Nouveau Monde Graphite Inc 6-K, filed Aug 12, 2021
Nouveau Monde Graphite Inc. (NMG)
About this 6-K
Nouveau Monde Graphite Inc filed this 6-K on August 12, 2021.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2021
Commission File Number: 001-40416
Nouveau Monde Graphite Inc.
(Translation of registrant's name into English)
481 rue Brassard
Saint-Michel-des-Saints, Quebec
Canada J0K 3B0
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover
of Form 20-F or Form 40-F.
Form 20-F [ ] Form 40-F [ X ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
DOCUMENT TO BE FILED AS PART OF THIS FORM 6-K
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Nouveau Monde Graphite Inc. | ||
| (Registrant) | ||
| Date: August 12, 2021 | /s/ David Torralbo | |
| David Torralbo | ||
| Chief Legal Officer and Corporate Secretary | ||
Exhibit 99.1
FINANCIAL STATEMENTS
Condensed consolidated interim unaudited financial statements
For the three and six-month periods ended June 30, 2021 and 2020
(Expressed in thousands of Canadian dollars, except where otherwise indicated)
TABLE OF CONTENTS
|
NOUVEAU MONDE GRAPHITE INC. |
| Consolidated statements of financial position | |
| (Amounts expressed in thousands of Canadian dollars - unaudited) | |
Consolidated statements of financial position
| Notes | As at June 30, 2021 | As at December 31, 2020 | |
| ASSETS | |||
| CURRENT | |||
| Cash | 17 | 86,457 | 4,520 |
| Grants and other receivables | 2,408 | 829 | |
| Restricted cash | - | 158 | |
| Sales taxes receivable | 1,382 | 736 | |
| Tax credits receivable | 3,958 | 3,958 | |
| Prepaid expenses | 1,243 | 215 | |
| Total current assets | 95,448 | 10,416 | |
| NON-CURRENT | |||
| Tax credits receivable | 4,071 | 3,802 | |
| Property, plant and equipment assets | 5 | 16,437 | 4,207 |
| Intangible assets | 675 | 920 | |
| Right-of-use assets | 6 | 2,450 | 1,067 |
| Restricted cash and deposits | 2,385 | 744 | |
| Total non-current assets | 26,018 | 10,740 | |
| Total assets | 121,466 | 21,156 | |
| LIABILITIES | |||
| CURRENT | |||
| Accounts payables and accrued liabilities | 13,011 | 6,988 | |
| Deferred grants | - | 1,511 | |
| Current portion of lease liabilities | 7 | 380 | 295 |
| Borrowings | 8 | 200 | 1,793 |
| Total current liabilities | 13,591 | 10,587 | |
| NON-CURRENT | |||
| Asset retirement obligation | 9 | 851 | 621 |
| Borrowings | 8 | 1,862 | - |
| Lease liabilities | 7 | 2,108 | 781 |
| Convertible bond | 14,619 | 14,505 | |
| Total non-current liabilities | 19,440 | 15,907 | |
| Total liabilities | 33,031 | 26,494 | |
| EQUITY (DEFICIENCY) | |||
| Share capital | 10.1 | 169,408 | 60,537 |
| Contributed surplus | 15,985 | 10,761 | |
| Equity component of convertible bond | 364 | 364 | |
| Deficit | (97,322) | (77,000) | |
| Total equity (deficiency) | 88,435 | (5,338) | |
| Total liabilities and equity (deficiency) | 121,466 | 21,156 | |
| Commitments | 18 | ||
| Subsequent Events | 19 |
APPROVED BY THE BOARD OF DIRECTORS
(s) Eric Desaulniers – “Director”
(s) Daniel Buron – “Director”
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
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|
NOUVEAU MONDE GRAPHITE INC. |
| Consolidated statements of loss and comprehensive loss | |
| (Amounts expressed in thousands of Canadian dollars - unaudited) | |
Consolidated statements of loss and comprehensive loss
| For the three-month periods ended | For the six-month periods ended | ||||
|
Notes
|
June 30, 2021 $ |
June 30, 2020 $ |
June 30, 2021 $ |
June 30, 2020 $ |
| EXPENSES | |||||
| Exploration and evaluation expenses | 11 | 2,499 | 2,033 | 5,007 | 5,130 |
| LiB1 Anode Plant project expenses | 12 | 908 | 692 | 1,191 | 1,244 |
| General and administrative expenses | 13 | 9,370 | 1,137 | 13,382 | 2,630 |
| Other revenues | (56) | - | (56) | - | |
| Operating loss | 12,721 | 3,862 | 19,524 | 9,004 | |
| Net financial costs | 14 | 157 | 145 | 798 | 244 |
| Net loss and comprehensive loss | 12,878 | 4,007 | 20,322 | 9,248 | |
| Basic and diluted loss per share | 10.1 | 0.34 | 0.15 | 0.57 | 0.35 |
| Weighted average number of shares outstanding | 37,709,064 | 26,181,781 | 35,757,150 | 26,180,022 | |
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
___________________________________
1 Lithium-Ion Battery (“LiB”)
2
|
NOUVEAU MONDE GRAPHITE INC. |
| Consolidated statements of changes in equity | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
Consolidated statements of changes in equity
| Notes | Number | Share capital |
Contributed surplus
|
Equity component of convertible bond $ |
Deficit $ |
Total equity (deficiency) $ | |
| Balance as at January 1, 2021 | 27,299,332 | 60,537 | 10,761 | 364 | (77,000) | (5,338) | |
| Shares issued from placements | 10.1 | 9,501,227 | 95,939 | - | - | - | 95,939 |
| Warrants exercised | 7,821,700 | 17,825 | (198) | - | - | 17,627 | |
| Options exercised | 10.2 | 331,251 | 1,476 | (517) | - | - | 959 |
| Shares issued for interest payment | 76,635 | 797 | - | - | - | 797 | |
| Share-based compensation | 10.2 | - | - | 5,939 | - | - | 5,939 |
| Share issue costs | - | (7,166) | - | - | - | (7,166) | |
| Net loss and comprehensive loss | - | - | - | - | (20,322) | (20,322) | |
| Balance as at June 30, 2021 | 45,030,145 | 169,408 | 15,985 | 364 | (97,322) | 88,435 |
| Notes | Number | Share capital |
Contributed surplus |
Deficit |
Total equity | |
| Balance as at January 1, 2020 | 26,178,281 | 56,184 | 9,592 | (59,022) | 6,754 | |
| Share-based compensation | - | - | 127 | - | 127 | |
| Options exercised | 15,000 | 46 | (19) | - | 27 | |
| Warrants expired | - | - | - | - | - | |
| Net loss and comprehensive loss | - | - | - | (9,248) | (9,248) | |
| Balance as at June 30, 2020 | 26,193,281 | 56,230 | 9,700 | (68,270) | (2,340) |
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
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|
NOUVEAU MONDE GRAPHITE INC. |
| Consolidated statements of cash flow | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
Consolidated statements of cash flows
| For the six-month periods ended | |||
|
Notes |
June 30, 2021 $ |
June 30, 2020 $ |
| OPERATING ACTIVITIES | |||
| Net loss | (20,322) | (9,248) | |
| Depreciation and amortization | 5 | 558 | 600 |
| Unrealized foreign exchange gain | (566) | - | |
| Loss on disposal of investment | - | 6 | |
| Share-based compensation | 10.2 | 5,939 | 345 |
| Financial costs | 1,303 | 163 | |
| Net change in working capital | 15 | (697) | 2,389 |
| Cash flows used in operating activities | (13,785) | (5,745) | |
| INVESTING ACTIVITIES | |||
| Additions to property, plant, and equipment assets | 5 & 15 | (11,752) | (348) |
| Restricted cash and deposits | (1,483) | (269) | |
| Tax credits and grants received | 1,468 | - | |
| Cash flows used in investing activities | (11,767) | (617) | |
| FINANCING ACTIVITIES | |||
| Proceeds from the issuance of placements | 95,939 | - | |
| Proceeds from debt, net of issue costs | 1,025 | 3,575 | |
| Repayment of borrowings and lease liabilities | 7 & 8 | (2,108) | (256) |
| Proceeds from the exercise of warrants | 17,627 | - | |
| Proceeds from the exercise of stock options | 10.2 | 959 | 27 |
| Share issue costs | (6,528) | - | |
| Cash flows from financing activities | 106,914 | 3,346 | |
| Effect of exchange rate changes on cash | 575 | - | |
| Net change in cash | 81,937 | (3,016) | |
| Cash at the beginning of the period | 4,520 | 4,077 | |
| Cash at the end of the period | 86,457 | 1,061 | |
| Additional information | 15 | ||
The accompanying notes are an integral part of the condensed consolidated interim financial statement
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
Notes to the condensed consolidated interim financial statements
- NATURE OF OPERATIONS AND LIQUIDITY RISK
Nouveau Monde Graphite Inc. (the “Company”) was established on December 31, 2012, under the Canada Business Corporations Act. The Company specializes in exploration, evaluation and development of mineral properties located in Québec and is developing a natural graphite-based anode material that would qualify as battery-grade material to supply the lithium-ion industry.
The Company’s shares are listed under the symbol NMG on the New York Stock Exchange (“NYSE”), NOU on the TSX Venture Exchange, and NM9A on the Frankfurt Stock Exchange. The Company’s registered office is located at 481 Brassard Street, Saint-Michel-des-Saints, Québec, Canada, J0K 3B0.
As at June 30, 2021, the difference between the Company’s current assets and currents liabilities was $81,857, the Company had an accumulated deficit of $97,322, and had incurred a loss of $20,322 for the six-month period then ended. Current assets included current tax credits receivable of $3,958 and cash of $86,457.
With the financing completed in the first half of 2021, management believes that the Company has sufficient funds to meet its obligations and planned expenditures for the ensuing twelve months as they fall 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, twelve months from the end of the reporting period. The Company’s ability to continue future operations and fund its exploration, evaluation and development activities is dependent on management’s ability to secure additional financing in the future, which may be completed in several ways including, but not limited to, a combination of strategic partnership, project debt finance, offtake financing, royalty financing and other capital markets alternatives. Management will pursue such additional sources of financing when required, and 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.
- BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE
The Company’s condensed consolidated interim financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) published by the International Accounting Standards Board (“IASB”), including IAS 34 Interim Financial Reporting, and also using the same accounting policies and procedures as those used for the Company’s audited consolidated financial statements as at December 31, 2020. These condensed consolidated interim financial statements do not include all the disclosures and notes required for annual consolidated financial statements and should therefore be read with the Company’s audited consolidated financial statements as at December 31, 2020, which have been prepared in accordance with IFRS.
The condensed consolidated interim financial statements for the three and six-month periods ended June 30, 2021 were approved and authorized for publication by the Board of Directors on August 12, 2021.
- ESTIMATES, JUDGEMENTS AND ASSUMPTIONS
In preparing its condensed consolidated interim financial statements, management makes several judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, revenues, and expenses.
Information about the significant estimates and assumptions that have the greatest impact on the recognition and measurement of assets, liabilities, revenues, and expenses is presented below. Actual results may differ significantly.
Technical Feasibility and Commercial Viability
The establishment of technical feasibility and commercial viability of a mineral property is assessed based on a combination of factors. By its nature, this assessment requires significant judgment.
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
Following the events of the quarter ended March 31, including the receipt of the Governmental authorisation (“Decree”) for the Matawinie Project, management determined that the technical feasibility and commercial viability for the Matawinie Project was established as at March 31, 2021 and as a result, the project entered the development phase during the second quarter of 2021.
- SIGNIFICANT ACCOUNTING POLICIES
Matawinie Mine project
Management has established that during the second quarter of 2021, the Matawinie mine project has now reached the development phase. Accordingly, all expenditures related to the development of the mine are capitalized under Miner under construction within Property, plant and equipment (see note 5). Capitalized expenditures will be carried at cost until the Matawinie project is placed into commercial production, sold, abandoned, or determined by management to be impaired in value. The equipment, building and the mine site are not yet in use as at June 30, 2021, therefore, the depreciation will begin when the assets are ready for their intended use.
The costs related to the operation of the Matawinie Demonstration Plant will continue to be expensed as incurred under exploration and evaluation expenses, unless the expenditures meet the recognition criterias set in IAS 16 property, plant and equipment or IAS 38 Intangible asset.
LiB Anode Plant project
Costs incurred in the construction and development of the Company’s LiB Anode Plant project are capitalized under LiB Anode Plant within Property, plant and equipment (See note 5). Capitalized expenditures will be carried at cost until the LiB Anode Plant project is placed into commercial production, sold, abandoned, or determined by management to be impaired in value. The equipment and building are not yet in use as at June 30, 2021, therefore, the depreciation will begin when the assets are ready for their intended use.
The costs related to the operation of the LiB Anode Demonstration Plant will continue to be expensed as incurred under LiB Anode Plant project expenses, unless the expenditures meet the recognition criterias set in IAS 16 property, plant and equipment or IAS 38 Intangible asset.
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|
NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
- PROPERTY, PLANT AND EQUIPMENT
| For the six-month period ended June 30, 2021 | |||||||||
|
Land $ |
Buildings $ |
Equipment $ |
Computers $ |
Furniture $ |
Rolling stock $ |
Mine under construction $ |
LiB Anode Demonstration Plant under construction $ |
Total $ |
| COST | |||||||||
| As at January 1, 2021 | 507 | 2,642 | - | 56 | 70 | 24 | - | 1,206 | 4,505 |
| Additions | 1,878 | 114 | 163 | 34 | - | - | 2,300 | 7,820 | 12,309 |
| As at June 30, 2021 | 2,385 | 2,756 | 163 | 90 | 70 | 24 | 2,300 | 9,026 | 16,814 |
| ACCUMULATED DEPRECIATION | |||||||||
| As at January 1, 2021 | - | 219 | - | 39 | 32 | 8 | - | - | 298 |
| Depreciation | - | 53 | 8 | 9 | 7 | 2 | - | - | 79 |
| As at June 30, 2021 | - | 272 | 8 | 48 | 39 | 10 | - | - | 377 |
| Net book value as at June 30, 2021 | 2,385 | 2,484 | 155 | 42 | 31 | 14 | 2,300 | 9,026 | 16,437 |
| For the year ended December 31, 2020 | ||||||||
|
Land $ |
Buildings $ |
Equipment $ |
Computers $ |
Furniture $ |
Rolling stock $ |
LiB Anode Demonstration Plant under construction $ |
Total $ |
| COST | ||||||||
| As at January 1, 2020 | 467 | 2,430 | 63 | 47 | 70 | 9 | - | 3,086 |
| Additions | 40 | 212 | - | 9 | - | 15 | 1,206 | 1,482 |
| Write-Off/Disposals | - | - | (63) | - | - | - | - | (63) |
| As at December 31, 2020 | 507 | 2,642 | - | 56 | 70 | 24 | 1,206 | 4,505 |
| ACCUMULATED DEPRECIATION | ||||||||
| As at January 1, 2020 | - | 118 | 59 | 14 | 19 | 4 | - | 214 |
| Depreciation | - | 101 | 2 | 25 | 13 | 4 | - | 145 |
| Write-Off/Disposals | - | - | (61) | - | - | - | - | (61) |
| As at December 31, 2020 | - | 219 | - | 39 | 32 | 8 | - | 298 |
| Net book value as at December 31, 2020 | 507 | 2,423 | - | 17 | 38 | 16 | 1,206 | 4,207 |
The Lib Anode Plant under construction presented net of grants received of $1,830 and $3,578 for the three and six-month periods ended June 30, 2021, respectively (three and six-month periods ended June 30, 2020: $72 and $153).
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
- RIGHT-OF-USE ASSETS
| For the six-month period ended June 30, 2021 | ||||
| Buildings $ |
Equipment $ |
Rolling stocks $ |
Total $ | |
| COST | ||||
| As at January 1, 2021 | 1,297 | 339 | 273 | 1,909 |
| New leases | 1,617 | - | - | 1,617 |
| End of leases | (253) | (312) | (109) | (674) |
| As at June 30, 2021 | 2,661 | 27 | 164 | 2,852 |
| ACCUMULATED DEPRECIATION | ||||
| As at January 1, 2021 | 386 | 321 | 135 | 842 |
| Depreciation | 208 | 3 | 23 | 234 |
| End of leases | (253) | (312) | (109) | (674) |
| As at June 30, 2021 | 341 | 12 | 49 | 402 |
| Net book value as at June 30, 2021 | 2,320 | 15 | 115 | 2,450 |
| For the year ended December 31, 2020 | ||||
| Buildings $ |
Equipment $ |
Rolling stocks $ |
Total $ | |
| COST | ||||
| As at January 1, 2020 | 457 | 339 | 158 | 954 |
| New leases | 840 | - | - | 840 |
| Remeasurement of lease | - | - | 115 | 115 |
| As at December 31, 2020 | 1,297 | 339 | 273 | 1,909 |
| ACCUMULATED DEPRECIATION | ||||
| As at January 1, 2020 | 157 | 167 | 67 | 391 |
| Depreciation | 229 | 154 | 68 | 451 |
| As at December 31, 2020 | 386 | 321 | 135 | 842 |
| Net book value as at December 31, 2020 | 911 | 18 | 138 | 1,067 |
Depreciation of right-of-use assets included in the exploration and evaluation expenses for the period are $54 and $107 for the three and six-month periods ended June 30, 2021, respectively (three and six-month periods ended June 30, 2020: $93 and $186). Depreciation of right-of-use assets included in the LiB Anode Plant project are $40 and $81 (three and six-month periods ended June 30, 2020: nil).
- LEASE LIABILITIES
For the six-month period ended June 30, 2021 $ |
For the year ended December
31, 2020 $ | |
| Opening balance | 1,076 | 609 |
| New liabilities and modifications of leases | 1,617 | 955 |
| Principal repayment | (205) | (488) |
| Ending balance | 2,488 | 1,076 |
| Current portion | 380 | 295 |
| Non-current portion | 2,108 | 781 |
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
- BORROWINGS
For the six-month period ended June 30, 2021 $ |
For the year ended December
31, 2020 | |
| Opening balance | 1,793 | 4,502 |
| New borrowing | 2,162 | 3,803 |
| Repayments | (1,902) | (2,419) |
| Issue costs | - | (21) |
| Accretion of issue costs | 9 | 25 |
| Interest capitalized | - | 209 |
| Debts settled in exchange of Royalty | - | (4,306) |
| Ending balance | 2,062 | 1,793 |
| Current portion | 200 | 1,793 |
| Non-current portion | 1,862 | - |
During the three and six-month periods ended June 30, 2021, the Company has paid interests to its lenders for a total of $33 and $60, respectively (three and six-month periods ended June 30, 2020: $36 and $72).
On January 29, 2021, the Company financed the purchase of a land located in Bécancour, Québec, through a financing agreement with the vendor, for a total of $1,137. The financed portion bears interest at 8% per annum and shall be repaid by December 2025. The Company may pay the balance of principal, in whole or in part, at any time without penalty.
During March 2021, the Company received $1,350 as part of a repayable contribution agreement with the Canada Economic Development for Quebec Regions. This contribution agreement bears no interest and will be repayable in 60 equal monthly installments starting September 2023. The loan was measured at the present value of all future payments discounted using a 5.50% interest rate, thus resulting in a loan valued at $1,025. The difference between the carrying value of the contribution and the discounted loan value was recognized as a grant of $325.
On June 30, 2021, the Company fully reimbursed its loan of $1,802 with Investissement Québec, a related party.
- ASSET RETIREMENT OBLIGATION
For the six-month period ended June 30, 2021 $ |
For the year ended December
31, 2020 | |
| Opening balance | 621 | 621 |
| New obligations | 230 | - |
| Ending balance | 851 | 621 |
The asset retirement obligation that arose during the three-month period ended June 30, 2021 represents the present value of the estimated amount of undiscounted cash flows required to satisfy the asset retirement obligation in respect of the Matawinie Mine. The estimation was made using a percentage of completion of the total budgeted cost of rehabilitation. The Company has determined the fair value of its rehabilitation obligation by using a discount rate of 3.72%, assuming reclamation work would be completed in 28 years. The liabilities accrete to their future value until the obligations are due. The estimated rehabilitation obligation will increase as the construction of the Matawinie Mine progresses.
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
- EQUITY
10.1 SHARE CAPITAL
Authorized share capital
Unlimited number of common shares voting and participating, with no par value.
For the six-month period ended June 30, 2021 $ |
For the year ended December
31, 2020 | |
| Shares issued at the start of the period | 27,299,332 | 26,178,281 |
| Shares issued from placements | 9,501,227 | - |
| Exercise of warrants | 7,821,700 | 872,291 |
| Exercise of options | 331,251 | 145,000 |
| Shares issued for interest payment | 76,635 | - |
| Share based compensation | - | 103,760 |
| Shares issued at the end of period | 45,030,145 | 27,299,332 |
On January 20, 2021, the Company concluded an underwritten public offering agreement for 1,034,500 common shares, at a price of $14.50 per share for gross proceeds of $15M. The buyers exercised their option to purchase and additional 155,175 common shares representing 15% of the number of common shares issued. The total gross proceeds obtained from this public offering agreement sum up to $17.25M.
On February 12, 2021, the Company closed a private placement equity financing totaling $5.8M and the Company issued a total of 396,552 common shares at a price of $14.50 per share. Of this amount, Investissement Québec, acting as mandatory for the government of Québec, subscribed for 317,241 common shares, and Pallinghurst, a related party, subscribed for the remainder of the common shares.
On March 24, 2021, the Company performed a ten-to-one share consolidation of the Company’s issued equity instruments including common shares, warrants and options. All information with respect to shares and share-based instruments and related per share amounts have been retrospectively adjusted on a 1:10 basis accordingly.
On June 23, 2021, the Company concluded an underwritten public offering agreement for 7,000,000 common shares, at a price of $9.22 (US$7.50) per share for gross proceeds of $64.5M (US$52.5M). The buyers exercised their option to purchase an additional 915,000 common shares representing 13.1% of the number of common shares issued. The total gross proceeds obtained from this public offering agreement sum up to $72.9M (US$59.4M). Of this amount, Pallinghurst purchased 66,666 common shares.
| 10.2 | SHARE-BASED PAYMENTS |
The Board of Directors determines the price per common share and the number of common shares which may be allocated to each director, officer, employee and consultant and all other terms and conditions of the option, subject to the rules of the TSXV. The plan has a policy that caps the maximum of total options that can be granted to 10% of the total outstanding shares of the Company.
All share-based payments will be settled in equity. The Company has no legal or contractual obligation to repurchase or settle the options in cash.
10
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
- EQUITY (continued)
| 10.2 | SHARE-BASED PAYMENTS (continued) |
The Company’s share options are as follows:
For the six-month period ended June 30, 2021 |
For the year ended December 31, 2020 | |||
|
Number | Weighted average exercise
price $ |
Number
|
Weighted average exercise
price $ |
| Opening balance | 2,400,000 | 3.20 | 1,582,500 | 2.80 |
| Granted | 705,000 | 16.28 | 1,192,500 | 3.64 |
| Exercised | (331,251) | 2.90 | (145,000) | 3.05 |
| Expired | - | - | (230,000) | 2.66 |
| Ending balance | 2,773,749 | 6.56 | 2,400,000 | 3.20 |
| Options that can be exercised | 2,260,000 | 6.88 | 2,000,000 | 3.37 |
During the six-month period ended June 30, 2021 the weighted average share price at the date of exercise was $19.04.
The weighted average fair value of the share options granted in the first half of 2021 were estimated using the Black-Scholes option pricing model based on the following average assumptions:
● Stock price when granted: $14.63
● Expected life: 5 years
● Expected volatility: 68%
● Risk-free rate: 0.80%
● Expected dividend: nil
- EXPLORATION AND EVALUATION EXPENSES
| For the three-month periods ended | For the six-month periods ended | ||||||||||
June 30, 2021 $ | June 30, 2020 $ | June 30, 2021 $ | June 30, 2020 $ | ||||||||
| Wages and benefits | 805 | 265 | 1,589 | 989 | |||||||
| Share-based compensation | 204 | 168 | 204 | 191 | |||||||
| Engineering | 632 | 1,098 | 1,802 | 2,220 | |||||||
| Professional fees | 95 | 118 | 127 | 332 | |||||||
| Materials, consumables, and supplies | 416 | 284 | 479 | 642 | |||||||
| Subcontracting | 248 | 209 | 641 | 774 | |||||||
| Geology and drilling | 72 | 80 | 114 | 194 | |||||||
| Utilities | 81 | 80 | 172 | 234 | |||||||
| Depreciation and amortization | 54 | 93 | 107 | 185 | |||||||
| Other | 32 | 39 | 76 | 167 | |||||||
| Grants | (36 | ) | - | (36 | ) | - | |||||
| Tax credits | (104 | ) | (401 | ) | (268 | ) | (798 | ) | |||
| Exploration and evaluation expenses | 2,499 | 2,033 | 5,007 | 5,130 | |||||||
The exploration and evaluation expenses relate to the Matawinie Mine in Quebec. The wages and benefits are net of the grants received as part of the Canada Emergency Wage Subsidy program of $305 and $473 for the three and six-month periods ended June 30, 2021, respectively (three and six-month periods ended June 30, 2020: $173 and $173).
11
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
- LiB ANODE PLANT PROJECT EXPENSES
| For the three-month periods ended | For the six-month periods ended | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| $ | $ | $ | $ | |
| Wages and benefits | 185 | 105 | 312 | 298 |
| Engineering | 492 | 574 | 558 | 1,319 |
| Professional fees | 332 | 110 | 422 | 196 |
| Materials, consumables, and supplies | 125 | 1 | 301 | 7 |
| Subcontracting | 49 | 71 | 89 | 234 |
| Depreciation and amortization | 44 | - | 85 | - |
| Other | 13 | 47 | 16 | 59 |
| Grants | (332) | (216) | (592) | (869) |
| LiB Anode Plant project expenses | 908 | 692 | 1,191 | 1,244 |
The wages and benefits are net of the grants received as part of the Canada Emergency Wage Subsidy program of $58 and $81 for the three and six-month periods ended June 30, 2021, respectively (three and six-month periods ended June 30, 2020: $47 and $47).
- GENERAL AND ADMINISTRATIVE EXPENSES
| For the three-month periods ended | For the six-month periods ended | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| $ | $ | $ | $ | |
| Wages and benefits | 933 | 287 | 2,193 | 849 |
| Share-based compensation | 5,250 | 115 | 5,735 | 153 |
| Professional fees | 1,072 | 198 | 2,204 | 499 |
| Consulting fees | 155 | 27 | 435 | 75 |
| Travelling, representation and convention | 79 | 49 | 205 | 176 |
| Office and administration | 1,227 | 189 | 1,468 | 366 |
| Stock exchange, authorities, and communication | 477 | 38 | 760 | 39 |
| Depreciation and amortization | 168 | 207 | 365 | 414 |
| Other financial fees | 9 | 27 | 17 | 59 |
| General and administrative expenses | 9,370 | 1,137 | 13,382 | 2,630 |
12
|
NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
- NET FINANCIAL COSTS
| For the three-month periods ended | For the six-month periods ended | |||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |
| $ | $ | $ | $ | |
| Unrealized foreign exchange loss (gain) | (511) | - | (521) | 8 |
| Interest income | (53) | (3) | (97) | (23) |
| Interest expense on lease liabilities | 28 | 7 | 58 | 16 |
| Accretion and interest on borrowings and bond | 689 | 139 | 1,349 | 237 |
| Accretion of issue costs | 4 | - | 9 | - |
| Loss on disposal of investment | - | 2 | - | 6 |
| Net financial costs | 157 | 145 | 798 | 244 |
- ADDITIONAL CASH FLOW INFORMATION
| For the six-month periods ended | ||
| June 30, 2021 | June 30, 2020 | |
| $ | $ | |
| Grants receivable | 531 | 143 |
| Deferred grants | (1,511) | 1,607 |
| Mining tax credits | (269) | (798) |
| Sales taxes receivable | (646) | 48 |
| Prepaid expenses | (1,028) | 230 |
| Accounts payable and accrued liabilities | 2,226 | 1,159 |
| Total net change in working capital | (697) | 2,389 |
| Items not affecting cash | ||
| Property and equipment included in accounts payable and accrued liabilities. | 2,767 | 177 |
| Share issue costs included in accounts payables and accrued liabilities | 638 | - |
| Shares issued for interest payment | 797 | - |
- RELATED PARTY TRANSACTIONS
During the three and six-month periods ended June 30, 2021, share-based compensation expenses for directors and officers totalled $5.1M and $5.5M (three and six-month periods ended June 30, 2020: nil).
In January 2021, the Company issued 76,635 shares in repayment of accrued interests of $797 as at December 31, 2020 on the convertible bond concluded with Pallinghurst.
Pallinghurst purchased 237,932 common shares as part of the financing closed on January 20,2021, 79,311 common shares as part of the financing closed on February 12,2021 and 66,666 common shares as part of the financing closed on June 23, 2021 (see note 10.1).
Investissement Québec, acting as mandatory for the Government of Quebec, purchased 317,241 common shares as part of the financing closed on February 12, 2021.
During the three and six-month periods ended June 30, 2021, the Company had accrued interests payable to Pallinghurst of $593 and $1,158 (three and six-month periods ended June 30, 2020: nil).
13
|
NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
- FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Fair value
Certain of the Company's accounting policies and disclosures require the determination of fair value. Fair value represents the amount at which a financial instrument could be exchanged between willing parties, based on current markets for instruments with the same risk, principal, and remaining maturity. Fair value estimates are based on quoted market values and other valuation methods. Fair values have been determined for measurement and/or disclosure purposes based on the fair value hierarchy contained in the Company’s financial instrument accounting policy. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
For all financial assets and liabilities, their net carrying amount is a reasonable approximation of fair value given their relatively short maturities.
Financial Risks
The Company is exposed to various financial risks resulting from its operations. The Company does not enter into derivative financial instruments for speculative purposes.
The main financial risks to which the Company is exposed as well as its policies for managing such risk are detailed below:
Liquidity risk
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.
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 because 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 June 30, 2021, all of the Company’s short-term liabilities totalled $13,591 ($10,587 as at December 31, 2020), 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.
With the financing completed in the first and second quarter of 2021 and the exercise of warrants during the same period, management believes that the Company has sufficient funds to meet its obligation and planned expenditures for the ensuing twelve months as they fall due (see note 1).
| As at June 30, 2021 | ||||||
Carrying amount |
Contractual cash flows |
Remainder of the year |
Year 2022 |
Year 2023 |
2024 and Onward | |
| Account payables and accrued liabilities | 13,011 | 13,011 | 13,011 | - | - | - |
| Lease liabilities | 2,488 | 2,995 | 261 | 434 | 415 | 1,885 |
| Borrowings | 2,062 | 2,079 | 98 | 208 | 225 | 1,548 |
| Convertible bond | 14,619 | 20,250 | 1,268 | 2,427 | 16,555 | - |
Credit risk
Credit risk results from the possibility that a loss may occur from the failure of another party to perform according to the terms of the contract. The Company’s credit risk is primarily related to receivables and cash. The receivables consist mainly of the refund of the goods and services tax receivable from the governments of Canada and Quebec, as well as tax credits receivable from the Government of Quebec. The Company mitigates credit risk by maintaining cash with Canadian chartered banks.
14
|
NOUVEAU MONDE GRAPHITE INC. |
| Notes to the condensed consolidated interim financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts - unaudited) | |
- FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
Currency risk
Given that most of the Company’s expenditures are in Canadian dollars, the currency risk exposure is limited by maintaining most of its cash in Canadian dollars. The Company periodically carries a portion of its accounts payable and accrued liabilities in US dollars and Euros and is subject to currency risk on these balances. However, the Company considers this risk to be minimal.
The balances of cash in currencies are as follows as at June 30, 2021 and December 31, 2020.
As at June 30, 2021 $ |
As
at December 31, 2020 $ | |
| Cash in US dollar | 18,636 | - |
| Canadian dollar equivalents | 23,097 | - |
- COMMITMENTS
In the normal course of business, the Company enters into contracts that give rise to commitments. As at June 30, 2021, the Company had issued $12,118 of purchase orders for the acquisition of PPE and $3,638 in relation to the operations.
- SUBSEQUENT EVENTS
On July 21, 2021, the Company nominated SD Capital Advisory Limited (“SDCA”) and GKB Ventures Limited (“GKB”) as joint financial advisors to assist it with the structuring and arranging of project financing, with a focus on Export Credit Agencies (“ECA”), for the development of the Company’s flagship Matawinie Graphite Mining project in Québec, Canada.
On July 23, 2021, the Company closed a private placement equity financing with Investissement Québec, acting as mandatory for the government of Québec, and issued a total of 1,978,750 common shares at a price of $9.25 per share for proceeds to the Company of $18.3M. This financing complemented the underwritten public offering agreement closed on June 23, 2021 (see note 10).
15
Exhibit 99.2
MANAGEMENT DISCUSSION & ANALYSIS
For the three and six-month periods ended June 30, 2021
 |
TABLE OF CONTENTS
| Preamble | 2 | |
| Period covered | 2 | |
| Cautionary statement regarding forward looking information | 2 | |
| The Company | 3 | |
| Corporate structure | 3 | |
| Value proposition | 4 | |
| Responsibilities | 4 | |
| Human capital | 4 | |
| Environment | 5 | |
| Carbon neutrality | 6 | |
| Societal | 6 | |
| Business lines | 7 | |
| Lib Anode Plant project | 8 | |
| Matawinie Mine project | 9 | |
| Resource | 10 | |
| Matawinie Mine Demonstration Plant (phase 1) | 11 | |
| Matawinie Mine (phase 2) | 11 | |
| Commercial strategy | 12 | |
| Sales | 12 | |
| Partnerships, research and development | 13 | |
| Market update | 13 | |
| Administration and governance | 14 | |
| Leadership | 14 | |
| Risks | 15 | |
| Quarterly results | 15 | |
| Second quarter and half year results | 16 | |
| Exploration and Evaluation expenses | 16 | |
| Lib Anode Plant project expenses | 17 | |
| General and administrative expenses | 18 | |
| Net financial costs | 18 | |
| Liquidity and funding | 19 | |
| Operating activities | 20 | |
| Investing activities | 20 | |
| Financing activities | 20 | |
| Additional information | 20 | |
| Related party transactions | 20 | |
| Off-balance sheet transactions | 21 | |
| Critical accounting estimates, new accounting policies, judgements and assumptions | 21 | |
| Contractual obligations and commitments | 21 | |
| Capital structure | 21 | |
| Subsequent events to June 30, 2021 | 21 | |
| Continuous disclosure | 21 |
Management Discussion and Analysis | 1 |
|
Preamble
This Management Discussion and Analysis (“MD&A”) dated August 12, 2021, 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 “Nouveau Monde”).
This MD&A should be read in conjunction with the Company’s condensed consolidated interim unaudited financial statements for the three and six-month periods ended June 30, 2021, and the consolidated audited financial statements for the years ended December 31, 2020, and 2019 and related notes included therein. The Company’s condensed consolidated interim unaudited financial statements have been prepared in compliance with the International Financial Reporting Standards (“IFRS”) published by the International Accounting Standards Board (“IASB”) including IAS 34 Interim Financial Reporting. 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 and six-month periods ended June 30, 2021, with additional information up to August 12, 2021.
Cautionary statement regarding forward looking information
All statements, other than statements of historical fact, contained in this MD&A including, but not limited to, those relating to (i) management’s belief that the Company has sufficient funds to meet its obligations and planned expenditures for the ensuing twelve months as they fall due, (ii) the Company’s ability to secure additional financing in the future to complete the construction and commissioning of its projects and meet its financial needs, (iii) the “Value Proposition” paragraph which essentially describes the Company’s outlook and objectives, (iv) the development plans and timeline for the projects and specialty products, (v) the results and operational highlights of the feasibility study covering the West Zone deposit of the Tony Claim Block, (vi) the updated pit constrained Mineral Resource Estimate, (vii) the project timeline, (viii) the electrification strategy and its intended results, (ix) the benefits of the Atomic Layer Deposition-coating technologies (“ALD”) technologies, (x) the capacity and output of the projected manufacturing LiB Anode Plant project, (xi) the completion of the FEL-2, (xii) graphite demand growth and trends, (xiii) the expected unfolding of construction and commissioning as well as the anticipated start of production at the Company’s Matawinie and Bécancour projects and (xiii) any information as to the future plans and outlook for the Company, constitute ''forward-looking information'' or ''forward-looking statements'' within the meaning of certain securities laws, and are based on expectations, estimates and projections as of the time of this MD&A. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company as of the time of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. These estimates and assumptions may prove to be incorrect. Moreover, these forward-looking statements were based upon various underlying factors and assumptions, including the timely delivery and installation of the equipment supporting the production, the Company’s business prospects and opportunities and estimates of the operational performance of the equipment, and are not guarantees of future performance.
The words "anticipates", ''plans'', ''expects'', "indicate", "intend", ''scheduled'', ''estimates'', ''forecasts", "guidance", "initiative", "outlook", "potential", "projected", "pursue", "strategy", "study", "targets", or ''believes'', or variations of or similar such words and phrases or statements that certain actions, events or results ''may'', ''could'', ''would'', or ''should'', ''might'', or "way forward", ''will be taken'', ''will occur'' or ''will be achieved'' and similar expressions identify forward-looking statements.
Management Discussion and Analysis | 2 |
|
Forward-looking information and statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking information and statements. Risk factors that could cause actual results or events to differ materially from current expectations include, among others, delays in the scheduled delivery times of the equipment, the ability of the Company to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability of financing or financing on favorable terms for the Company, the dependence on commodity prices, the impact of inflation on costs, the risks of obtaining the necessary permits, the operating performance of the Company’s assets and businesses, competitive factors in the graphite mining and production industry, changes in laws and regulations affecting the Company’s businesses, political and social acceptability risk, environmental regulation risk, currency and exchange rate risk, technological developments, the impacts of the global COVID-19 pandemic and the governments’ responses thereto, and general economic conditions, as well as earnings, capital expenditure, cash flow and capital structure risks and general business risks. Unpredictable or unknown factors not discussed in this Cautionary Statement could also have material adverse effects on forward-looking statements.
Many of these uncertainties and contingencies can directly or indirectly affect, and could cause, actual results to differ materially from those expressed or implied in any forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management’s expectations and plans relating to the future. Readers are cautioned not to place undue reliance on these forward-looking statements as a number of important risk factors and future events could cause the actual outcomes to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates, assumptions and intentions expressed in such forward-looking statements. Such risk factors are more particularly set out hereinafter, under the section titled “Risks” of this MD&A. The Company disclaims any intention or obligation to update or revise any forward-looking statements or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law.
The Company
Corporate structure
The Company was established on December 31, 2012, under the Canada Business Corporations Act. Nouveau Monde’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, and NM9A on the Frankfurt Stock Exchange.
As at June 30, 2021, the difference between the Company’s current assets and currents liabilities was $81,857 and the Company had an accumulated deficit of $97,322, and had incurred a loss of $12,878 and $20,322 for the three and six-month periods then ended. Current assets included current tax credits receivable of $3,958 and cash of $86,457.
With the financing completed in the first half of 2021, management believes that the Company has sufficient funds to meet its obligations and planned expenditures for the ensuing twelve months as they fall 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, twelve months from the end of the reporting period. The Company’s ability to continue future operations and fund its exploration, evaluation and development activities is dependent on management’s ability to secure additional financing in the future, which may be completed in several ways including, but not limited to, a combination of strategic partnership, project debt finance, offtake financing, royalty financing and other capital markets alternatives. Management will pursue such additional sources of financing when required, and 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.
Management Discussion and Analysis | 3 |
|
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.
Value proposition
Nouveau Monde is striving to become a key contributor to the sustainable energy revolution. The Company is working towards developing a fully integrated source of green battery Anode material in Québec, Canada. Targeting commercial operations by 2023, the Company is developing advanced carbon-neutral graphite-based material solutions for the growing lithium-ion and fuel cell markets. With projected low-cost operations and high environmental, social & governance (“ESG”) standards, Nouveau Monde aspires to become a strategic supplier to the world’s leading battery and automobile 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 SolutionsTM. |
| Mission | Provide the greenest advanced graphite materials with a carbon-neutral footprint for a sustainable world. |
| Values | Safety, responsibility, openness, integrity and entrepreneurial spirit. |
Responsibilities
Human capital
The Company is committed to providing a safe work environment to its staff and business partners. No incidents occurred during the three-month period ended June 30, 2021. Nouveau Monde had an Occupational Safety and Health Administration (“OSHA”) Recordable Incident Rate of 2.61 as a result of an incident at the demonstration plant in the first quarter of 2021.
| ̶ | In response to the situation, the Company carried out a risk analysis, corrected work procedures, modified the equipment in cause in the incident and conducted a safety awareness session with operators. |
In relation to the COVID-19 pandemic, Nouveau Monde has implemented preventive measures and strict work protocols to provide a safe environment to its employees, contractors, and communities. The Company continuously tracks public health directives and adapts work procedures accordingly.
Management Discussion and Analysis | 4 |
|
Focused on sustainable development, the Company has launched initiatives to train and hire local workers, particularly through the “Comité de formation de la main-d’oeuvre de la Haute-Matawinie”, which includes industrial, institutional and business partners who come together to share services.
| ̶ | Diploma of Vocational Studies in Production Equipment Operation: Three cohorts of this on-the-job training program leading graduates to a position as an operator at the Matawinie ore concentrator plant have now been launched; a fourth is currently being recruited. There is significant interest in the region to support multiple cohorts and develop a skilled workforce in anticipation of the commercial mining operations. |
| ̶ | Mining and Logging Essentials: This sociovocational integration program is for members of the Atikamekw communities and aims to reinforce the employability of Indigenous workers. Program enrollments were completed early in 2020; the launch is paused until the COVID-19 situation enables easier movements between the Manawan and Saint-Michel-des-Saints communities. |
As the Company advances the Matawinie mine project and the Bécancour LiB Anode Plant, recruitment of key personnel continues both at the operational and corporate levels.
Environment
The Company plans to develop its projects to extract and transform natural graphite while limiting its environmental footprint. Dedicated to stringent sustainable development standards, Nouveau Monde is committed to adopting a fully electric operating model. By leveraging Québec’s renewable hydropower, the Company plans to produce carbon-neutral graphite-based solutions for the booming battery markets supporting the energy transition.
On April 15, 2019, the Company officially filed its Environmental and Social Impact Assessment (“ESIA”) for the Matawinie mine project with the Government of Québec, an important step in the project’s analysis and authorization. The Government of Québec issued a notice of admissibility for the ESIA of the Matawinie project, following its analysis by 25 provincial agencies and ministries. Subsequently, the Ministère de l’Environnement et de la Lutte contre les changements climatiques (“MELCC”) 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 (see press release dated June 26, 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, the Québec Government issued a ministerial decree on February 10, 2021, authorizing Nouveau Monde’s Matawinie mining project for a 100,000-tpa high-purity graphite concentrate production. |
To protect the environment and the well-being of the community, Nouveau Monde has developed an environmental surveillance and monitoring program to oversee the construction, operation and closure activities of the Matawinie project.
Mine tailings represent a significant environmental responsibility. Nouveau Monde 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. An experimental cell was built during the third quarter of 2020 to demonstrate in real conditions the performance of this innovative environmental method. Field scale cells were built to calibrate the parameters with respect to 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.
Management Discussion and Analysis | 5 |
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Carbon neutrality
Taking responsibility for its entire organizational GHG footprint, the Company has taken concrete steps to avoid, reduce, and fully offset its emissions by committing to a tailor-made Climate Action Plan (see press release dated April 13, 2021). Nouveau Monde is utilizing carbon credits in compliance with the CSA Clean Projects Registry to compensate its entire historic emissions and confirm its “carbon-neutral status”.
| ̶ | The Company has partnered with Québec-based experts NEL-i to develop one of the largest carbon offsetting projects in Eastern Canada to secure future supply of carbon credits for the Matawinie mine as well as the Bécancour Anode material plant. |
| ̶ | Nouveau Monde’s R&D team is developing innovative projects for effective carbon storage solutions that can potentially extend beyond the Company’s own needs. Nouveau Monde intends to supply any such excess carbon credits to third parties. |
Societal
The Matawinie graphite mine project is located in the municipality of Saint-Michel-des-Saints, founded in 1863, in the Lanaudière region. The main industries in the Upper Matawinie region are recreation and forestry. 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:
| ̶ | over 70 information events, including public sessions and open-house events, to establish open and constructive dialogue with local organizations, residents, cottage owners, and members of First Nations; |
| ̶ | creation of a stakeholder committee (2017) to build trust with stakeholders throughout the mining development process and integrate concerns and expectations in the project design. |
| ̶ | consultations as part of the ESIA to analyze resident perspectives and identify mitigation or enhancement measures; |
| ̶ | a pre-development agreement with the Atikamekw First Nation (2019), i.e. the Conseil des Atikamekw de Manawan and the Conseil de la Nation Atikamekw, to provide a guideline for negotiating an Impact and Benefit Agreement for the Matawinie project; |
| ̶ | a collaboration and benefit-sharing agreement with the municipality of Saint-Michel-des-Saints (2020) to set out a concrete social, economic and environmental development partnership through financial and participatory mechanisms; and |
| ̶ | surveys to measure social license conducted in 2018 and 2019 among residents of Saint-Michel-des-Saints and Saint-Zénon, which showed a high and stable rate of support for the project: 83% (2018) and 82% (2019). |
The LiB Anode Plant is located in Bécancour, Québec, founded in 1965 from an amalgamation of eleven municipalities, in the Centre-du-Québec region. From its original agricultural tradition, the community’s economy has shifted toward heavy industry and now counts one of the largest industrial parks in Canada and a deep-water international port on the St. Lawrence River.
Management Discussion and Analysis | 6 |
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Nouveau Monde strives to develop business activities that are supported by its communities and contribute to the overall development and advancement of the areas where it operates. Nouveau Monde is committed to continuing its tradition of listening and responding to community 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.
Business lines
Nouveau Monde is developing high-purity natural flake graphite as well as a line of specialty products ranging from expandable graphite (for industrial applications, such as an additive to roofing membranes and construction materials providing increased end-use safety) to spherical graphite, which is an essential component in all lithium-ion batteries used in electric vehicles, energy storage solutions and consumer technology applications such as 5G technologies.
The Company activities are focused on the Matawinie Mine project and the LiB Anode Plant, both of which are progressing concurrently toward commercial operations.
| LiB Anode Plant Project | |
| Phase 2 – LiB Anode Plant | |
| Phase 1 – LiB Anode Demonstration Plants | |
| Shaping Demonstration Plant | Since February 2020, the Company has been operating two commercial scale shaping units. |
| Purification Demonstration Plant | The purification demonstration unit is currently being deployed at a 2,000 tonnes per annum (“tpa”). Construction was completed in the second quarter; commissioning is being carried out.
|
| Coating Demonstration Plant | The Company is currently in the detailed engineering phase and has initiated the procurement to build the first module of the Phase 1 with a 2,000 tpa capacity coating demonstration unit that is scheduled to be commissioned early in 2022.
|
| Matawinie Mine Project | |
| Phase 2 – Matawinie Mine | Construction of the facilities has started; commissioning of commercial operations (Phase 2) at the Matawinie Mine is scheduled for 2023.
|
| Phase 1 – Matawinie Mine Demonstration Plant | |
| Flake Demonstration Plant | Since September 2018, the Company has been operating a flake concentration demonstration plant. |
Management Discussion and Analysis | 7 |
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Lib Anode Plant project
In the last year, the Company has made considerable progress with respect to its LiB Anode Plant project. The shaping equipment (phase 1) is producing spherical graphite and samples tested have attested to the performance of the secondary transformation process developed by Nouveau Monde (see press release dated February 26, 2020).
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, Nouveau Monde 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 Nouveau Monde’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 Bécancour, Québec facility. Commissioning activities are currently underway. The scalable furnaces shall have a nameplate capacity of 2,000 tonnes purified battery-grade graphite per year. |
Determined to develop the entire value chain from mine to anode material to provide a traceable and carbon-neutral source to battery manufacturers, Nouveau Monde is advancing with the deployment of its environmentally friendly coated spherical graphite 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.
| ̶ | Nouveau Monde has successfully completed the detailed engineering study for its Phase-1 2,000 tonnes per year coating production line. The first production is currently planned for Q1-2022 (see press release dated January 26, 2021). |
| ̶ | In addition, the Company has signed an important collaboration agreement for the use of Forge Nano’s proprietary ALD (see press release dated October 6, 2020). ALD technologies will enhance the performance of Nouveau Monde’s graphite as part of the lithium-ion battery system. |
Nouveau Monde’s anode material has outperformed leading Asian commercial producers (see press release dated November 23, 2020). In a series of electrochemical tests performed by the National Research Council of Canada revealed that under the same conditions in half-button cell batteries, the reversible capacity (a measure of the energy density for performance) obtained with the Company’s anode material is 365 mAh/g compared with 360 mAh/g for the leading Asian standards. Further, the broader market minimum specification for reversible capacity is well below at only 350 mAh/g, highlighting the market opportunity for the Company.
In January 2021, Nouveau Monde purchased a 2 million-square-foot land in the Bécancour industrial park (see press release dated January 21, 2021), adjacent to Olin’s facility, to build an integrated manufacturing plant of anode material for lithium-ion batteries with a projected annual production volume of 45,000 tpa (phase 2). The property presents no environmental limitations for construction and offers all necessary infrastructure to have a safe and direct pipeline chemical supply from Olin as well as rail, port, and road for both importing raw materials and exporting final products throughout North America and Europe.
During the first quarter of 2021, the Company obtained the results of its Front-End Loading engineering analysis (“FEL-1”) for its large-scale lithium-ion active Anode material facility (“Bécancour LiB Anode Plant”). The Bécancour LiB Anode Plant project is designed to receive approximately 60 kilotonnes per annum (“ktpa”) of flake graphite from Nouveau Monde’s Matawinie mine, or from alternative third-party sources of supply deemed suitable, to be transformed into approximately 42 ktpa of Anode material, 3 ktpa of purified flakes and 14 ktpa of micronized graphite representing a valuable process by-product.
Management Discussion and Analysis | 8 |
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| ̶ | The FEL-1 includes a review of all environmental regulations and permits, the project schedule, product specifications definition, stakeholders’ analysis, the capital expenditure budget, and projected operating costs. |
| ̶ | Given the favorable economics revealed in the FEL-1, Nouveau Monde has commenced a Front-End Loading feasibility engineering analysis (“FEL-2 & 3”) with the goal to be completed in H1-2022. The study is expected to cost approximately $11.5 million. |
| ̶ | Engineering firm BBA has been awarded the mandate to complete a definitive feasibility study for the 45,000 tpa Phase 2 Bécancour battery anode plant, building on the company’s FEL-1 Scoping study (see press release dated June 8, 2021). |
Matawinie Mine project
The Matawinie property includes 319 mining claims covering 17,585 hectares, in which the Company owns a 100% interest. The Tony Claim Block is located approximately 150 km north of Montreal, Québec, Canada, in Saint-Michel-des-Saints. This block is easily accessible via existing forest roads and is close to high-quality infrastructure, including paved roads and high-voltage power lines. The regional community has an abundance of skilled laborers who are available following the permanent cessation of many forestry activities. 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.
On October 25, 2018, the Company announced the results of a feasibility study (“FS”) covering the West Zone deposit of the Tony Claim Block, which is part of its Matawinie graphite property. The FS performed by Met-Chem/DRA, in compliance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”), demonstrated the project’s economic potential:
| ̶ | pre-tax net present value (“NPV”) of $1.287 billion at an 8% discount rate; |
| ̶ | after-tax NPV of $751 million at an 8% discount rate; |
| ̶ | pre-tax internal rate of return (“IRR”) of 40.6%; |
| ̶ | after-tax IRR of 32.2%; |
| ̶ | life of mine (“LOM”) of 25.5 years; |
| ̶ | mine pay back estimated at 2.2 years (pre tax); |
| ̶ | mine pay back estimated at 2.6 years (after tax); |
| ̶ | initial capital costs (“Capex”) of $276 million (including contingency of $31.5 million); |
| ̶ | operating expenditures (“Opex”) of $499 per tonne of concentrate; |
| ̶ | average sales price of graphite concentrate at US$1,730 per tonne; and |
| ̶ | USD/CAD conversion rate of 1.307. |
Operational highlights of the FS include:
| ̶ | average annual full production of 100,000 tonnes of graphite concentrate; |
| ̶ | a Probable reserve of 59.8 million tonnes at a 4.35% Cg average grade contained in the mineralization; |
| ̶ | graphite milling recovery above 94%; |
| ̶ | finished product / concentrate purity above 97% Cg; and |
| ̶ | stripping ratio (LOM) of 1.06:1 |
Management Discussion and Analysis | 9 |
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Resource
In March 2020, the Company published an updated pit-constrained Mineral Resource Estimate (the “Current Resource”) for its West Zone deposit, located in the Tony Claim Block part of its Matawinie graphite property (see press release dated March 19, 2020). The Mineral Resource Estimate includes a 25.6% increase in the combined Measured and Indicated Mineral Resource categories with a minimal change to the new resource pit footprint and mineralization that remains open at depth and both to the north and south. This update follows a drilling campaign completed in the fall of 2019 (see press release dated December 3, 2019).
The Current Resource is summarized below and compared to the previous pit-constrained Mineral Resource Estimate (the “Previous Resource”) published in a press release dated June 27, 2018.
Pit-Constrained Mineral Resource Estimate for the West Zone (1)
| RESOURCE CATEGORY 2 | CURRENT RESOURCE (March 19, 2020) 8 |
PREVIOUS RESOURCE (June 27, 2018) 8 | ||||
| Tonnage (Mt) 5, 7 | Grade (% Cg) 3 |
Cg (Mt) |
Tonnage (Mt) 5, 7 | Grade (% Cg) 3 |
Cg (Mt) | |
| Measured | 24.5 | 4.27 | 1.05 | 0 | 0 | 0 |
| Indicated | 95.8 | 4.26 | 4.08 | 95.8 | 4.28 | 4.10 |
| Measured + Indicated 9 | 120.3 | 4.26 | 5.13 | 95.8 | 4.28 | 4.10 |
| Inferred 4 | 4.5 | 4.43 | 0.20 | 14.0 | 4.19 | 0.59 |
| 1. | The mineral resources provided in this table were estimated using current Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Reserves, Definitions and Guidelines. |
| 2. | Mineral resources are not to be considered mineral reserves as their economic viability has not been demonstrated. Additional drilling and/or trenching will be required to convert Inferred and Indicated Mineral Resources to Indicated and Measured Mineral Resources. |
| 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 drilling and/or trenching will be required to convert Inferred Mineral Resources to Indicated or Measured Mineral Resources. |
| 5. | Current Resource effective as of March 19, 2020; detailed scientific and technical information can be found in the Company’s March 19, 2020 announcement titled: Nouveau Monde Announces Updated Resource Estimate and Increases Combined Measured & Indicated Resources by 25 % to 120.3 Mt @ 4.26 % Cg. |
| 6. | Previous Resource published June 27, 2018; detailed scientific and technical information can be found in the Company’s announcement titled; Nouveau Monde Increases Its Indicated Resources to 95.8MT at a Grade of 4.28% CG for its West Zone Graphite Deposit - Matawinie Property. |
| 7. | The Current and Previous Mineral Resources are stated at a cut-off grade of 1.78% Cg. |
| 8. | The standards used for this Resource Update are the same standards produced over the course of the Prefeasibility Study (results published June 27, 2018). The difference between the Current and Previous Resources comes from new drilling done in 2019 mainly in the south-west sector of the deposit and from deep drilling. |
| 9. | Mineral Resource tonnage, grade and quantity have been rounded to reflect the accuracy of the estimate, and the totals therefore may not represent the exact sums of their components. The Mineral Reserve Estimate has an effective date of May 7, 2019. Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral resource will be converted into mineral reserve. |
Management Discussion and Analysis | 10 |
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Open-Pit Mineral Reserves Estimate for the West Zone (1)
| RESERVE CATEGORY 2 | CURRENT RESERVE (July 10, 2018) 6 | ||
| Tonnage (Mt) 4, 5 |
Grade (% Cg) 3 |
Cg (Mt) | |
| Proven | 0 | 0 | 0 |
| Probable 2 | 59.8 | 4.35 | 2.52 |
| Proven & Probable 5 | 59.8 | 4.35 | 2.52 |
| 1. | The mineral reserves provided in this table were estimated using current Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Reserves, Definitions and Guidelines. |
| 2. | The Mineral Reserves are the Measured and Indicated Mineral Resources that have been identified as being economically extractable and which incorporate mining losses and the addition of waste dilution as set out in detailed scientific and technical information in the NI 43-101 technical report dated July 10, 2018, titled “NI 43-101 Technical Feasibility Study Report for the Matawinie Graphite Project” that was filed with the securities regulatory authorities in each of the provinces of Canada on December 10, 2018. |
| 3. | The cut-off grade for the open pit Mineral Reserves is 2.20 % Cg. |
| 4. | Graphite tonnage is based on an average graphite recovery of 94% and concentrate product purity of 97%. |
| 5. | The open pit design includes 59.8 Mt of Probable Mineral Reserves at a diluted grade of 4.35% Cg. In order to access these reserves, 13.2 Mt of overburden and 50.0 Mt of waste rock will need to be removed. This results in a LOM stripping ratio of 1.06 to 1 (waste/ore). |
| 6. | Detailed scientific and technical information on the Matawinie Graphite Project can be found in the NI 43-101 technical report dated July 10, 2018, titled “NI 43-101 Technical Feasibility Study Report for the Matawinie Graphite Project” that was filed with the securities regulatory authorities in each of the provinces of Canada on December 10, 2018. |
Matawinie Mine Demonstration Plant (phase 1)
Since the third quarter of 2018, the Company has been operating a 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 tons of graphite concentrate have been produced so far with the materials extracted from the West Zone Deposit of the Matawinie graphite property with grades between 94-98% Cg (as per technical requirements).
Matawinie Mine (phase 2)
The ministerial decree authorizing the project (see press release dated February 10, 2021) now supports the technical feasibility and commercial viability of the Matawinie Mine and provides Nouveau Monde with the final design parameters to launch the construction activities, subject to additional financing. Through an innovative coordination table set up by the Québec Government, Nouveau Monde has worked collaboratively with various authorities to prepare the permitting process.
The detailed engineering and procurement services for the construction of the graphite mine and concentrator continue to progress with the technical team.
| ̶ | Tier-1 supplier Metso Outotec has been retained for procurement of the process equipment chain as well as services promoting design and integration efficiencies. |
Nouveau Monde started early works in April 2021 to prepare the site for the mine industrial platform and the access road connecting the project to the local highway.
Management Discussion and Analysis | 11 |
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| ̶ | Tree clearing was completed before the nesting season to limit impacts to avifauna. Wood harvested as part of the preliminary works is being transformed by regional sawmills and wood product manufacturers to optimize carbon sequestration and local economic benefits. |
| ̶ | On-site construction work started in July 2021 to build the access road. The pragmatic 30-month construction timeline places project commissioning activities and start-up of commercial production in 2023, in time to meet the growing demand of battery manufacturers. |
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.
Following its international call for pre-qualification as part of its procurement process for its all-electric fleet and charging infrastructure, Nouveau Monde signed an agreement with Caterpillar Inc. on June 22, 2021.
| ̶ | Caterpillar will develop, test and produce Cat® “zero-emission machines” for the Matawinie Mine project with a view to becoming the exclusive supplier of an all-electric mining fleet for deployment at Nouveau Monde’s Matawinie mine by 2028. |
Nouveau Monde has been selected as the first mining partner of the Canadian and Quebec governments as they roll out their electrification strategy (see press release dated November 2, 2020). 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.
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 project mine and concentrator to Hydro-Québec’s hydropower network that will enable the full electrification of its operations (see press release dated April 15, 2020).
Commercial strategy
Sales
Following intensified marketing and technical sales activities, Nouveau Monde secured sales agreements on North American, European, and Asian markets for hundreds of tonnes of high-quality graphite, produced from the Company’s demonstration plant (see press release dated September 24, 2020).
| ̶ | The basket price received per tonne of flake graphite has been in excess of US$1,500 per tonne, excluding the downstream LiB Anode Plant. |
| ̶ | The Company is currently under several NDAs with major electric vehicle OEMs qualifying its carbon-neutral advanced materials for lithium-ion batteries. |
As commercial discussions intensify with European automakers for Nouveau Monde’s battery anode material, the Company announced the opening of a London-based sales office to readily respond to the growing enquiries from local customers and stakeholders (see press release dated November 5, 2020).
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 operation.
Management Discussion and Analysis | 12 |
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| ̶ | Traxys will market flake graphite concentrate from the Company’s currently operating graphite demonstration plant 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 Nouveau Monde. |
| ̶ | Traxys will have the exclusive right to market, distribute and resell the flake graphite products to its customer base. |
Partnerships, research and development
The Company has partnered with Hydro-Québec to research and develop graphite anode material for lithium-ion batteries (see press release dated May 17, 2018). A world-renowned innovation hub, Hydro-Québec’s Center of Excellence in Transportation Electrification and Energy Storage is developing some of the world’s most advanced battery material technologies for electric vehicles and other energy storage applications. Through the partnership, Hydro-Québec’s impressive intellectual property portfolio (over 2,000 patents) and leading-edge facilities provide a springboard for Nouveau Monde’s technological developments and commercialization activities.
| ̶ | Nouveau Monde also holds an operating license to commercialize Hydro-Québec’s battery material technologies and position the province of Québec in the lithium-ion battery value chain. |
The Company also maintains a portfolio of research and development projects to refine its line of specialty products based on market demands and innovations.
| ̶ | Nouveau Monde 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 graphite advanced products, optimize production costs, and improve the properties for existing performance (see press release dated January 26, 2021). |
Nouveau Monde has signed a collaboration agreement with Lithion Recycling (“Lithion”) for the recovery and value-added transformation of recycled graphite for reuse as anode material for lithium-ion batteries (see press release dated June 10, 2021). The partnership aims at leveraging Nouveau Monde’s and Lithion’s proprietary processes and expertise to promote graphite circularity and better position both companies in the evolving global market.
Market update
Global market parameters and trends remain very attractive as economies transition to a post-COVID era and western governments invest in stimulus packages, particularly in cleantech and electrification. With China being the only producer of purified spherical graphite, the current situation has reinforced the need for local and resilient supply chains. Nouveau Monde is set to become the only fully integrated source of green battery anode material in the Western World, benefiting in this respect.
| ̶ | Currently, lithium-ion battery plants under construction in North America and Europe account for approximately 1,010 GWh of capacity (Benchmark Mineral Intelligence, May 2021). As the number of battery megafactories increases, graphite demand is forecasted to grow over 410% by 2030. |
Technological trends and new GHG policies have pushed the graphite market, mainly with regard to lithium-ion batteries and fuel-cell technologies, into an accelerated growth curve. Benchmark Mineral Intelligence forecasts that demand for natural graphite will exceed supply, creating a deficit market starting in 2023.
| ̶ | On the heels of the European Union, China and Canada’s own declarations, the U.S. has identified graphite as a strategic mineral for economic growth and national security as per the Presidency Executive Order on “Addressing the Threat to the Domestic Supply Chain from Reliance on Critical Minerals from Foreign Adversaries” dated September 30, 2020. |
Management Discussion and Analysis | 13 |
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| ̶ | 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. |
Concurrently to exponential demand, there is increased focus on carbon neutrality in the market to cater to consumers’ green expectations and governments’ more stringent environmental regulations. Nouveau Monde is ideally positioned to respond to this growing trend thanks to its green, carbon-neutral and traceable materials.
Administration and governance
During the second quarter of 2021, Nouveau Monde completed an underwritten public offering of its common shares for aggregate gross proceeds of $72.9 million (see press release dated June 23, 2021). This financing was subsequently complemented by a private placement of $18.3 million with Investissement Québec, acting as mandatary for the government of Québec, subscribing for the full amount which closed on July 23, 2021 (see press release dated July 23, 2021).
During the first quarter of 2021, the Company raised approximately $22 million through a bought deal public offering with BMO Capital Markets (see press release dated January 20, 2021) and a non-brokered private placement with institutional investors (see press release dated February 12, 2021).
During March 2021, the Company received $1.35 million as part of a repayable contribution agreement with Canada Economic Development for Quebec Regions. This contribution agreement bears no interest and will be repayable in 60 equal monthly installments starting September 2023.
During the first quarter of 2021, the Company received $17.6 million from the exercise of previously issued warrants.
On January 25, 2021, Nouveau Monde issued an aggregate of 76,635 common shares of its share capital at a price of $10.40 per common Share, in settlement of interests owed on a secured convertible bond in the principal amount of $15 million issued by the Company to Pallinghurst Graphite Limited (“Pallinghurst”).
On March 22, 2021, Sustainable Development Technology Canada increased its grant contribution related to the construction of its purification processing facility of $223, bringing the total amount of the contribution to $4.7 million. The initial grant agreement was secured in August of 2019 (see press release dated August 20, 2019).
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 declaration of ethical values and sustainable development policy can be found on Nouveau Monde’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.
Management Discussion and Analysis | 14 |
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| ̶ | On April 1, 2021, Nouveau Monde appointed Dr. Jürgen Köhler – a global industry expert and the former CEO of a world-leading advanced graphite materials company – to its Board of Directors (see press release dated April 6, 2021). |
| ̶ | On May 13, 2021, the Company nominated Andrew Willis to its Board of Directors, enhancing internal expertise in international finance. |
| ̶ | At the Company’s Annual General and Special Meeting of Shareholders, shareholders re-elected all nine nominated directors to the Board (see press release dated June 29, 2021). |
To reflect the development and growth nature of the Company, the Board of Directors recently reorganized its committees to enhance governance practices. The following committees now support the Board of Directors’ activities: the Audit Committee; the Human Resources, Nomination and Remuneration Committee; the Governance, Compliance and Legal Committee; the Safety, Health and Well-Being Committee; the Project and Development Committee; as well as the ESG, Community, Sustainability and Diversity Committee.
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 recent Annual Information Form and its Prospectus Supplement No 1 on file with the Canadian provincial securities regulatory authorities and on SEDAR.
Quarterly results
During the three-month period ended June 30, 2021, the Company recorded a net loss of $12,878 ($4,007 for three-month period ended June 30, 2020) and a net loss per share of $0.34 ($0.15 for three-month period ended June 30, 2020).
| Description | Q2-2021
(note a) $ |
Q1-2021
(note b) $ |
Q4-2020
$ |
Q3-2020
(note c) $ |
| Revenue | - | - | - | - |
| Net loss | (12,878) | (7,444) | (8,229) | (501) |
| Loss per share | (0.34) | (0.22) | (0.31) | (0.02) |
| Description | Q2-2020 $ |
Q1-2020 $ |
Q4-2019 $ |
Q3-2019 $ |
| Revenue | - | - | - | - |
| Net loss | (4,007) | (5,240) | (5,956) | (4,331) |
| Loss per share | (0.15) | (0.20) | (0.26) | (0.17) |
| a) | The net loss in Q2-2021 increased by $5.4M compared to the Q1-2021 mainly due to non-cash share-based compensation expenses arising from the grant of options to key management personnel. |
Management Discussion and Analysis | 15 |
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| b) | The net loss in Q1-2021 is $785 lower compared to the Q4-2020 mainly due to the capitalized expenditures in Q1-2021, in connection with the coating demonstration plant, laboratory, and shaping projects. Additionally, there were lower expenditures related to the flake demonstration plant in Q1-2021. |
| c) | The net loss observed in the third quarter of 2020 is much lower than the net loss of the third quarter of 2019 due to the net smelter royalty transaction that has been concluded with Pallinghurst group. |
Second quarter and half year results
Exploration and Evaluation expenses
| For the three-month periods ended | For the six-month periods ended | |||||||
| Description | June 30, 2021 $ | June 30, 2020 $ | June 30, 2021 $ | June 30, 2020 $ | ||||
| Wages and benefits (a) | 805 | 265 | 1,589 | 989 | ||||
| Share-based compensation | 204 | 168 | 204 | 191 | ||||
| Engineering (b) | 632 | 1,098 | 1,802 | 2,220 | ||||
| Professional fees (c) | 95 | 118 | 127 | 332 | ||||
| Materials, consumables, and supplies (d) | 416 | 284 | 479 | 642 | ||||
| Subcontracting | 248 | 209 | 641 | 774 | ||||
| Geology and Drilling expenses | 72 | 80 | 114 | 194 | ||||
| Utilities | 81 | 80 | 172 | 234 | ||||
| Depreciation and amortization | 54 | 93 | 107 | 185 | ||||
| Other | 32 | 39 | 76 | 167 | ||||
| Grants | (36) | - | (36) | - | ||||
| Tax credits (e) | (104) | (401) | (268) | (798) | ||||
| Exploration and Evaluation Expenses | 2,499 | 2,033 | 5,007 | 5,130 | ||||
| a) | The increase of $540 and $600 for the wages and benefits for the three and six-month periods ended June 30, 2021, is mainly due to a temporary closure of the demonstration plant that occurred in the second quarter of 2020 due to Covid-19 which translated into temporary layoffs of workers and decreased the wages and benefits expense in that period combined with an increase in headcount in the first six months of 2021 compared to the same period in 2020. |
| b) | The decrease of $466 and $418 for engineering fees for the three and six-month periods ended June 30, 2021, is due to the start of the capitalization of detailed engineering expenses that relates to the development of the Matawinie Mine and concentrator project subsequent to April 1, 2021. |
| c) | The decrease in professional fees of $205 for the six-month period ended June 30, 2021, is mainly due to services rendered in connection with the public hearing (BAPE). |
| d) | The decrease in materials, consumables, and supplies of $132 and $163 for the three and six-month periods ended June 30, 2021, is due to lower rental fees that occurred for a crusher, partially offset by higher consumption of spare parts for the demo plant. |
Management Discussion and Analysis | 16 |
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| e) | The decrease in tax credits of $297 and $530 for the three and six-month periods ended June 30, 2021, is mainly due to a decrease in geological and drilling activities, which reduces the eligible Canadian exploration costs. |
Lib Anode Plant project expenses
| For the three-month periods ended | For the six-month periods ended | |||||||
| Description | June 30, 2021 $ | June 30, 2020
$ | June 30, 2021 $ | June 30, 2020
$ | ||||
| Wages and benefits | 185 | 105 | 312 | 298 | ||||
| Engineering (a) | 492 | 574 | 558 | 1,319 | ||||
| Professional fees (b) | 332 | 110 | 422 | 196 | ||||
| Materials, consumables and supplies (c) | 125 | 1 | 301 | 7 | ||||
| Subcontracting (d) | 49 | 71 | 89 | 234 | ||||
| Amortization | 44 | - | 85 | - | ||||
| Other | 13 | 47 | 16 | 59 | ||||
| Grants (e) | (332) | (216) | (592) | (869) | ||||
| LiB Anode Plant project expenses | 908 | 692 | 1,191 | 1,244 | ||||
| a) | The decrease of $761 in engineering expenses for the six-month period ended June 30, 2021, is due to the progress in the LiB Anode Plant, leading to the capitalization of engineering studies relating to the demonstration plant. In the first six months of 2020, the LiB Anode Plant project was still in the research phase, therefore all the engineering fees were expensed. |
| b) | The increase of $222 and $226 in Professional fees for the three and six-month periods ended June 30, 2021, is mostly explained by new research agreements signed during Q2-2021 in relation to the LiB Anode Plant project, compared to 2020. |
| c) | The increase of $124 and $294 for the three and six-months periods ended June 30, 2021, in materials, consumables, and supplies fees is due to new activities in connection with the LiB Anode Demonstration Plant in the first six months of 2021 as well as a temporary shutdown of the plant in Q2 2020 due to Covid-19. |
| d) | The decrease of $145 in subcontracting for the six-month period ended June 30, 2021, is mostly due to non recurrent external fees incurred in 2020 in relation to the shaping process. |
| e) | The decrease in grants of $277 for the six-month period ended June 30, 2021, is due to more expenditures eligible to grants being capitalized, therefore, a greater portion of the grants have been applied against those capitalized costs. The variation will move depending on the nature of the expenditures. |
Management Discussion and Analysis | 17 |
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General and administrative expenses
| For the three-month periods ended | For the six-month periods ended | |||||||
| Description | June 30, 2021 $ | June 30, 2020 $ | June 30, 2021 $ | June 30, 2020 $ | ||||
| Wages and benefits (a) | 933 | 287 | 2,193 | 849 | ||||
| Share-based compensation (b) | 5,250 | 115 | 5,735 | 153 | ||||
| Professional fees (c) | 1,072 | 198 | 2,204 | 499 | ||||
| Consulting fees | 155 | 27 | 435 | 75 | ||||
| Travelling, representation and convention | 79 | 49 | 205 | 176 | ||||
| Office and administration (d) | 1,227 | 189 | 1,468 | 366 | ||||
| Stock exchange, authorities, and communication (c) | 477 | 38 | 760 | 39 | ||||
| Depreciation and amortization | 168 | 207 | 365 | 414 | ||||
| Other financial fees | 9 | 27 | 17 | 59 | ||||
| General and administrative expenses | 9,370 | 1,137 | 13,382 | 2,630 | ||||
| a) | The increase of $646 and $1,344 for the wages and benefits for the three and six-month periods ended June 30, 2021, is due to an increased headcount to support the Company’s growth phase, combined with an accounting provision related to taxable benefit fees on employees’ stock options that can be exercised as at June 30, 2021. The taxable benefit provision did not exist in the first six months of 2020 as the share price of the Company was less than the strike price of the options exercisable. |
| b) | There was an increase in share-based compensation expenses of $5,135 and $5,582 for the three and six-month periods ended June 30, 2021, mostly due to new options being granted to employees, directors, consultant and officers during the second quarter of 2021. |
| c) | The increase of $874 and $1,705 in Professional fees as well as $439 and $721 in stock exchange, authorities, and communication for the three and six-month periods ended June 30, 2021, is due to fees in connection with the NYSE listing that occurred in May 2021. |
| d) | The increase of $1,038 and $1,102 in office and administration fees for the three and six-month periods ended June 30, 2021 is mainly due to higher insurance fees. |
Net financial costs
The increase of $554 in financial costs for the six-month period ended June 30, 2021, is mostly due to the accrued interest on the Convertible bond partially offset by the effect of an unrealized foreign currency exchange on cash in the second quarter of 2021.
Management Discussion and Analysis | 18 |
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Liquidity and funding
As at June 30, 2021, the difference between the Company’s current assets and currents liabilities was $81,857, including $86,457 in cash.
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.
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 June 30, 2021, all of the Company’s short-term financial liabilities in the amount of $13,591 ($10,587 as at December 31, 2020) 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.
With the financings completed in the first half of 2021, management believes that the Company has sufficient funds to meet its obligations and planned expenditures for the ensuing twelve months as they fall due.
| As at June 30, 2021 | ||||||||||||
| Carrying amount | Contractual cash flow | Remainder of the year | Year 2022 | Year 2023 | 2024 and forward | |||||||
| Account payables and accrued liabilities | 13,011 | 13,011 | 13,011 | - | - | - | ||||||
| Lease liabilities | 2,488 | 2,995 | 261 | 434 | 415 | 1,885 | ||||||
| Borrowings | 2,062 | 2,079 | 98 | 208 | 225 | 1,548 | ||||||
| Convertible bond | 14,619 | 20,250 | 1,268 | 2,427 | 16,555 | - | ||||||
For the six-month period ended June 30, 2021, the Company had an average monthly cash expenditure rate of approximately $4,259 per month, including addition to property, plant and equipment, deposit 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 flow from operating activities in future periods at least until commercial production is achieved and additional financing will be needed to bring the Matawinie Mine and the Bécancour Commercial Plant to commercial production.
Management Discussion and Analysis | 19 |
|
| CASH FLOWS PROVIDED BY (USED IN) | For the six-month period ended June 30, 2021 $ |
For
the six-month period ended June 30, 2020 $ |
| Operating activities before the net change in working capital items | (13,088) | (8,134) |
| Net change in working capital items | (697) | 2,390 |
| Operating activities | (13,785) | (5,745) |
| Investing activities | (11,767) | (617) |
| Financing activities | 106,914 | 3,346 |
| Effect of exchange rate changes on cash | 575 | - |
| Increase (decrease) in cash and cash equivalents | 81,937 | (3,016) |
Operating activities
For the six-month period ended June 30, 2021, cash outflows from operating activities totalled $13,785, while there were $5,745 of cash outflows for the same period in 2020. The cash outflows were higher due to the decrease in the working capital of $3,087, combined with a greater net loss as described in the above section. Further details regarding the net change in working capital are provided in note 15 of the condensed consolidated interim financial statements.
Investing activities
For the six-month period ended June 30, 2021, cash used in investing activities totalled $11,767 whereas for the same period in 2020 investing activities were of $617. The major variance is explained by the progress of the LiB Anode Plants construction in Bécancour, combined with the start of the construction development phase of the Matawinie mine in the second quarter of 2021.
Financing activities
For the six-month period ended June 30, 2021, the Company had net cash receipts related to financing activities of $106.9M, mainly due to the public offering following its listing on the NYSE of $72.9M, combined with the private placement offering and bought deal public offering of $23M, and $17.6M related to warrants exercised in the first quarter of 2021.
Additional information
Related party transactions
During the three and six-month periods ended June 30, 2021, share-based compensation expenses for directors and officers totalled $5.1M and $5.5M (three and six-month periods ended June 30, 2020: nil).
In January 2021, the Company issued 76,635 shares in repayment of accrued interests of $797 as at December 31, 2020 on the convertible bond concluded with Pallinghurst.
Pallinghurst purchased 237,932 common shares as part of the financing closed on January 20,2021, 79,311 common shares as part of the financing closed on February 12,2021 and 66,666 common shares as part of the financing closed on June 23, 2021 (see note 10.1).
Management Discussion and Analysis | 20 |
|
Investissement Québec, acting as mandatory for the Government of Quebec, purchased 317,241 common shares as part of the financing closed on February 12, 2021.
During the three and six-month periods ended June 30, 2021, the Company had accrued interests payable to Pallinghurst of $593 and $1,158 (three and six-month periods ended June 30, 2020: nil).
Off-balance sheet transactions
There are no off-balance sheet transactions.
Critical accounting estimates, new accounting policies, judgements and assumptions
Refer to note 3 and 4 in the condensed consolidated interim financial statements and note 4 and 6 in the Company’s audited consolidated financial statements as at December 31, 2020.
Contractual obligations and commitments
Refer to note 18 in the condensed consolidated interim financial statements.
Capital structure
| As at August 12, 2021 | |
| Common shares | 47,008,895 |
| Convertible bond | 7,500,000 |
| Options | 2,773,750 |
| Total common shares fully diluted | 57,282,645 |
Subsequent events to June 30, 2021
Refer to note 19 in the condensed consolidated interim financial statements.
Continuous disclosure
Additional information on the Company is available through regular filings of press releases, financial statements, and our Annual Information Form on SEDAR (www.sedar.com). These documents and other information about Nouveau Monde Graphite may also be found on our website at www.nmg.com
August 12, 2021
| (signed) Eric Desaulniers | (signed) Charles-Olivier Tarte |
| Eric Desaulniers, MSc, Geo | Charles-Olivier Tarte, CPA CMA |
| President and Chief Executive Officer | Chief Financial Officer |
| Management Discussion and Analysis | 21 |
Exhibit 99.3
Form 52-109F2 – IPO/RTO
Certification of Interim Filings Following
an Initial Public Offering, Reverse Takeover or
Becoming a Non-Venture Issuer
I, Éric Desaulniers, President & Chief Executive Officer of Nouveau Monde Graphite Inc., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Nouveau Monde Graphite Inc. (the “issuer”) for the interim period ended June 30, 2021. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
Date: August 12, 2021
_(s) Éric Desaulniers_
Éric Desaulniers
President & Chief Executive Officer
NOTE TO READER
In contrast to the usual certificate required for non-venture issuers under Regulation 52-109 respecting Certification of Disclosure in Issuers’ Annual and Interim Filings (c. v-1.1, r. 27) (Regulation 52-109), namely, Form 52-109F2, this Form 52-109F2 – IPO/RTO does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in Regulation 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of
| i) | controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| ii) | a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate.
Investors should be aware that inherent limitations on the ability of certifying officers of an issuer to design and implement on a cost effective basis DC&P and ICFR as defined in Regulation 52-109 in the first financial period following
· completion of the issuer’s initial public offering in the circumstances described in s. 5.3 of Regulation 52-109;
· completion of a reverse takeover in the circumstances described in s. 5.4 of Regulation 52-109; or
· the issuer becoming a non-venture issuer in the circumstances described in s. 5.5 of Regulation 52-109;
may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
Exhibit 99.4
Form 52-109F2 – IPO/RTO
Certification of Interim Filings Following
an Initial Public Offering, Reverse Takeover or
Becoming a Non-Venture Issuer
I, Charles-Olivier Tarte, Chief Financial Officer of Nouveau Monde Graphite Inc., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Nouveau Monde Graphite Inc. (the “issuer”) for the interim period ended June 30, 2021. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
Date: August 12, 2021
_(s) Charles-Olivier Tarte _
Charles-Olivier Tarte
Chief Financial Officer
NOTE TO READER
In contrast to the usual certificate required for non-venture issuers under Regulation 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (c. v-1.1, r. 27) (Regulation 52-109), namely, Form 52-109F2, this Form 52-109F2 – IPO/RTO does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in Regulation 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of
| i) | controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| ii) | a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate.
Investors should be aware that inherent limitations on the ability of certifying officers of an issuer to design and implement on a cost effective basis DC&P and ICFR as defined in Regulation 52-109 in the first financial period following
· completion of the issuer’s initial public offering in the circumstances described in s. 5.3 of Regulation 52-109;
· completion of a reverse takeover in the circumstances described in s. 5.4 of Regulation 52-109; or
· the issuer becoming a non-venture issuer in the circumstances described in s. 5.5 of Regulation 52-109;
may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.