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NextSource Materials Inc. – Developing the World’s Next Source of High Quality Flake Graphite

Overview

NextSource Materials Inc. (TSX:NEXTis a Canadian mine development company based in Toronto, Ontario, that is rapidly developing its 100%-owned Molo Graphite Project in southern Madagascar to production. 

The Molo is a Feasibility-stage project and ranks as one of the largest-known and highest quality flake graphite deposits in the world.  The Molo hosts a National Instrument 43-101 compliant total combined graphite resource of 141.28 million tonnes (Mt) at 6.13% total graphitic carbon (C), with a contained ore reserve of 22.44 Mt at 7.02%C.

A (bankable) Feasibility Study completed February 2015 confirmed that the Molo Project is expected to be a lowest-quartile producer due to its low-cost, open pit operation that has a negligible stripping ratio. With already having completed both a Front-end Engineering and Design (FEED) Study and a Detailed Engineering Study, the Company also initiated an updated Feasibility Study (FS) on Phase 1 of its two-phased approach to production this past February, using a “mining first”, fully modular mine build philosophy. The results of this updated FS based on Phase 1 of the Molo mine plan is expected to be released imminently.

Phase 1 will consist of a permanent processing plant with a feed rate of 240,000 tonnes per annum and a production rate of approximately 16,000 tonnes of finished SuperFlake™ graphite concentrate at purities between 97%C to 98%C per annum. This production level will rank the Molo Project among one of the top five largest producers of graphite globally.

Phase 2 of the Molo mine will be the expansion of SuperFlake™ production to 50,000 tonnes per annum, as envisioned in the Company’s 2015 Feasibility Study. Molo SuperFlake™ has been verified by end-users for use in all the top demand applications – refractory (steel), lithium-ion battery applications, expanded graphite (foil) applications and graphene ink applications.

By utilizing a two-phased approach, it ideally positions the Molo Project with first-mover advantage while simultaneously creating a competitive barrier to entry. Commissioning and production are expected in 2018.

The Molo project is currently in the permitting stage and is presently focused on securing project financing and off take agreements on the strength of the 2015 Feasibility Study results and the soon to be released updated Feasibility Study results for Phase 1. Investment Highlights

Project Differentiators/Attributes

The two main factors that determine the selling price for graphite is the size of the flake and carbon purity you can achieve in your process. The larger the flake size and higher the purity – the higher the selling price.

The Molo Project is consistently ranked by analysts and major graphite buyers as one of the highest-quality graphite projects in the world.

The following differentiators summarize are what set us apart from other competing projects.

  1. Exceptional Flake Quality (SuperFlake™)
  • 100% de-risked metallurgy
  • Very high percentage (46%) of premium-priced large and jumbo-sized flake
  • Can achieve 98% carbon (near battery-grade purity) with simple flotation
  • SuperFlake™ verified by end users for all top demand markets
  1. Size and Expandability
  • Ranks as one of the largest deposits globally :141Mt resource, 22.4Mt reserve
  • 90+ mine life based on reserves alone
  • Unlimited expansion capability (300+ kms of continuous graphite)
  1. Easy Extraction, Low Cost Open Pit Mining
  • Immediately at surface with minimal overburden
  • Negligible stripping ratio
  • Low social and environmental liabilities
  1. Lowest Capital Costs of Any Project

Approx. US$21M for 16,000 tpa (Phase 1); Would rank as a Top 5 producer globally

  1. Lowest Quartile Operating Costs
  • Lowest quartile producer
  • Competitive with Chinese flake pricing
  1. Engineering and technical expertise
  • Highly technical leadership with a cumulative 80-years of mine construction and operations experience
  1. Modular Build Methodology
  • Provides significant competitive advantage in costs, efficiencies and speed to market

 

Strong Institutional Investor Base

Dundee Resources (CAN) 19%

VR Capital Group (UK)            9%

JP Morgan Asset Management (UK)    8%

Investors Group/Mackenzie Financial (CAN) 5%

AGF Mutual Fund Group (CAN) 3%

DRA Global (RSA) 1%

Management & Insiders 7%

Project Summary

NextSource Materials’s Molo Graphite Project is located 160 kilometers southeast of Toliara in the Tulear region of southern Madagascar and 220 kilometers northwest of the port town of Fort Dauphin. 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
Energizer Resources - A “Shovel-Ready” Graphite Project Verified for Top Demand Markets

The democratically elected Madagascar government recognizes the importance of the mining industry to the nation’s economic growth and is highly supportive of the Molo Graphite Project. The Word Bank has partnered with the government to implement strategies for improving the country’s business climate as well as social indicators with a focus on infrastructure.

In February 2016, the World Bank approved Madagascar’s access to International Development Association (IDA) finds. The 2016 IDA allocation for the country is $110 million which is set to more than double to $230 million in 2018. Currently, the World Bank has a total commitment of $618 million in investment operations in Madagascar with transport and infrastructure projects accounting for 27 percent.

In March 2016, the World Bank announced the country had received an IDA credit of US$65 million in support of improving electricity access throughout the nation. “We’ve teamed up with the authorities in identifying a set of high priority activities that could be carried out in the short–to-medium-term to achieve significant improvements in the sector’s operations and governance,” stated Isabel Neto, World Bank Team Leader for the operation. “In the longer run, the actions identified aim to create the building blocks to attract sound private sector investments in generation and access to electricity in Madagascar.”

Key Project: Molo Graphite Project

 The Molo Graphite Project is easily accessible by a network of secondary and district roads as well as an all-weather, year-round airstrip adjacent to the property. The deposit is immediately at surface with a nearly negligible strip-ratio (0.81:1) and situated in a sparsely populated, dry savannah grassland region devoid of flora and fauna—ideal for a low cost, open pit operation.

Energizer Resources - A “Shovel-Ready” Graphite Project Verified for Top Demand Markets

 

Resources

  • Measured: 23.62 million tonnes at 6.32 percent carbon
  • Indicated: 76.75 million tonnes at 6.32 percent carbon
  • Inferred: 40.91 million tonnes at 5.78 percent carbon

Reserves

  • Proven: 14.17 million tonnes at 7.00 percent carbon
  • Probable: 8.37 million tonnes at 7.04 percent carbon
Molo Metallurgical Data – Flake Size Distribution and Product Grade
Product Size                            % Distribution              Product Grade (% Carbon)
+48 mesh (jumbo flake)             23.6                               96.9
+65 mesh (coarse flake)            14.6                               97.1
+80 mesh (large flake)               8.2                                97.0
+100 mesh (medium flake)      6.9                                 97.2
+150 mesh (medium flake)      15.5                               97.3
+200 mesh (small flake)            10.1                              98.1
-200 mesh (fine flake)                21.1                              97.5

It’s all about the size and quality of your flake

Madagascar graphite is renowned for its quality and flake size. For almost a century, Madagascar has been exporting flake graphite to the world but only in very small quantities from privately owned mines. That is about to change.

The Molo Project represents the first and substantial maiden discovery of high-quality graphite in Madagascar in decades. Comprising almost 50 percent of premium-priced large and jumbo flake SuperFla, the Molo Project is blessed with an excellent flake size distribution and can produce a SuperFlake™ concentrate between 97% to 98% carbon purity with simple flotation alone.

nextsource-electron-mircoscope

Electron Microscope Images of Molo SuperFlake

SuperFlake™ Purity by Size Distribution 

Mesh Size % Distribution % Grade Carbon (t)
+48 (jumbo flake) 23.6 96.9
+65 (coarse flake) 14.6 97.1
+80 (large flake) 8.2 97.0
+100 (medium-large flake) 6.9 97.2
+150 (medium flake) 15.5 97.3
+200 (medium-small flake) 10.1 98.1
-200 (small-fine flake) 21.1 97.5

“Our Molo deposit is blessed with very favorable metallurgical qualities,” explained Brent Nykoliation, Senior Vice President of Corporate Development at NextSource Materials. “Not only is the flake distribution attractive, it is of very high quality with no known contaminants. All the major graphite manufacturers and end-users, notably for graphite foil and battery applications, require flake graphite free of contaminants such as iron and vanadium.”

 The Molo deposit can produce a high-quality SuperFlake™ concentrate at one of the lowest operating costs in the industry over a very long mine life. The easily scalable operation has the ability to provide material for any end-user in the refractory, graphite foil and electric vehicle battery markets.

“The Feasibility Study confirmed that we are in the lowest quartile for operating costs,” explained Nykoliation. “This is essential as the Molo can compete  with Chinese operating costs for flake graphite and the ability to compete with the Chinese flake deposits is critical in this industry.”

The high purity of graphite flake that can be achieved with standard flotation contributes significantly to the project’s low operating costs as there is no additional need to remove deleterious elements from NextSource Materials’ graphite. “Our Molo SuperFlake™ can approach battery-grade purities with simple processing and this can be an advantage in having lower operating costs when further upgrading to 99.9 percent purity.” added Nykoliation.

 

Molo concentrate verified across multiple graphite markets

A number of the world’s leading graphite buyers and processors have validated Molo for all the top demand markets for graphite including refractories, batteries, foils and graphene. Various independent end-user tests have confirmed that the SuperFlake™ concentrate from NextSource Materials’ Molo deposit meets or exceeds the quality requirements for all these end-markets.

Energizer Resources - A “Shovel-Ready” Graphite Project Verified for Top Demand Markets

“As far as we are aware, NextSource Materials has completed some of the most extensive validation testing at the end-user stage compared to its peers and that has provided us a lot of traction with potential strategic partners,” said Nykoliation.

Refractories

The refractory market represents 50 percent of the global demand for flake graphite. Molo SuperFlake™concentrate has received positive results across all testing parameters from five of the world’s top refractory producers. This industry requires flake sizes of medium, large and jumbo. Nearly 79 percent of Molo SuperFlake™ is classified as medium, large or jumbo flake.

Graphite Foil

The graphite foil market is currently the fastest growing market segment for flake graphite and represents about 10 percent of total global demand. Graphite foils are used in smartphones and tablets, gasket materials in automotive, petroleum, chemical and nuclear industries, and conductive plates in fuel cells and vanadium redox batteries.

A leading European manufacturer of carbon-based products has proven that Molo SuperFlake™ can be successfully manufactured into a graphite foil. Independent testing has also verified that Molo SuperFlake™ meets all specifications and quality requirements for specialty graphite foil applications. For graphite foil, jumbo flake is the required manufacturer size. The Molo deposit is made up of 23.6 percent jumbo flake according to the feasibility study.

Lithium-ion batteries

The electric vehicle battery market is the second largest market segment for flake graphite, representing 25 percent of global demand; in fact, graphite is the anode material of choice in all batteries. In lithium-ion batteries, approximately 10 times more graphite is required than lithium itself. Based on demand forecasts for lithium-ion batteries, the demand for graphite in this market is projected to grow by about 10 percent per year. 

Both a leading Japanese manufacturer of battery anode material and a top European supplier of spherical graphite for electric vehicles successfully manufactured spherical graphite from Molo SuperFlake™ and verified that met all specifications and quality requirements for lithium-ion battery anode material production.

Graphene

Results from verification testing by UK-based Haydale Graphene Industries PLC have validated the Molo deposit as a viable source of graphene nanoplatelets used in the development of graphene inks for printed and flexible electronics. Haydale Graphene Industries is a global leader in the processing and application of graphene nano-materials. According to BCC Research, the global graphene-based product market will grow at a CAGR of 58.7 percent between 2015 and 2020 to reach $675.1 million.

Off-take and partnership discussions

NextSource Materials is currently engaged in discussions concerning strategic partnerships and off-take agreements with several parties. The Company has been in contact with certain potential partners for over two years, and is focused on being the first graphite development-stage company to secure a “true” binding off-take agreement – one that is both credit-worthy from a chartered bank’s perspective and facilitates debt and equity funding of the project.

Executive Management

Craig Scherba
President and Chief Executive Officer
P.Geo.
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
Senior Vice President, Mine Development
Pr.Tech Eng
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
Senior Vice President, Corporate Development
BCom (Hons)
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 (Marketing) with Honours degree from Queen’s University and also serves as a director of Red Pine Exploration Inc., (TSX.V:RPX) a publically listed gold resource exploration company headquartered in Toronto, Canada.

Marc Johnson
Chief Financial Officer
CFA, CPA
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.

Roland Fok Seung
Madagascar Country Manager
ACA
Mr. Fok Seung is a Chartered Accountant of the Institute of England and Wales and the Association of Chartered Certified Accountants. Employed as NextSource Materials’s Madagascar Country Manager for the past 7 years, Mr. Fok Seung is based full time in Madagascar and will continue to act in this capacity with a focus on financial related business activity.

Johann de Bruin
Senior Consultant, Operational Readiness
PrEng
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.

 

Investor Relations
Brent Nykoliation
Senior Vice President,
Corporate Development

E-mail: info@nextsourcematerials.com

+1.416.364.4911

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