NextSource Materials Inc.

Developing the World’s Next Source of High Quality Flake Graphite

This NextSource Materials Inc. profile is part of a paid investor education campaign.*

Overview

NextSource Materials Inc. (TSX:NEXT, OTCQB:NSRCF) is a Canadian mine development company based in Toronto that wholly-owns a very advanced and shovel-ready graphite project in southern Madagascar. The Molo project is a fully-permitted, feasibility-stage project that ranks as one of the largest-known and highest quality flake graphite deposits in the world. The Molo project hosts a NI 43-101 compliant graphite resource of 141.28 million tonnes grading 6.13 percent total graphitic carbon, with a contained ore reserve of 22.44 million tonnes grading 7.02 percent carbon. NextSource Materials intends to bring the Molo project into production by Q4 2020.

Feasibility-Stage and Fully Permitted Project

In February 2019, NextSource Materials received its mining permit for an unlimited amount of production volume for a 40-year term, with the ability to renew in additional 20-year increments. The company also received its full environmental permit in April 2019. NextSource recently released an updated 2019 definitive feasibility study (FS) for the Molo project that confirmed robust project economics and one of the lowest mine capital costs in the industry at just US$21 million, while maintaining lowest-quartile operating costs.

Full Modular Build Approach & Phased Production

NextSource is planning production in two phases. Phase 1 production is expected to start at a realistic output of 17,000 tonnes per annum (TPA) that does not disrupt the current market while minimizing capital costs and the risk associated with introducing a new source of supply into the market. Phase two production is the expansion to 45,000 TPA in year three.

NextSource will utilize a fully-modular build approach, which enables Phase 1 to have a build time of just 9 months. The modular components are constructed and fully tested off-shore at contracted prices and then shipped in a standard shipping container and reassembled onsite. Once fully assembled, the entire processing plant will cover a 60-meter by 30-meter area, greatly reducing NextSource Materials’ environmental footprint.

The updated 2019 FS shows Phase 1 at 17,000 TPA is expected to generate an after-tax NVP8 of $68.4 million and an after-tax IRR of 43 percent using current market pricing, modeled for a mine life of 30 years. The projected mine life at 17,000 TPA is over 100 years.

Phase 1 will consist of a permanent processing plant with a feed rate of 240,000 tonnes per annum producing 17,000 tonnes of finished SuperFlake® graphite concentrate at purities between 95 percent graphitic carbon to 98 percent graphitic carbon per annum. This production level is expected to rank the Molo project among the top five largest producing mines of graphite outside of China.

Phase 2 of the Molo mine is the expansion of production to 45,000 tonnes per annum in the third year of production and is expected to generate an after-tax NVP8 of US$184.3 million and an after-tax IRR of 36.2 percent.

The company is presently focused on securing the all-in US$24 million mine financing cost, which includes working capital, to begin construction.

Off-take Agreements Secured for 100% of Planned Production

As announced in October 2018, NextSource Materials signed a binding offtake agreement with a prominent Japanese trading company that supplies one of Japan’s largest producers of graphite anode material for lithium-ion batteries. The agreement is for a 10-year period and based on FOB China pricing and activates upon the commercial production of graphite at Molo.

NextSource Materials is also expected to announce an additional off-take with a leading European customer in the very near future.

NextSource Materials’ management team has focused its time and resources towards successfully completing the required product testing and technical and engineering studies needed to de-risk and verify its graphite with these key customers, whose applications span the top demand markets for graphite. This is a time and capital-intensive process that very few projects are able to undertake, as it requires a minimum of 3-4 years of continuous bulk product testing at pilot-plant scale before offtake agreements can be discussed, let alone secured. NextSource is very proud to be regarded by graphite buyers as having demonstrated best practices in this process.

NextSource Trench

nextsource large rock

A Very High-Quality Graphite Concentrate Suitable for All Demand Markets

Molo SuperFlake® graphite has been verified by a number of the world’s leading graphite buyers and processors for use in all the top demand applications for flake graphite, including refractory (steel), lithium-ion batteries, graphite foils and graphene inks.

The two main factors that determine the selling price for graphite are the size of the flake and the carbon purity you can achieve in the flotation process. The larger the flake size and higher the purity, the higher the selling price. The Molo deposit contains a high percentage (46 percent) of premium-priced large and jumbo-sized flake graphite and can achieve near battery-grade purity (98 percent carbon) with simple flotation.

SuperFlake® Purity by Size Distribution

NextSource SuperFlakeR Pitch

Mining Friendly Jurisdiction

Madagascar is a mining-friendly jurisdiction with a well-established mining code and democratic government that recognizes the importance of the mining industry to the nation’s economic growth and is supportive of the Molo graphite project. The country is home to two substantial mining projects in operation that account for over 35 percent of the country’s GDP – Sherritt International’s Ambitovy nickel mine (US$9B CAPEX) and Rio Tinto/QMM’s mineral sands project (US$1B CAPEX). Madagascar is world-renowned for its graphite, with global buyers coveting it for its large-size flake and high carbon grade. Madagascar has been exporting graphite for over a century, but in very small quantities supplied from a few small-scale, artisanal operations. NextSource’s Molo project is one of the largest graphite discoveries in the world and would vault Madagascar to a top 5 global producer of graphite after China, Brazil, India and Mozambique.

NextSource Materials’ Molo graphite project is located 160 kilometers southeast of Toliara in the Tulear region of southern Madagascar, 220 kilometers northwest of the port town of Fort Dauphin.

NextSource Molo Map

Madagascar is situated in the hub of the world’s leading markets for graphite applications and the country’s world-renowned flake graphite resources are of the highest quality. Molo represents one of the largest discoveries of graphite in the world and its attractive location includes unrestricted access to a major shipping port connecting to key Asian, European and North American markets.

NextSource Materials Management Team

Since 2012, NextSource has invested US$40M into Madagascar and has developed two world-class NI 43-101 compliant resources of battery minerals – vanadium and graphite. US$25M has been invested into the graphite project comprising extensive exploration, environmental and social baseline studies and audits, a preliminary economic assessment study (2014), three definitive feasibility studies (2015/2017/2019), a full pilot plant study, and detailed engineering and permitting. NextSource is focusing solely on the graphite due to its advanced stage and intends to further develop the vanadium asset, which ranks as one of the largest and highest-grade vanadium deposits in the world, once the graphite project reaches production. Current management has been with the company for 12 years and involved with the projects since discovery.

NextSource has a strong technical and management team with over 125 years of engineering and mine operations expertise with extensive Madagascar experience. An operational readiness team is in place to immediately start construction once CAPEX funding is secured with an ownership team already in place and ready to operate the mine once commissioning can begin.

Craig Scherba, P.Geo. – President, CEO and Director

Mr. Scherba was appointed President and Chief Operating Officer in September 2012 and has been a director since January 2010. Previously, Mr. Scherba served as Vice President, Exploration of the Company since January 2010. Prior to joining the Company, Mr. Scherba was a managing partner for six years with Taiga Consultants Ltd. (“Taiga”), a mining exploration consulting company. Mr. Scherba has been a professional geologist (P. Geo.) since 2000, and his expertise includes supervising large Canadian and international exploration programs. Mr. Scherba was an integral member of the exploration team that developed Nevsun Resources’ high-grade gold, copper and zinc Bisha project in Eritrea. Mr. Scherba served as the Company’s Country and Exploration Manager in Madagascar during its initial exploration stage, discovering both the Molo Graphite and the Green Giant Vanadium deposits.

Robin Borley, Pr.Tech Eng – COO and Director

Mr. Robin Borley is a Graduate mining engineering professional and a certified mine manager with more than 25 years of international mining experience building and operating mining ventures. He has held senior management positions both Internationally and within the South African mining industry. He has most recently served as Mining Director for DRA Mineral Projects and was instrumental as the COO of Red Island Minerals in a developing a Madagascar coal venture.

His diverse career has spanned resource project management, evaluation, exploration and mine development. Robin has completed several mine evaluations including operational and financial evaluations of new and existing operations across a diverse range of resource sectors. He has experience in the management of underground and surface mining operations from both the contractor and owner miner environments.

From 2006 through to 2012, Robin participated in the BEE management buy-out transaction of the Optimum Colliery mining property from BHP, through its independent listing and its ultimate sale to Glencore in December 2012.

Brent Nykoliation, BCom (Hons) – Senior Vice President, Corporate Development

Mr. Nykoliation joined the senior management team at NextSource Materials as Vice President, Corporate Development in 2007 and oversees the fundraising and investor relations for the Company. He brings over 16 years of management experience, having held senior marketing and strategic development positions with several Fortune 500 corporations in Canada, notably Nestlé, Home Depot and Whirlpool.

Mr. Nykoliation holds a Bachelor of Commerce with Honours degree from Queen’s University.

Marc Johnson, CFA, CPA – CFO

Mr. Johnson is a bilingual senior executive with over 20 years of business experience, including 10 years at public corporations as CFO, VP Corporate Development and other financial management positions, and 10 years in capital markets in investment banking and equity research. Mr. Johnson is a Chartered Financial Analyst (CFA) and a Chartered Professional Accountant (CPA) and joined as CFO in October 2015. He also holds a Bachelor of Commerce (Finance) from the John Molson School of Business at Concordia University in Montreal.

Oliver Peters, P.Eng. – Senior Consultant for Process Engineering

Oliver Peters was the head process engineer at SGS Minerals Canada (Lakefield) and former process manager at DRA Global. He has over 25 years of process engineering experience in Africa and Canada and extensive graphite processing experience.

Johann de Bruin, PrEng – Senior Consultant for Operational Readiness

Mr. de Bruin has an impressive track record as a seasoned mining industry engineer and executive with substantial knowledge of mining operations on the African continent, Australia and Canada.

Mr. de Bruin retired as Managing Director from DRA in November 2016 after successfully navigating DRA through the diversification of its business into Central, East & West Africa. Mr. de Bruin was responsible for leading a globalization agenda that included two significant acquisitions and a horizontal integration into energy, water and agriculture to create sustainability. During his tenure at DRA, Mr. de Bruin was instrumental in growing the mining project portfolio to include design and construction of 35 platinum concentrators, 42 coal processing plants and 12 metallurgical plants across multiple commodities, collectively valued at over $5 billion.

John P. Sanderson, Q.C. – Non-Executive Chairman

Mr. Sanderson has served as Chairman of the Board of Directors of the Company since March 2016 and prior to that, was the Vice Chairman of the Board since October 1, 2009. Mr. Sanderson is a mediator, arbitrator, consultant and lawyer called to the Bar in the Canadian Provinces of Ontario and British Columbia and brings many years of legal and mediation expertise from various industries. He has acted as mediator, facilitator and arbitrator in British Columbia, Alberta, Ontario and the Northwest Territories, in numerous commercial transactions, including insurance claims, corporate contractual disputes, construction matters and disputes, environmental disputes, inter-governmental disputes, employment matters, and in relation to aboriginal claims. He is a member of mediation and arbitration panels with the British Columbia Arbitration and Mediation Institute, the British Columbia International Commercial Arbitration Centre and Mediate BC. Mr. Sanderson also currently serves as the Chairman of the Board of MacDonald Mines Exploration Ltd., a publicly listed resource exploration company headquartered in Toronto, Canada.

Dean Comand, P.Eng. – Non-Executive Director

Mr. Comand is a former executive of Sherritt International, where he held the position of Vice President of Operations for Sherritt’s Madagascar Ambatovy Project, which is one of the largest lateritic nickel mines in the world. Ambatovy is a joint venture between Sherritt International, Japan’s Sumitomo Corp, Korea’s Resources Corp (KORES) and Canada’s SNC Lavalin Inc. Mr. Comand is a Professional Engineer (P.Eng) and Certified Engineering Technologist (CET) who earned his Maintenance Manager Professional Designation (MMP) license in 2006 and his Charter Director designation (C.Dir) in 2012. He is currently consulting for numerous clients around the world in the mining and energy sectors. Mr. Comand spent the past 3.5 years in Madagascar and successfully led the organization through construction, commissioning and operations of the project to commercial production. Throughout his career he has consistently held senior positions in complex operations, business development, environmental management, maintenance, and project construction.

Mr. Comand, P. Eng, CET MMP CDir, is a Mechanical Engineer with extensive Madagascar mining operations experience and holds his P. Eng designation in the province of Ontario as well as designation as a Certified Engineering Technologist.

Dalton Larson, Q.C. – Non-Executive Director

Mr. Larson is a Canadian attorney with more than 35 years as a member of the Law Society of British Columbia and has significant experience in the capital markets, specifically the equity and debt sectors.

Mr. Larson holds a Master’s Degree in law from the University of London, England and has served more than 25 years as a director of several investment funds managed by the CW Funds group of companies, affiliated with Ventures West Management Inc., which was one of the largest venture capital firms in Canada. He has served as Chairman of the Board of Directors of a Philippine ethanol company and was a founding shareholder and first Chairman of the Board of Directors of the First Coal Corporation, which started operations in 2004 and raised in excess of $65 million in equity to finance its development activities. This company was sold to Xstrata in 2011 for in excess of $150 million.


*Disclaimer: This profile is sponsored by NextSource Materials Inc. (TSX:NEXT,OTCQB:NSRCF). This profile provides information which was sourced by the Investing News Network (INN) and approved by NextSource Materials Inc., in order to help investors learn more about the company. NextSource Materials Inc. is a client of INN. The company’s campaign fees pay for INN to create and update this profile.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with NextSource Materials Inc. and seek advice from a qualified investment advisor.