand their perspective, concerns, and priorities towards this project.
| Management Discussion and Analysis | 24 |
The Company appointed a Manager, Indigenous
Relations to liaise with Indigenous communities, leaders, and organizations. She develops engagement strategies to facilitate the participation
of the Indigenous workforce, businesses, and communities in NMG’s activities, coordinate flagship partnerships that support Indigenous
community priorities, and assist diversity, equity, and inclusion efforts within the Company.
NMG is committed to continuing its tradition
of listening and responding to community and First Nations’ concerns and needs, creating well-paying jobs for the local communities
to maximize local employment, be a leader in environmental stewardship, and invest in the region and province through tax generation
and the purchase of goods and services.
governance
Leadership
The Company’s management team and Board
of Directors recognize the value of good corporate governance and the need to adopt best practices in terms of social, economic, and
environmental responsibility. The Company’s Code of Conduct, Board of Directors’ charter, and key policies can be found on
NMG’s website.
The Company’s directors have vast expertise
in mining development and exploration; health, environment, and safety; legal and intellectual property; finance, investor relations
and financing; business administration and corporate governance; technology development and innovation; sustainability, diversity and
inclusion; manufacturing and construction; Indigenous relations; as well as sales and marketing.
| » | At
the Company’s 2022 Annual General Meeting of Shareholders, the mandates of Daniel Buron,
Eric Desaulniers, Arne H Frandsen, Jürgen Köhler, Nathalie Pilon, James Scarlett,
and Andrew Willis were reconfirmed as per shareholders’ vote. |
| » | Stephanie
Anderson was appointed to the Board of Directors on November 11, 2022. |
NMG recognizes
that a diverse and inclusive environment that values the diversity of thought, background, skills, and experience facilitates a broader
exchange of perspectives and improves oversight, decision-making and governance in the best interests of the Company. The Corporate
Governance and Nomination Committee, which is responsible for recommending director nominees to the Board of Directors, seeks to attract
high-quality individuals. In assessing potential candidates, the Committee considers their merit based on a balance of skills, abilities,
personal qualities, educational qualifications, and professional experience.
On March 23,
2023, the Board of Directors approved an overhaul of the charters of certain standing committees to better align with prevalent corporate
governance rules and best practices. The following committees support the Board of Directors’ activities: the Audit Committee;
the Human Resources, Diversity, Equity, and Inclusion, and Compensation Committee; the Corporate Governance and Nomination Committee;
the ESG, Health and Safety, and Sustainability Committee; as well as the Projects and Development Committee. Upon completion and approval
of the updated charters by the Board of Directors, they will be posted on the Corporation’s website at www.nmg.com.
NMG’s management team, leaders with distinctive
skillsets, qualities, and a shared sense of enthusiasm towards the Company’s vision, steers its development.
| » | In
April 2023, NMG nominated to its management team Stéphane Imbeault as Vice President,
Bécancour Project. |
| » | In
February 2023, NMG appointed Jean Cayouette as Vice President, Metallurgy &
Process. |
| Management Discussion and Analysis | 25 |
Risks
The Company operates in an industry that contains
various risks and uncertainties. For a more comprehensive discussion of these inherent risks, see “Risk Factors”’ in
the Company’s most recent annual information form and its prospectus supplements no. 1 and no. 2 on file with the Canadian provincial
securities regulatory authorities and on SEDAR and on EDGAR.
Financing
NMG continues to advance financing efforts for
the development of its fully vertically integrated Phase-2 operations, combining the Bécancour Battery Material Plant and Matawinie
Mine. Following the appointment of financial advisors to assist with the structuring and securing of project financing, the Company
has engaged with export credit agencies, governments, strategic investors, and potential customers to frame a robust capital structure
that leverages international debt, government funding and equity. NMG received formal expressions of interest to cover approximately
up to 70% of the estimated total funding for an integrated project, subject to standard project finance conditions.
| » | NMG’s
financing approach strives to further derisk its development by seeking to secure medium-term
debt, complemented by strategic equity participation. |
| » | NMG
appointed Société Générale as the sole mandated lead arranger
to oversee the due diligence process, support efforts to obtain final credit approval and
assist in offtake negotiations. |
| » | To
support the latest stages of project financing with its projected lenders, NMG hosted independent
consultants to its facilities to review the engineering, environmental and social components
of its current and projected operations as part of Société Générale’s
due diligence. |
| » | Through
a Framework Agreement signed on October 19, 2022, NMG, Mitsui, and Panasonic Energy
will work to optimize the Phase 2 parameters with the intention to proceed with project financing
and the final investment decision on both the Matawinie Mine and Bécancour Battery
Material Plant once that optimization phase is completed, and all operational variables are
well understood. |
In March 2023, the Canadian Government published
its 2023 budget which includes stimulus measures for the development of a national clean energy economy. A new Investment Tax Credit
for Clean Technology Manufacturing is set to provide Canadian businesses investing in eligible assets, which includes extraction and
processing of critical minerals such as graphite and anode materials, a refundable tax credit of up to 30% of eligible capital expenditures.
The Québec Government also included investment
incentives in its 2023 budget through a non-refundable credit of up to 25% on projects exceeding $100 million in the province, including
mining and advanced manufacturing. The Company is updating its financing structure to best capture these tax measures for the construction
of its Phase-2 Matawinie Mine and Bécancour Battery Material Plant.
On April 17,
2023, NMG closed a US $22 million public offering in the United States and Canada to bring the development of the Matawinie Mine Project
and the Bécancour Battery Material Plant Project to FID and project financing. Some of the net proceeds will be used as well for
the development of the Uatnan Mining Project and for general working capital and corporate expense needs. This financing
provides the Company with the flexibility to put in place all required elements that will lead to FID including but not limited to; securing
a definitive offtake with an anchor customer, finalizing the senior debt and equity packages, securing potential governmental support,
and optimizing Phase-1 processes.
On October 19, 2022, NMG entered into unsecured
convertible note subscription agreements with Mitsui, Pallinghurst and Investissement Québec pursuant to which NMG has agreed
to issue, upon closing of the transaction, to each holder an unsecured convertible note: Mitsui subscribed for US$25 million, while Pallinghurst,
and Investissement Québec each subscribed for US$12.5 million, for a total of US$50 million. On November 8, 2022, the Company
closed the previously announced private placement of unsecured convertible notes.
| Management Discussion and Analysis | 26 |
| » | The
convertible notes will mature 36 months from the date of issuance and shall bear interest
at the higher of 6% per annum and the 3-month CME term SOFR (secured overnight financing
rate) plus 4% per annum. At the end of each quarter starting December 31,
2022, the Company has an option to pay the interest in (i) cash; or (ii) in Common
Shares subject to TSXV and NYSE approvals, by delivering share certificates to the Holders
upon maturity, conversion or redemption at a US Dollar equivalent of the Company’s
market share price determined at the quarter end on which such interest become payable. |
Subsequently and effective January 1, 2023, the Notes contracts
were amended by:
| » | Removing
the interest capitalization provisions, such that accrued interest will be deemed paid in
full in shares each quarter following the Exchanges approval; and |
| » | Increasing
the interest rate to the greater of (a) 7% and (b) the 3-month CME Term SOFR plus
5%. |
In Q1-2023, the Company announced the closing
of grants for an amount of $3.6 million for the deployment of the coating technology at NMG’s Phase-1 operations and for
R&D projects targeting the development of advanced manufacturing of graphite-based materials with a low environmental impact. Included
in the amount above is the TEQ coating demonstration plant grant totalling $3M, which has an effective date for costs incurred starting
January 2022.
ATM Offering
The net proceeds received from the ATM Offering
since January 2022, totalling $3.9 million have been used for general working capital and corporate expense needs.
| Management Discussion and Analysis | 27 |
Quarterly
results
During the three-month period ended March 31,
2023, the Company recorded a net loss of $25,146 ($16,071 in 2022) and a basic and diluted loss per share of $0.45 ($0.29 in 2022).
| Description | |
Q1-2023
(note a)
$ | | |
Q4-2022
(note b)
$ | | |
Q3-2022
(note c)
$ | | |
Q2-2022
(note d)
$ | |
| Revenue | |
| - | | |
| - | | |
| - | | |
| - | |
| Net loss | |
| (25,146 | ) | |
| (4,836 | ) | |
| (12,765 | ) | |
| (14,042 | ) |
| Basic loss per share | |
| (0.45 | ) | |
| (0.09 | ) | |
| (0.23 | ) | |
| (0.25 | ) |
| Diluted loss per share | |
| (0.45 | ) | |
| (0.13 | ) | |
| (0.23 | ) | |
| (0.25 | ) |
| Description | |
Q1-2022
$ | | |
Q4-2021
$ | | |
Q3-2021
$ | | |
Q2-2021
$ | |
| Revenue | |
| - | | |
| - | | |
| - | | |
| - | |
| Net loss | |
| (16,071 | ) | |
| (10,623 | ) | |
| (8,945 | ) | |
| (12,878 | ) |
| Basic loss per share | |
| (0.29 | ) | |
| (0.25 | ) | |
| (0.19 | ) | |
| (0.34 | ) |
| Diluted loss per share | |
| (0.29 | ) | |
| (0.25 | ) | |
| (0.19 | ) | |
| (0.34 | ) |
| a) | The
net loss in Q1-2023 increased by $9.1M compared to Q1-2022 mainly due to a loss of 10M$ related
to the fair value revaluation as at March 31, 2023 of the embedded derivatives on the
2022 convertible notes. This is partially offset by the decrease in engineering fees for
the Bécancour Battery Material Plant and the decrease in share-based compensation
expenses relating to the timing of stock options granted in Q1-2022 versus Q1-2023. |
| b) | The
net loss in Q4-2022 decreased by $5.8M compared to Q4-2021 mainly due to a gain of 11.2M$
related to the fair value adjustment as at December 31, 2022 of the embedded derivatives
on the convertible notes. This is partially offset by the vesting expenses of stock
options granted to key management personnel and consultants in 2022 and higher depreciation
expenses related to the purification demonstration plant and the laboratory that were placed
in service in 2022. |
| c) | The
net loss in Q3-2022 increased by $3.8M compared to Q3-2021 mainly due to the start of depreciation
for the purification demonstration plant and for the laboratory equipment in 2022. Secondly,
wages and benefits also increased due to the beginning of operations at the purification
demonstration plant and new hires were made to support the Company’s growth phase.
Lastly, share-based compensation expenses increased mostly due to vesting expenses of stock
options granted to key management personnel and consultants in 2022. |
| d) | The
net loss in Q2-2022 increased by $1.2M compared to Q2-2021 mainly due to the increase in
engineering fees related to the feasibility study for the Bécancour Battery Material
Plant, the start of depreciation expenses for the purification demonstration plant
and the laboratory equipment, and an increase in insurance fees following the NYSE listing,
which is partially offset by a decrease in share-based compensation. |
| Management Discussion and Analysis | 28 |
First
quarter results
Exploration
and Evaluation expenses
| Description | |
For
the three-month
period ended
March 31, 2023
$ | | |
For
the three-month
period ended
March 31, 2022
$ | | |
Variation
$ | |
| Wages and benefits | |
| 815 | | |
| 933 | | |
| (118 | ) |
| Share-based compensation (a) | |
| 79 | | |
| 262 | | |
| (183 | ) |
| Engineering | |
| - | | |
| 60 | | |
| (60 | ) |
| Professional fees | |
| 175 | | |
| 43 | | |
| 132 | |
| Materials, consumables, and supplies (b) | |
| 166 | | |
| 310 | | |
| (144 | ) |
| Maintenance and subcontracting | |
| 204 | | |
| 300 | | |
| (96 | ) |
| Geology and drilling | |
| - | | |
| 15 | | |
| (15 | ) |
| Utilities | |
| 104 | | |
| 148 | | |
| (44 | ) |
| Depreciation and amortization | |
| 73 | | |
| 60 | | |
| 13 | |
| Other | |
| 65 | | |
| 41 | | |
| 24 | |
| Uatnan mining project (c) | |
| 95 | | |
| - | | |
| 95 | |
| Grants | |
| (54 | ) | |
| - | | |
| (54 | ) |
| Tax credits | |
| (75 | ) | |
| (190 | ) | |
| 115 | |
| Exploration and Evaluation Expenses | |
| 1,647 | | |
| 1,982 | | |
| (335 | ) |
| a) | The
decrease in share-based compensation expenses of $183 for the three-month period ended March 31,
2023, is due to the timing of new options being granted. New options were granted to employees,
directors, consultants, and officers on March 28, 2022, compared to no grants in Q1-2023. |
| b) | The
decrease of $144 is due to the reduced production activities of the concentrator demonstration
plant, due to increased efforts allocated towards the commissioning of the coating demonstration
plant. |
| c) | The
increase of $95 is related to costs incurred to complete the PEA for the Uatnan Mining Project.
On January 10, 2023, NMG released the results of the PEA. |
| Management Discussion and Analysis | 29 |
Battery
material plant project expenses
| Description | |
For
the three-month
period ended
March 31, 2023
$ | | |
For
the three-month
period ended
March 31, 2022
$ | | |
Variation
$ | |
| Wages and benefits (a) | |
| 908 | | |
| 535 | | |
| 373 | |
| Share-based compensation | |
| 75 | | |
| 9 | | |
| 66 | |
| Engineering (b) | |
| 1,519 | | |
| 3,367 | | |
| (1,848 | ) |
| Professional fees | |
| 203 | | |
| 349 | | |
| (146 | ) |
| Materials, consumables and supplies (c) | |
| 600 | | |
| 375 | | |
| 225 | |
| Maintenance and subcontracting | |
| 396 | | |
| 183 | | |
| 213 | |
| Utilities | |
| 214 | | |
| 213 | | |
| 1 | |
| Depreciation and amortization | |
| 1,021 | | |
| 879 | | |
| 142 | |
| Other | |
| 34 | | |
| 41 | | |
| (7 | ) |
| Grants | |
| (237 | ) | |
| (336 | ) | |
| 99 | |
| Battery Material Plant Project
expenses | |
| 4,733 | | |
| 5,615 | | |
| (882 | ) |
| a) | The
increase of $373 in wages and benefits for the three-month period ended March 31, 2023,
is due to the operations at the purification demonstration plant, commissioning activities
of the coating demonstration plant, and new hires to support the Company’s growth phase
in its Battery material segment. |
| b) | The
decrease of $1,848 in engineering expenses for the three-month period ended March 31,
2023, is due to lower engineering fees in 2023 compared to Q1-2022, due to work on the Feasibility
Study, which was completed and published in Q3-2022. |
| c) | The
increase of $225 in Materials, consumables and supplies for the three-month period ended
March 31, 2023, is due to the increase in activities for the Phase 1 – Battery
Material Demonstration Plants and efforts to optimize its purification process. |
| Management Discussion and Analysis | 30 |
General
and administrative expenses
| Description | |
For
the three-month
period ended
March 31, 2023
$ | | |
For
the three-month
period ended
March 31, 2022
$ | | |
Variation
$ | |
| Wages and benefits | |
| 2,062 | | |
| 2,024 | | |
| 38 | |
| Share-based compensation (a) | |
| 429 | | |
| 2,995 | | |
| (2,566 | ) |
| Professional fees (b) | |
| 1,032 | | |
| 398 | | |
| 634 | |
| Consulting fees (c) | |
| 755 | | |
| 512 | | |
| 243 | |
| Travelling, representation and convention | |
| 210 | | |
| 87 | | |
| 123 | |
| Office and administration | |
| 2,226 | | |
| 2,157 | | |
| 69 | |
| Stock exchange, authorities, and communication | |
| 126 | | |
| 111 | | |
| 15 | |
| Depreciation and amortization | |
| 63 | | |
| 56 | | |
| 7 | |
| Other financial fees | |
| 6 | | |
| 10 | | |
| (4 | ) |
| General and administrative expenses | |
| 6,909 | | |
| 8,350 | | |
| (1,441 | ) |
| a) | The
decrease in share-based compensation expenses of $2,566 for the three-month period ended
March 31, 2023, is mostly due to the timing of new options being granted as described
above. |
| b) | The
increase in professional fees of $634 for the three-month period ended March 31, 2023,
is mostly due to an increase in legal and professional fees in relation with the preparation
of the project financing. |
| c) | The
increase in consulting fees of $243 for the three-month period ended March 31, 2023,
is mostly due to an increase in project financing fees following the appointment of Société
Générale to oversee the due diligence process. |
Net
financial costs
The increase of
$11.6M in financial costs for the three-month period ended March 31, 2023, is mainly due to the loss of $10M related to the
fair value revaluation of the embedded derivatives and $2.8M costs related to the accrued interests and accretion expense on the 2022
convertible notes. This is partially offset by higher interest income on the short-term cash investment activities and by the increase
in Mason Graphite’s share market value.
Liquidity
and funding
As at March 31, 2023, the difference between
the Company’s current assets and current liabilities was $44,100, including $48,798 in cash and cash equivalents.
Liquidity risk is the risk that the Company encounters
difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.
Management believes that without additional funding,
the Company does not have sufficient liquidity to pursue its planned expenditures over the next twelve months. These circumstances indicate
the existence of material uncertainties that cast substantial doubt upon the Company’s ability to continue as a going concern.
| Management Discussion and Analysis | 31 |
The Company manages its liquidity risk by using
budgets that enable it to determine the amounts required to fund its exploration, evaluation, and development expenditure programs. The
Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital markets or other
alternative forms of financing is hindered, whether as a result of a downturn in stock market conditions generally or related to matters
specific to the Company. The Company has historically generated cash flow primarily from its financing activities.
As at March 31, 2023, all of the Company’s
short-term liabilities totalling $14,745 ($16,105 as at December 31, 2022) have contractual maturities of less than one year and
are subject to normal trade terms. The Company regularly evaluates its cash position to ensure preservation and security of capital as
well as maintenance of liquidity.
| | |
| | |
| | |
| | |
As at March 31,
2023 | |
| | |
Carrying
amount | | |
Contractual
cash flows | | |
Remainder
of
the year | | |
Year 2024 | | |
Year 2025 | | |
2026 and
Onward | |
| Account payables and accrued liabilities | |
| 13,072 | | |
| 13,072 | | |
| 13,072 | | |
| - | | |
| - | | |
| - | |
| Lease liabilities | |
| 2,716 | | |
| 3,289 | | |
| 426 | | |
| 647 | | |
| 566 | | |
| 1,650 | |
| Borrowings | |
| 1,951 | | |
| 2,261 | | |
| 283 | | |
| 577 | | |
| 577 | | |
| 824 | |
| Convertible
Notes – Host(i) | |
| 50,995 | | |
| 67,668 | | |
| - | | |
| - | | |
| 67,668 | | |
| - | |
| Convertible
Notes – Embedded Derivatives(i) | |
| 17,007 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| (i) | Based
on the spot rate as of March 31, 2023 |
For the three-month period ended March 31,
2023, the Company had an average monthly cash expenditure rate of approximately $3,413 per month, including additions to property, plant
and equipment, deposits to suppliers and all operating expenses. This expenditure rate can be adjusted to preserve liquidity. The Company
anticipates it will continue to have negative cash flows from operating activities in future periods at least until commercial production
is achieved. Significant additional financing will be needed to bring the Matawinie Mine and the Bécancour Battery Material Plant
to commercial production.
| Cash flows provided
by (used in) | |
For
the three-month
period ended
March 31, 2023
$ | | |
For
the three-month
period ended
March 31, 2022
$ | |
| Operating activities before the net change in
working capital items | |
| (11,043 | ) | |
| (11,598 | ) |
| Net change in working capital items | |
| 2,229 | | |
| (1,206 | ) |
| Operating activities | |
| (8,814 | ) | |
| (12,804 | ) |
| Investing activities | |
| (1,425 | ) | |
| (5,928 | ) |
| Financing activities | |
| (876 | ) | |
| 45 | |
| Effect of exchange rate changes on cash
and cash equivalents | |
| (11 | ) | |
| (181 | ) |
| Decrease in cash and cash equivalents | |
| (11,126 | ) | |
| (18,868 | ) |
Operating
activities
For the three-month period ended March 31,
2023, cash outflows from operating activities totalled $8.8M, while there were $12.8M of cash outflows for the same period in 2022. The
cash outflows were lower mainly due to the increase in the working capital items of $3.4M. Further details regarding the net change in
working capital are provided in note 11 of the condensed consolidated interim financial statements.
| Management Discussion and Analysis | 32 |
Investing
activities
For the three-month period ended March 31,
2023, cash used in investing activities totalled $1.4M whereas for the same period in 2022 investing activities were of $5.9M. The variance
is due to higher capitalizable expenses in 2022 related to the construction of the coating demonstration plant and grants received in
Q1-2023 in relation to capitalizable expenditures.
Financing
activities
For the three-month period ended March 31,
2023, cash outflow in financing activities totalled $876 whereas for the same period in 2022, cash inflow related to financing activities
were $45. The variance is mostly due to payments of transaction costs incurred in 2022 related to the closing of the convertible notes
in Q4-2022.
On January 21,
2022, the Company filed a prospectus supplement establishing a new at-the-market equity offering
(“ATM Offering”). The ATM Offering allows the Company to offer for sale
and issue up to US$75M (or the equivalent in Canadian dollars) of common shares of the Company from time to time, at the Company’s
discretion. From January 21, 2022 to December 31, 2022, the Company issued 502,082 common shares at an average price
of $7.94 for gross proceeds of $3,987, commissions of $100, for total net proceeds of $3,887. During the three-month period ended March 31,
2023, no common shares were issued in connection with the ATM Offering.
All tabular amounts are in thousands of dollars,
unless otherwise noted.
| | |
For
the three-month period
ended | | |
For
the year ended | |
| | |
March 31,
2023 | | |
December 31,
2022 | |
| Number of common shares issued | |
| - | | |
| 502,082 | |
| Average price per share | |
| - | | |
| 7.94 | |
| Gross proceeds | |
| - | | |
| 3,987 | |
| Commissions | |
| - | | |
| 100 | |
| Net Proceeds | |
| - | | |
| 3,887 | |
Additional
information
Related
party transactions
During the three-month period ended March 31,
2023, share-based compensation expenses for key management personnel totalled $107 ($1,762 for the three-month period ended March 31,
2022) and nil for directors ($1,247 for the three-month period ended March 31, 2022).
During the three-month period ended March 31,
2023, the Company also incurred interest to be paid to Investissement Québec and Pallinghurst. The Company has elected to pay the accrued interest in common shares which will be issued at maturity or conversion
of the Notes.
| Management Discussion and Analysis | 33 |
Off-balance
sheet transactions
There are no off-balance sheet transactions.
Critical
accounting estimates, new accounting policies, judgements and assumptions
Refer to note 3 in the condensed consolidated
interim unaudited financial statements for the three-month period ended March 31, 2023, and notes 3, 4, and 5 in the Company’s
audited consolidated financial statements for the year ended December 31, 2022.
Financial
instruments and risk management
Refer to note 13 in the condensed consolidated
interim unaudited financial statements for the three-month period ended March 31, 2023.
Contractual
obligations and commitments
Refer to note 14 in the condensed consolidated
interim unaudited financial statements for the three-month period ended March 31, 2023.
Capital
structure
| | |
As
at May 10, 2023 | |
| Common shares | |
| 60,748,898 | |
| Options | |
| 3,808,548 | |
| Warrants | |
| 10,000,000 | |
| Convertible Notes | |
| 10,000,000 | |
| Other reserves - settlement of interests
on Convertible Notes | |
| 395,015 | |
| Total common shares fully diluted | |
| 84,952,461 | |
Subsequent
events to March 31, 2023
On April 17, 2023, the Company concluded
an underwritten public offering agreement for 4,850,000 common shares, at a price of US$4.55 per share for gross proceeds of $29.5M (US$22.0M).
The Offering was conducted on a bought deal basis through a syndicate of underwriters led by BMO Capital Markets and Cormark Securities
Inc. In consideration for the services rendered by the underwriters, the Company has agreed to pay the underwriters a cash fee equal
to 6% of the gross proceeds of the Offering.
| Management Discussion and Analysis | 34 |
Additional
information and continuous disclosure
The Company is
required to comply with National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings.
The certification of interim filings requires us to disclose in the MD&A any changes in our internal controls over financial reporting
that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. We confirm
that no such changes were made to the internal controls over financial reporting during the three-month period ended March 31, 2023.
The Chief Executive Officer and Chief Financial Officer have signed form 52-109F1, Certification of Annual Filings, which can
be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Additional information
on the Company is available through regular filings of press releases, financial statements, and the most recent annual information form
on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov.). These documents and other information about NMG may also be
found on our website at www.nmg.com
May 10, 2023
| (signed)
Eric Desaulniers |
|
(signed)
Charles-Olivier Tarte |
| |
|
|
| Eric
Desaulniers, MSc, géo. |
|
Charles-Olivier
Tarte, CPA |
| |
|
|
| President
and Chief Executive Officer |
|
Chief
Financial Officer |
| Management Discussion and Analysis | 35 |
