Nouveau Monde Graphite Inc 6-K, filed Mar 24, 2022
Nouveau Monde Graphite Inc. (NMG)
About this 6-K
Nouveau Monde Graphite Inc filed this 6-K on March 24, 2022.
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 March 2022
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 file annual reports under cover of 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): ¨
INCORPORATION BY REFERENCE
Exhibits 99.1, 99.2, 99.3, 99.4 and 99.5 of this Form 6-K are hereby filed and incorporated by reference into the registrant’s Registration Statement on Form F-10 (File No. 333-256340).
DOCUMENTS TO BE FILED AS PART OF THIS FORM 6-K
| 99.1 | Audited Consolidated Financial Statements as at and for the year ended December 31, 2021 |
| 99.2 | Management’s Discussion and Analysis for the year ended December 31, 2021 |
| 99.3 | Consent of Independent Registered Public Accounting Firm |
| 99.4 | Consent of Eric Desaulniers |
| 99.5 | Consent of Antoine Cloutier |
| 99.6 | Certification of Annual Filings by the CEO |
| 99.7 | Certification of Annual Filings by the CFO |
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, there unto duly authorized.
| Nouveau Monde Graphite Inc. | |
| (Registrant) | |
| Date: March 24, 2022 | /s/ David Torralbo |
| David Torralbo | |
| Chief Legal Officer and Corporate Secretary |
Exhibit 99.1
FINANCIAL STATEMENTS
Consolidated audited
financial statements
For the years ended December 31, 2021 and 2020
(Expressed in thousands of Canadian dollars, except where otherwise indicated)
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Nouveau Monde Graphite Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Nouveau Monde Graphite Inc. and its subsidiaries (together, the Company) as of December 31, 2021 and 2020, and the related consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 1 to the consolidated financial statements, the Company believes that without additional funding, it does not have sufficient liquidity to pursue its planned expenditures over the next twelve months. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502
“PwC” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership.
1
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Montréal, Canada
March 23, 2022
We have served as the Company’s auditor since 2017.
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| NOUVEAU MONDE GRAPHITE INC. |
| Consolidated statements of financial position |
| (Amounts expressed in thousands of Canadian dollars) |
Consolidated statements of financial position
| Notes | December 31, 2021 | December 31, 2020 | ||||||||||
| ASSETS | ||||||||||||
| CURRENT | ||||||||||||
| Cash | 62,355 | 4,520 | ||||||||||
| Grants receivable and other current assets | 10 | 3,096 | 829 | |||||||||
| Restricted cash | - | 158 | ||||||||||
| Sales taxes receivable | 2,002 | 736 | ||||||||||
| Tax credits receivable | 3,958 | 3,958 | ||||||||||
| Prepaid expenses | 2,768 | 215 | ||||||||||
| Total current assets | 74,179 | 10,416 | ||||||||||
| NON-CURRENT | ||||||||||||
| Tax credits receivable | 5,509 | 3,802 | ||||||||||
| Property, plant and equipment assets | 6 | 42,103 | 4,207 | |||||||||
| Intangible assets | 7 | 481 | 920 | |||||||||
| Right-of-use assets | 8 | 2,254 | 1,067 | |||||||||
| Restricted cash and deposits | 1,823 | 744 | ||||||||||
| Total non-current assets | 52,170 | 10,740 | ||||||||||
| Total assets | 126,349 | 21,156 | ||||||||||
| LIABILITIES | ||||||||||||
| CURRENT | ||||||||||||
| Accounts payables and accrued liabilities | 9 | 15,193 | 6,988 | |||||||||
| Deferred grants | 10 | - | 1,511 | |||||||||
| Current portion of lease liabilities | 11 | 329 | 295 | |||||||||
| Borrowings | 12 | 208 | 1,793 | |||||||||
| Total current liabilities | 15,730 | 10,587 | ||||||||||
| NON-CURRENT | ||||||||||||
| Asset retirement obligation | 14 | 1,009 | 621 | |||||||||
| Borrowings | 12 | 1,921 | - | |||||||||
| Lease liabilities | 11 | 1,994 | 781 | |||||||||
| Convertible bond | 13 | - | 14,505 | |||||||||
| Total non-current liabilities | 4,924 | 15,907 | ||||||||||
| Total liabilities | 20,654 | 26,494 | ||||||||||
| EQUITY (DEFICIENCY) | ||||||||||||
| Share capital | 15.1 | 206,483 | 60,537 | |||||||||
| Contributed surplus | 16,102 | 10,761 | ||||||||||
| Equity component of convertible bond | 13 | - | 364 | |||||||||
| Deficit | (116,890 | ) | (77,000 | ) | ||||||||
| Total equity (deficiency) | 105,695 | (5,338 | ) | |||||||||
| Total liabilities and equity (deficiency) | 126,349 | 21,156 | ||||||||||
| Going Concern | 1 | |||||||||||
| Commitments | 26 | |||||||||||
| Subsequent Events | 27 | |||||||||||
APPROVED BY THE BOARD
OF DIRECTORS
(s) Eric Desaulniers – “Director”
(s) Daniel Buron –
“Director”
The accompanying notes are an integral part of the consolidated financial statements.
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| NOUVEAU MONDE GRAPHITE INC. |
| Consolidated statements of loss and comprehensive loss |
| (Amounts expressed in thousands of Canadian dollars, except per share amount) |
Consolidated statements of loss and comprehensive loss
| For the years ended | ||||||||||||
| Notes | December
31, 2021 $ | December
31, 2020 $ | ||||||||||
| EXPENSES | ||||||||||||
| Exploration and evaluation expenses | 16 | 8,362 | 10,340 | |||||||||
| Battery Material Plant project expenses | 17 | 5,976 | 2,911 | |||||||||
| General and administrative expenses | 18 | 24,203 | 7,770 | |||||||||
| Other revenues | (57 | ) | - | |||||||||
| Net smelter royalty | 12 | - | (4,306 | ) | ||||||||
| Operating loss | 38,484 | 16,715 | ||||||||||
| Net financial costs | 19 | 1,006 | 1,263 | |||||||||
| Loss before tax | 39,490 | 17,978 | ||||||||||
| Income tax | 20 | 400 | 0 | |||||||||
| Net loss and comprehensive loss | 39,890 | 17,978 | ||||||||||
| Basic and diluted loss per share | 15.2 | (0.93 | ) | (0.68 | ) | |||||||
| Weighted average number of shares outstanding | 42,971,152 | 26,287,106 | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
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| NOUVEAU MONDE GRAPHITE INC. |
| Consolidated statements of changes in equity |
| (Amounts expressed in thousands of Canadian dollars, except per share amount) |
Consolidated statements of changes in equity
| Notes | Number | Share
capital $ | Contributed surplus and warrants $ | 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 | 15.1 | 11,479,977 | 114,242 | - | - | - | 114,242 | |||||||||||||||||||||
| Warrants exercised | 15.3 | 7,821,700 | 17,825 | (198 | ) | - | - | 17,627 | ||||||||||||||||||||
| Options exercised | 15.4 | 720,201 | 3,339 | (1,137 | ) | - | - | 2,202 | ||||||||||||||||||||
| Shares issued for interest payment | 13 – 15.1 | 297,106 | 2,697 | - | - | - | 2,697 | |||||||||||||||||||||
| Share-based compensation | 15.4 | - | - | 6,676 | - | - | 6,676 | |||||||||||||||||||||
| Share issue costs | - | (7,170 | ) | - | - | - | (7,170 | ) | ||||||||||||||||||||
| Conversion of convertible bond | 13 – 15.1 | 7,500,000 | 15,013 | - | (364 | ) | - | 14,649 | ||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | - | (39,890 | ) | (39,890 | ) | ||||||||||||||||||||
| Balance as at December 31, 2021 | 55,118,316 | 206,483 | 16,102 | - | (116,890 | ) | 105,695 | |||||||||||||||||||||
| Notes | Number | Share
capital $ | Contributed surplus and warrants $ | Equity
component of convertible bond $ | Deficit $ | Total
equity (deficiency) $ | ||||||||||||||||||||||
| Balance as at January 1, 2020 | 26,178,281 | 56,184 | 9,592 | - | (59,022 | ) | 6,754 | |||||||||||||||||||||
| Warrants expired | 15.3 | 872,292 | 3,574 | (521 | ) | - | - | 3,053 | ||||||||||||||||||||
| Options exercised | 15.4 | 145,000 | 572 | (132 | ) | - | - | 440 | ||||||||||||||||||||
| Share-based compensation | 15.4 | 103,759 | 208 | 1,822 | - | - | 2,030 | |||||||||||||||||||||
| Share issue costs | - | (1 | ) | - | - | - | (1 | ) | ||||||||||||||||||||
| Convertible bond | 13 – 15.1 | - | - | - | 364 | - | 364 | |||||||||||||||||||||
| Net loss and comprehensive loss | - | - | - | - | (17,978 | ) | (17,978 | ) | ||||||||||||||||||||
| Balance as at December 31, 2020 | 27,299,332 | 60,537 | 10,761 | 364 | (77,000 | ) | (5,338 | ) | ||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
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 |
NOUVEAU MONDE GRAPHITE INC. |
| Consolidated statements of cash flows | |
| (Amounts expressed in thousands of Canadian dollars) |
Consolidated statements of cash flows
| For the years ended | ||||||||||||
| Notes | December
31, 2021 $ | December
31, 2020 $ | ||||||||||
| OPERATING ACTIVITIES | ||||||||||||
| Net loss | (39,890 | ) | (17,978 | ) | ||||||||
| Depreciation and amortization | 6-8 | 1,095 | 1,202 | |||||||||
| Unrealized foreign exchange gain | (1,022 | ) | - | |||||||||
| Loss on disposal of investment | - | 22 | ||||||||||
| Loss on asset disposal | 18 | 5 | 2 | |||||||||
| Share-based compensation | 15.4 | 6,676 | 2,030 | |||||||||
| Financial costs | 2,053 | 1,114 | ||||||||||
| Net smelter royalty | 12 | - | (4,306 | ) | ||||||||
| Accretion of the rehabilitation obligation | 14 | 5 | - | |||||||||
| Net change in working capital | 21 | (3,247 | ) | (135 | ) | |||||||
| Cash flows used in operating activities | (34,325 | ) | (18,049 | ) | ||||||||
| INVESTING ACTIVITIES | ||||||||||||
| Additions to property, plant, and equipment assets | 6 | (36,984 | ) | (1,269 | ) | |||||||
| Restricted cash and deposits | (921 | ) | (123 | ) | ||||||||
| Tax credits and grants received | 6 | 3,327 | 731 | |||||||||
| Cash flows used in investing activities | (34,578 | ) | (661 | ) | ||||||||
| FINANCING ACTIVITIES | ||||||||||||
| Proceeds from placements | 15.1 | 114,242 | - | |||||||||
| Proceeds from convertible bond, net of issue costs | 13 | - | 14,786 | |||||||||
| Proceeds from borrowings, net of issue costs | 12 | 1,189 | 3,781 | |||||||||
| Repayment of borrowings and lease liabilities | 11, 12 | (2,408 | ) | (2,906 | ) | |||||||
| Proceeds from the exercise of warrants | 15.3 | 17,627 | 3,053 | |||||||||
| Proceeds from the exercise of stock options | 15.4 | 2,202 | 440 | |||||||||
| Share issue costs | (7,121 | ) | (1 | ) | ||||||||
| Cash flows from financing activities | 125,731 | 19,153 | ||||||||||
| Effect of exchange rate changes on cash | 1,007 | - | ||||||||||
| Net change in cash | 57,835 | 443 | ||||||||||
| Cash at the beginning of the year | 4,520 | 4,077 | ||||||||||
| Cash at the end of the year | 62,355 | 4,520 | ||||||||||
| Additional information | 21 | |||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
Notes to consolidated financial statements
| 1. | NATURE OF OPERATIONS AND GOING CONCERN |
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, NOU on the TSX Venture Exchange (“TSXV”), 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.
The Company’s consolidated financial statements have been prepared using accounting principles applicable to a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business as they come due. In assessing whether the going concern assumption is appropriate, management considers all available information about the future, which is at least, but not limited to, the next twelve months.
Management believes that without additional funding, the Company does not have sufficient liquidity to pursue its planned expenditures over the next twelve months. These circumstances indicate the existence of material uncertainties that cast substantial doubt upon the Company’s ability to continue as a going concern and accordingly, the appropriateness of the use of IFRS applicable to a going concern.
The Company's ability to continue future operations and fund its development and acquisition activities is dependent on management's ability to secure additional financing in the future, which may be completed in a number of ways including, but not limited to, the issuance of debt or equity instruments, expenditure reductions, or a combination of strategic partnerships, joint venture arrangements, project debt finance, offtake financing, royalty financing and other capital markets alternatives. While management has been successful in securing financing in the past, there can be no assurance it will be able to do so in the future or that these sources of funding or initiatives will be available for the Company or that they will be available on terms which are acceptable to the Company.
These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities, expenses and financial position classifications that would be necessary if the going concern assumption was not appropriate. These adjustments could be significant.
| 2. | BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE |
The Company’s consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”), as published by the International Accounting Standards Board (“IASB”).
The accounting policies set out in note 3 were consistently applied to all years presented in these consolidated financial statements.
The numbers for the average basic and diluted shares outstanding for all the periods presented in the consolidated statements of loss and comprehensive loss have been adjusted to reflect the effect of the 1:10 share consolidation that took place on March 24, 2021.
The consolidated financial statements for the year ended December 31, 2021 were approved and authorized for publication by the Board of Directors on March 22, 2022.
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|
NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 3. | SIGNIFICANT ACCOUNTING POLICIES |
| 3.1 | BASIS OF CONSOLIDATION |
The Company’s consolidated financial statements consolidate those of the parent company and its subsidiaries. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary, and could affect those returns through its power over the subsidiary.
All transactions and balances between group companies are eliminated upon consolidation, including unrealized gains and losses on transactions between group companies. Amounts reported in the financial statements of the subsidiary have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Company.
Profit and loss and other comprehensive income of subsidiaries acquired or sold during the period are recognized from the effective date of the acquisition, or up to the effective date of disposal, as applicable.
| Subsidiaries |
Information on the Company’s subsidiaries as at December 31, 2021, all of which are wholly-owned, is as follows:
| NAME OF SUBSIDIARY | PRINCIPAL ACTIVITY | COUNTRY OF INCORPORATION | YEAR OF INCORPORATION |
| Quartier Nouveau Monde Inc. | Real estate company | Canada | 2017 |
| Nouveau Monde Europe LTD | Trading company | England and Wales | 2020 |
| 3.2 | FUNCTIONAL AND REPORTING CURRENCY |
The Group’s consolidated financial statements are presented in Canadian dollars, which is also the functional currency of the parent company and its subsidiaries and the presentation currency.
Transactions in foreign currencies are initially recorded at their functional currency spot rates at the date the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. All differences are taken to the statement of loss and comprehensive loss.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transaction.
| 3.3 | TAX CREDITS RECEIVABLE |
The Company is entitled to a refundable tax credit on qualified exploration expenditures incurred, refundable credit on duties for losses under the Mining Tax Act (Quebec) and research and development tax credits. The tax credits are recognized as a reduction of the costs incurred based on estimates made by management. The Company records these tax credits when there is reasonable assurance that the credits will be received and that the Company will continue to comply with the conditions associated to them.
| 3.4 | GRANTS RECEIVABLE |
The Company periodically receives grants from different incentive programs. These grants are recognized initially when there is a reasonable assurance that they will be received and when the Company has intentions to comply with the conditions associated with the grant. The financial aid received for expenditures incurred is recognized against these expenditures on a systematic basis and in the same accounting period in which the expenditures are incurred.
8
|
NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 3.5 | RESEARCH AND DEVELOPMENT COSTS |
Research costs are expensed during the year in which the expenses are incurred. Development costs are capitalized when they meet the criteria for capitalization in accordance with IAS 38 Intangible Assets. The costs incurred for activities associated with the development of the processes associated with the Battery Material Plant are considered as research and development costs.
| 3.6 | PROPERTY AND EQUIPMENT |
Property and equipment are recognized at cost less accumulated depreciation and accumulated impairment losses. The assets are capitalized and amortized on a straight-line basis in the consolidated statement of loss and comprehensive loss. Generally, the depreciation rates are as follows:
| Buildings | 25 years |
| Equipment | 5-15 years |
| Furnitures | 3-7 years |
| Computers | 3 years |
| Rolling Stock | 5 years |
The residual value, depreciation method and the useful life of each asset are reviewed at least at each financial year-end. Gains or losses arising on the disposal of property and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognized in the statement of loss and comprehensive loss.
| 3.7 | INTANGIBLE ASSETS |
The intangible assets include software and licenses with a definite useful life. The assets are capitalized and amortized on a straight-line basis in the consolidated statement of loss and comprehensive loss. The intangible assets are assessed for impairment whenever there is an indication that the intangible assets may be impaired.
Generally, the depreciation rates are as follows:
| Software | 2 years |
| Licences | 2-10 years |
| 3.8 | MATAWINIE MINE PROJECT |
Management has established that effective from the beginning of the second quarter of 2021, the Matawinie mine project is in the development phase. Accordingly, all expenditures related to the development of the mine are capitalized under Mine under construction within Property, plant and equipment (see note 6). 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 December 31, 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.
| 3.9 | BATTERY MATERIAL PLANT PROJECT |
Costs incurred in the construction and development of the Company’s Battery Material Plant project are capitalized under Battery Material Demonstration Plant within Property, plant and equipment (See note 6). Capitalized expenditures will be carried at cost until the Battery Material 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 December 31, 2021, therefore, the depreciation will begin when the assets are ready for their intended use.
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
The costs related to the operation of the Battery Material Demonstration Plant will continue to be expensed as incurred under Battery Material Plant project expenses, unless the expenditures meet the recognition criterias set in IAS 16 Property, plant and equipment or IAS 38 Intangible asset.
| 3.10 | IMPAIRMENT OF NON-FINANCIAL ASSETS |
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment, and some are tested at a cash-generating unit level.
Whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, an asset or cash-generating unit is reviewed for impairment.
An impairment loss is recognized in profit or loss for the amount by which the assets or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less cost to sell and its value in use.
An impairment charge is reversed if the assets or cash-generating unit’s recoverable amount exceeds its carrying amount.
| 3.11 | INCOME TAXES |
Income tax is recognized in the statements of loss and comprehensive loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.
| ̶ | Current taxes |
Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end, adjusted for amendments to income tax payable regarding previous years.
| ̶ | Deferred taxes |
Deferred tax is provided using the liability method, providing for temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. The temporary difference is not provided for if it arises from the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position reporting date and whose implementation is expected over the period in which the deferred tax is realized or recovered. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be used.
Assets and liabilities are offset where the entity has a legally enforceable right to offset current tax assets and liabilities or deferred tax assets and liabilities, and the respective assets and liabilities relate to income taxes levied by the same taxation authority.
| 3.12 | EQUITY |
| ̶ | Share capital |
Share capital represents the amount received on the issue of shares, less issuance costs, net of any underlying tax benefit from these issuance costs. In addition, if shares were issued as consideration for the acquisition of a mineral property or some other form of non-monetary assets, they are measured at their fair value according to the quoted price on the day of the conclusion of the agreement.
10
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| ̶ | Contributed surplus and warrants |
Contributed surplus includes charges related to share options not exercised and amounts attributable to expired warrants.
| 3.13 | BASIC AND DILUTED LOSS PER SHARE |
Basic loss per share is calculated by dividing the loss attributable to common equity holders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by adjusting loss attributable to common equity holders of the Company, and the weighted average number of common shares outstanding, for the effects of all dilutive potential common shares which include convertible debt, options, broker’s options, and warrants. Dilutive potential common shares arising from option type instruments shall be deemed to have been exercised at the beginning of the period or, if later, at the date of issue of the potential common shares and the proceeds from their exercise used to repurchase common shares at the average market price. The if-converted method is used for convertible bond.
| 3.14 | PROVISION AND CONTINGENT LIABILITIES |
Provisions are recognized when present legal or constructive obligations as a result of a past event will probably lead to an outflow of economic resources from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Provisions are discounted when the time value of money is significant.
The Company’s operations are governed by government environment protection legislation. Environmental consequences are difficult to identify in terms of amounts, timetable and impact. As of the reporting date, management believes that the Company’s operations are in compliance with current laws and regulations. An asset retirement provision is recognized when there is constructive commitment that has resulted from past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of the obligation can be measured with sufficient reliability.
In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote.
All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
| 3.15 | PROVISION FOR ASSET RETIREMENT OBLIGATION |
Provision for environmental rehabilitation, restructuring costs and legal claims, where applicable, is recognized when:
| i) | The Company has a present legal or constructive obligation as a result of past events; | |
| ii) | It is probable that an outflow of resources will be required to settle the obligation; | |
| iii) | The amount can be reliably estimated. |
The provision is measured at management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period, and is discounted to present value where the effect is material. The increase in the provision due to passage of time is recognized as finance costs. Changes in assumptions or estimates are reflected in the period in which they occur. Provision for environmental rehabilitation represents the legal and constructive obligations associated with the eventual closure of the Company’s property, plant and equipment. These obligations consist of costs associated with reclamation and monitoring of activities and the removal of tangible assets. The discount rate used is based on a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation, excluding the risks for which future cash flow estimates have already been adjusted.
11
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 3.16 | SHARE-BASED PAYMENTS |
The Company operates an equity-settled share-based payment plan for its eligible directors, officers, employees and consultants. The Company’s plan does not feature any option for a cash settlement.
All goods and services received in exchange for the grant of any share-based payments are measured at their fair values unless that fair value cannot be estimated reliably. If the Company cannot estimate reliably the fair value of the goods or services received, the Company shall measure their value indirectly by reference to the fair value of the equity instruments granted. For the transactions with employees and others providing similar services, the Company measured the fair value of the services rendered by reference to the fair value of the equity instruments granted.
All equity-settled share-based payments (except broker’s options) are ultimately recognized as an expense in profit or loss with a corresponding credit to Contributed surplus, in equity. Equity-settled share-based payments to brokers, in respect of an equity financing, are recognized as issuance costs of the equity instruments with a corresponding credit to Contributed surplus, in equity.
The expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in a prior period if some vested share options are not ultimately exercised.
| 3.17 | FINANCIAL INSTRUMENTS |
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument and are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit or loss (“FVTPL”), which are measured initially at fair value. The subsequent measurement of financial assets and financial liabilities is described below (and Note 24).
Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires.
Financial assets and financial liabilities are offset, and the net amount is reported in the statement of financial position when there is an unconditional and legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
| ̶ | Financial assets |
Financial assets are initially measured at fair value. If the financial asset is not subsequently accounted for at FVTPL, then the initial measurement includes transaction costs that are directly attributable to the asset’s acquisition or origination. On initial recognition, the Company classifies its financial assets in the following measurement categories:
| ̶ | measured subsequently at amortized cost; or |
| ̶ | measured subsequently at fair value (either through other comprehensive loss, or through net loss). |
| i) | Financial assets measured at amortized cost |
A financial asset is subsequently measured at amortized cost, using the effective interest method and net of any impairment loss, if:
| ̶ | the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and |
| ̶ | the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| ii) | Financial assets measured at fair value |
A financial asset shall be measured at fair value through net loss unless it is measured at amortized cost or at fair value through other comprehensive loss.
A financial asset shall be measured at fair value through other comprehensive loss if both of the following conditions are met:
| ̶ | the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and |
| ̶ | the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
For investments in debt instruments, this will thus depend on the business model in which the investment is held. For investments in equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive loss, in which case, gains and losses will never be reclassified to net loss, and no impairment may be recognized in net loss. Dividends earned from such investments are recognized in net loss, unless the dividend clearly represents a repayment of part of the cost of the investment.
| ̶ | Financial liabilities |
Financial liabilities are subsequently measured at amortized cost using the effective interest method, except for financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
Financial instruments – Fair value
The fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction.
Fair values of financial instruments traded in active markets are determined based on quoted market prices, where available. For financial instruments not traded in an active market, fair values are determined based on appropriate valuation techniques. Such techniques may include discounted cash flow analysis, using recent arm’s-length market transactions, reference to the current fair value of another instrument that is substantially the same, and other valuation models. The Company applies a hierarchy to classify valuation methods used to measure financial instruments carried at fair value. Levels 1 to 3 are defined based on the degree to which fair value inputs are observable and have a significant effect on the recorded fair value, as follows:
| ̶ | Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; |
| ̶ | Level 2: Valuation techniques use significant observable inputs, directly or indirectly, or valuations are based on quoted prices for similar instruments; and |
| ̶ | Level 3: Valuation techniques use significant inputs that are not based on observable market data (unobservable inputs). |
| ̶ | Compound instruments |
The convertible bond issued by the Company was a compound financial instrument which the principal amount, together with all accrued and unpaid or uncapitalized interest could be converted into a fixed number of common shares of the Company at the option of the holder.
The liability component of the compound instrument was established by discounting the contractual cash flow, the remaining balance, net of the issuance cost, was allocated to the equity component of the financial instrument.
| ̶ | Impairment of financial assets |
The Company assesses on a forward-looking basis the expected credit loss associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. This assumption is used principally for cash and related balances.
13
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
The Company assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. An external rating of investment grade is considered to indicate that a financial instrument that may be considered as having low credit risk.
The Company applies the simplified approach permitted by IFRS 9 for trade receivables and contract assets, which requires lifetime expected credit losses to be recognized from initial recognition of the receivables.
The Company’s financial instruments consist of the following:
| FINANCIAL ASSETS | CLASSIFICATION |
| Cash | Amortized cost |
| Amounts receivable | Amortized cost |
| Grant and other receivables | Amortized cost |
| Investment | Fair value through profit or loss |
| FINANCIAL LIABILITIES | CLASSIFICATION |
| Accounts payable and accrued liabilities | Amortized cost |
Borrowings |
Amortized cost |
| Convertible bond (liability component) | Amortized cost |
| 3.18 | LEASES |
Leases are recognized as a right-of-use asset and a corresponding liability in lease liabilities at the date at which the leased asset is available for use by the Company.
The lease liability is initially measured at the present value of the future lease payment, including variable lease payment that depends on an index or a rate. The lease liability is discounted using the interest rate implicit in the contract if this rate can be easily determined, otherwise, the lessee must use his marginal borrowing rate.
The monthly lease payments are segregated between the principal repayment and the finance cost. The present value of the lease liability is increased to reflect the accretion of interest and decreased by the principal repayment. The accretion of interest is charged to the profit and loss over the lease period.
If a change to the lease were to happen, the lease liability would be remeasured to reflect those changes (e.g., changes in the lease term or changes in the lease payment).
The right-of-use assets are initially measured at cost, which includes the amount of the initial measurement of the lease liability and any lease payments made at or before the commencement date. The right-of-use assets are amortized on a straight-line basis over the duration of the lease.
Rental payments under short-term leases or leases with low-value underlying assets are recorded in operating expenses on a straight-line basis over the duration of the lease.
| 3.19 | SEGMENT DISCLOSURE |
The Company currently operates in two segments: the Matawinie Mine Project and the Battery Material Plant project. The business segments presented reflect the management structure of the Company and the way in which the Company’s chief operating decision maker reviews business performance. The Matawinie Mine Project and Batterie Material Plant project were identified as separate segments due to their specific nature. Indeed, the nature of the products and services, the production processes, regulatory environment and the targeted customer are very different for each operating segment.
The measure of profit or loss for each segment corresponds to the amounts reported for Exploration and evaluation expenses and Battery Material Plant project expenses, respectively, in the consolidated statement of loss and comprehensive loss. All the Company’s activities are conducted in Quebec, Canada.
14
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 4. | ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE |
The Company has not yet adopted certain standards, interpretations to existing standards and amendments which have been issued but have an effective date later than December 31, 2021. Many of these updates are not expected to have any significant impact on the Company and are therefore not discussed herein
Amendments to IAS 16 Property, plant and equipment
The IASB has made amendments to IAS 16 Property, plant and equipment, which will be effective for financial years beginning on or after January 1, 2022. Proceeds from selling items before the related item of Property, plant and equipment is available for use should be recognized in profit or loss, together with the costs of producing those items. The Company will therefore need to distinguish between the costs associated with producing and selling items before the item of Property, plant and equipment (pre-production revenue) is available for use and the costs associated with making the item of Property, plant and equipment available for its intended use. For the sale of items that are not part of a company’s ordinary activities, the amendments will require the Company to disclose separately the sales proceeds and related production cost recognized in profit or loss and specify the line items in which such proceeds and costs are included in the statement of loss and comprehensive income. These amendments will have an impact on the Company’s consolidated financial statements. While these amendments will not have retrospective effects upon adoption, any future sales of products and related costs of sales occuring before commercial production is achieved will be recorded in the statement of loss and comprehensive loss.
| 5. | ESTIMATES, JUDGEMENTS AND ASSUMPTIONS |
In preparing its consolidated 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.
Following the events of the quarter ended March 31, 2021, 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.
Going concern
The assessment of the Company's ability to execute its strategy by funding future working capital requirements involves judgement. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
COVID-19 impact
The duration and full financial effect of the COVID-19 pandemic is unknown at this time, as are the measures taken by governments, companies, and others to attempt to reduce the spread of COVID-19. Any estimate of the length and severity of these developments is therefore subject to uncertainty, and accordingly estimates of the extent to which the COVID-19 may materially and adversely affect the Company's operations, financial results and condition in future periods are also subject to uncertainty. As at December 31, 2020, and 2021 the demonstration plant in Saint-Michel-des-Saints was producing graphite flakes similarly to pre-COVID-19 levels, activities related to the detail engineering of the mine and concentrator continues to advance, and the construction of the Battery Material Demonstration Plant in Bécancour continues to make significant progress.
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
Provision for asset retirement obligation
The Company's exploration activities are subject to several environmental protection laws and regulations. The Company accounts for management's best estimate of asset retirement obligations in the period in which the obligations arise. Costs actually incurred in future periods could be significantly different from these estimates. In addition, future changes in laws and regulations, timing of estimated cash flows and discount rates may impact the carrying amount of this provision.
Share-based payments
The Company uses the Black-Scholes option pricing model in determining share-based payments, which requires a number of assumptions to be made, including the risk-free interest rate, expected life, forfeiture rate and expected share price volatility.
Tax credits
Tax credits for the current and prior periods are measured at the amount that the Company expects to recover, based on its best estimate and judgment at the reporting date. However, uncertainties as to the interpretation of the tax regulations, regarding refundable mining rights credits for loss and refundable tax credits on eligible exploration expenses, as well as regarding amount and timing of recovery of these tax credits.
To determine whether the expenses it incurs are eligible for exploration tax credits, the Company must use judgment and resort to complex techniques. As a result, there may be a significant difference between the amount recognized in respect of tax credits and the actual amount of tax credits received because of the tax administrations' review of matters that were subject to interpretation. In the event of such a difference, an adjustment will be made to the tax credits for mineral prospecting expenses in future periods.
It can take a long time for the tax administration to report its decisions on tax issues, thereby extending the tax credit recovery period. Mineral exploration tax credits that the Company expects to recover in more than one year are classified as non-current assets. The amounts recognized in the consolidated financial statements are based on the best estimates of the Company and in its best possible judgment, as noted above. However, given the uncertainty inherent in obtaining the approval of the tax authority concerned, the amount of tax credits that will be recovered and the timing of such recovery may differ materially from accounting estimates and would affect the financial position and cash flow of the Company.
16
 | NOUVEAU
MONDE GRAPHITE INC. Notes to consolidated financial statements (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 6. | PROPERTY, PLANT AND EQUIPMENT |
Land $ | Buildings $ | Equipment $ |
|
Computers $ |
Furniture $ | Rolling stock $ | Mine
under $ | Battery Material Demonstration Plant under construction $ | Total $ | |||||||||||||||||||||||||||
| COST | ||||||||||||||||||||||||||||||||||||
| Balance as at January 1, 2021 | 507 | 2,642 | - | 56 | 70 | 24 | - | 1,206 | 4,505 | |||||||||||||||||||||||||||
| Acquisition | 1,905 | 149 | 163 | 132 | - | 29 | 18,032 | 17,680 | 38,090 | |||||||||||||||||||||||||||
| Write-Off/Disposals | - | - | - | (47 | ) | (45 | ) | - | - | - | (92 | ) | ||||||||||||||||||||||||
| Balance as at December 31, 2021 | 2,412 | 2,791 | 163 | 141 | 25 | 53 | 18,032 | 18,886 | 42,503 | |||||||||||||||||||||||||||
| ACCUMULATED DEPRECIATION | ||||||||||||||||||||||||||||||||||||
| Balance as at January 1, 2021 | - | 219 | - | 39 | 32 | 8 | - | - | 298 | |||||||||||||||||||||||||||
| Depreciation | - | 111 | 19 | 30 | 22 | 7 | - | - | 189 | |||||||||||||||||||||||||||
| Write-Off/Disposals | - | - | - | (44 | ) | (43 | ) | - | - | - | (87 | ) | ||||||||||||||||||||||||
| Balance as at December 31, 2021 | - | 330 | 19 | 25 | 11 | 15 | - | - | 400 | |||||||||||||||||||||||||||
| Net book value as at December 31, 2021 | 2,412 | 2,461 | 144 | 116 | 14 | 38 | 18,032 | 18,886 | 42,103 | |||||||||||||||||||||||||||
Land $ | Buildings $ | Equipment $ | Computers $ | Furniture $ | Rolling stock $ | Mine
under $ | Battery Material Demonstration Plant under construction $ | Total $ | ||||||||||||||||||||||||||||
| COST | ||||||||||||||||||||||||||||||||||||
| Balance as at January 1, 2020 | 467 | 2,430 | 63 | 47 | 70 | 9 | - | - | 3,086 | |||||||||||||||||||||||||||
| Acquisition | 40 | 212 | - | 9 | - | 15 | - | 1,206 | 1,482 | |||||||||||||||||||||||||||
| Write-Off/Disposals | - | - | (63 | ) | - | - | - | - | - | (63 | ) | |||||||||||||||||||||||||
| Balance as at December 31, 2020 | 507 | 2,642 | - | 56 | 70 | 24 | - | 1,206 | 4,505 | |||||||||||||||||||||||||||
| ACCUMULATED DEPRECIATION | ||||||||||||||||||||||||||||||||||||
| Balance as at January 1, 2020 | - | 118 | 59 | 14 | 19 | 4 | - | - | 214 | |||||||||||||||||||||||||||
| Depreciation | - | 101 | 2 | 25 | 13 | 4 | - | - | 145 | |||||||||||||||||||||||||||
| Write-Off/Disposals | - | - | (61 | ) | - | - | - | - | - | (61 | ) | |||||||||||||||||||||||||
| Balance 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 | |||||||||||||||||||||||||||
17
| NOUVEAU
MONDE GRAPHITE INC. Notes to consolidated financial statements (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
The Battery Material Demonstration Plant under construction is presented net of grants of $5,483 for the year ended December 31, 2021 (December 31, 2020: $731).
During the year ended December 31, 2021, the Company bought back a 1.8% NSR on the Matawinie property for $1.8M that is included in Mine under construction.
| 7. | INTANGIBLE ASSETS |
In 2019, the Company and Hydro-Quebec (“HQ”) signed a licence agreement by which the Company is allowed to use HQ’s patented technologies for the micronization, spheronization, purification and natural graphite coating to serve the lithium-ion battery market. The Company paid US $2 million ($2,562) for the use of the patents which have different expiry dates between October 24, 2021, to June 7, 2028. The licence was capitalized as an intangible asset and will be amortized over the life of the underlying patents.
| Software $ | Licenses $ | Total $ | ||||||||||
| COST | ||||||||||||
| Balance as at January 1, 2021 | 16 | 2,562 | 2,578 | |||||||||
| Write-off of assets | (16 | ) | (958 | ) | (974 | ) | ||||||
| Balance as at December 31, 2021 | - | 1,604 | 1,604 | |||||||||
| ACCUMULATED DEPRECIATION | ||||||||||||
| Balance as at January 1, 2021 | 16 | 1,643 | 1,659 | |||||||||
| Amortization | - | 438 | 438 | |||||||||
| Write-off of assets | (16 | ) | (958 | ) | (974 | ) | ||||||
| Balance as at December 31, 2021 | - | 1,123 | 1,123 | |||||||||
| Net book value as at December 31, 2021 | - | 481 | 481 | |||||||||
| Software $ | Licenses $ | Total $ | ||||||||||
| COST | ||||||||||||
| Balance as at January 1, 2020 | 16 | 2,562 | 2,578 | |||||||||
| Balance as at December 31, 2020 | 16 | 2,562 | 2,578 | |||||||||
| ACCUMULATED DEPRECIATION | ||||||||||||
| Balance as at January 1, 2020 | 7 | 1,045 | 1,052 | |||||||||
| Amortization | 9 | 597 | 606 | |||||||||
| Balance as at December 31, 2020 | 16 | 1,642 | 1,658 | |||||||||
| Net book value as at December 31, 2020 | - | 920 | 920 | |||||||||
18
| NOUVEAU
MONDE GRAPHITE INC. Notes to consolidated financial statements (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 8. | RIGHT-OF-USE ASSETS |
The Company has lease contracts for various items of mining equipment, motor vehicles and buildings used in its operations. Leases of mining equipment and rolling stock generally have lease terms between two and three years, while buildings generally have lease terms between two and five years.
Set below are the carrying amount of Right-of-use assets and the movement during the years.
| Buildings $ | Equipment $ | Rolling stocks $ | Total $ | |||||||||||||
| COST | ||||||||||||||||
| As at January 1, 2021 | 1,297 | 339 | 273 | 1,909 | ||||||||||||
| New leases | 1,612 | - | - | 1,612 | ||||||||||||
| End of leases | (252 | ) | (339 | ) | (109 | ) | (700 | ) | ||||||||
| Remeasurement of lease | 58 | - | - | 58 | ||||||||||||
| As at December 31, 2021 | 2,715 | - | 164 | 2,879 | ||||||||||||
| ACCUMULATED DEPRECIATION | ||||||||||||||||
| As at January 1, 2021 | 386 | 321 | 135 | 842 | ||||||||||||
| Depreciation | 419 | 3 | 46 | 468 | ||||||||||||
| End of leases | (252 | ) | (324 | ) | (109 | ) | (685 | ) | ||||||||
| As at December 31, 2021 | 553 | - | 72 | 625 | ||||||||||||
| Net book value as at December 31, 2021 | 2,162 | - | 92 | 2,254 | ||||||||||||
| 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 | ||||||||||||
Included in the depreciation of Right-of-use assets for the period is $213 ($321 in 2020) that have been included under the Evaluation and exploration expenses and $166 ($27 in 2020) under the Battery Material Plant project expenses line in the consolidated statements of loss and comprehensive loss.
| 9. | ACCOUNTS PAYABLES AND ACCRUED LIABILITIES |
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Trade payables and accrued liabilities | 13,284 | 4,285 | ||||||
| Wages and benefits liabilities | 1,772 | 1,767 | ||||||
| Other payables | 137 | 139 | ||||||
| Interest payable on convertible bond | - | 797 | ||||||
| Accounts payables and accrued liabilities | 15,193 | 6,988 | ||||||
19
| NOUVEAU
MONDE GRAPHITE INC. Notes to consolidated financial statements (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 10. | GRANTS RECEIVABLE AND OTHER CURRENT ASSETS |
Grants
In August 2019, the Company completed the closing of a federally funded grant with Sustainable Development Technology Canada (“SDTC”) for a total of $4.25 million. The SDTC decided in March 2021 to increase the grant by an additional $223. This grant will help the Company build the Purification Demonstration Plant in Bécancour, Quebec. In February 2020, the Company received the first milestone payment of $2 million. SDTC also increased its initial commitment of $4.25 million to the Company by 5%, representing an additional $213 in grant, because of the COVID-19 impact on Canadian companies. The additional $213 amount was received at the end of March 2020. During the year 2021, the Company received a payment of $1,191. As at December 31, 2021, $1,111 of grant receivable was recorded for eligible expenditures.
In addition to the SDTC program, the Company finalized another grant agreement in April 2020 with Transition énergétique Québec (“TEQ”), a Quebec government funded program, in relation to the same project of building the Purification Demonstration Plant in Bécancour. The additional grant of $3 million was secured via TEQ’s Technoclimat program. As at December 31, 2021 $1,463 of grant receivable was recorded for eligible expenditures.
As at December 31, 2020, the Company had $1.5 million recorded as deferred grants for both of the above-mentioned programs. The full amount was applied against related eligible expenditures during 2021.
The remaining $380 grants receivable as at December 31, 2021 is composed of various smaller grants as there is reasonable assurance that they will be received and when the Company has reasonable assurance that it will continue to comply with the conditions associated with the grants.
| 11. | LEASE LIABILITIES |
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Opening balance | 1,076 | 609 | ||||||
| New liabilities and modifications of leases | 1,670 | 955 | ||||||
| Lease write off | (15 | ) | - | |||||
| Principal repayment | (408 | ) | (488 | ) | ||||
| Ending balance | 2,323 | 1,076 | ||||||
| Current portion | 329 | 295 | ||||||
| Non-current portion | 1,994 | 781 | ||||||
The Company also has certain leases of assets with lease terms of 12 months or less. The Company applies the short-term lease assets recognition exemptions for these leases. The expenses related to short term leases were $339 for the year ended December 31, 2021 (December 31, 2020: $572).
20
| NOUVEAU
MONDE GRAPHITE INC. Notes to consolidated financial statements (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 12. | BORROWINGS |
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Opening balance | 1,793 | 4,502 | ||||||
| New borrowings | 2,281 | 3,803 | ||||||
| Repayments | (2,000 | ) | (2,419 | ) | ||||
| Issue costs | - | (21 | ) | |||||
| Accretion of issue costs | 9 | 25 | ||||||
| Interest capitalized | 46 | 209 | ||||||
| Debts settled in exchange of Royalty | - | (4,306 | ) | |||||
| Ending balance | 2,129 | 1,793 | ||||||
| Current portion | 208 | 1,793 | ||||||
| Non-current portion | 1,921 | - | ||||||
On March 16, 2020, the Company concluded a new financing agreement with Pallinghurst, a related party, for a total of $2,000. This agreement required the reimbursement of the capital plus all accrued interests at the latest on December 31, 2020. The agreement bore interest at 9% annually.
On April 29, 2020, the Company closed a financing agreement with Investissement Québec for an aggregate amount received of $1,803 through two loan offers. The conditions also included a 1% issue cost fee calculated on the total aggregate amount. The interest on the loan offer totalling $611 was the current prime rate of 2.45% plus 0.07%, while the interest rate on the loan offer totalling $1,192 was the current prime rate of 2.45%. The capital had to be repaid by no later than June 30, 2021. To secure its obligations set out in the loan offers, the Company had granted two first-ranking mortgages for a total of the loan amount received covering the universality of its present and future receivables, including the universality of its tax credits. On June 30, 2021, the Company fully reimbursed its loan of $1,802 with Investissement Québec, a related party.
On August 28, 2020, the Company closed a financing transaction with Pallinghurst where the Company issued a 3.0% royalty over the Matawinie graphite property to Pallinghurst for an aggregate purchase price of $4,306. The purchase price for the royalty was satisfied by setting-off all principal and accrued interest owed by the Company to Pallinghurst under the promissory note dated June 27, 2019 in the principal amount of $2 million, the promissory note dated March 16, 2020 in the principal amount of $2 million, and the accrued interests totaling $306. As the carrying amount of the underlying properties was nil, an amount corresponding to the purchase price has been reported as net smelter royalty in the consolidated statement of loss and comprehensive loss.
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. Also, during December 2021, the Company received the remaining $150, which was measured at the present value using the same interest rate, thus resulting in a loan valued at $119. The difference between the carrying value of the contribution and the discounted loan value was recognized as a grant of $31.
During the year ended December 31, 2021, the Company paid out a total of $101 ($123 for the year ended December 31, 2020) of interest to its lenders.
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NOUVEAU MONDE GRAPHITE INC. Notes to consolidated financial statements (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 13. | CONVERTIBLE BOND |
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Opening balance | 14,505 | - | ||||||
| Proceeds | - | 15,000 | ||||||
| Equity component of convertible bond | - | (364 | ) | |||||
| Issue costs | - | (214 | ) | |||||
| Conversion | (14,649 | ) | - | |||||
| Accretion expense | 144 | 83 | ||||||
| Ending balance | - | 14,505 | ||||||
| Current portion | - | - | ||||||
| Non-current portion | - | 14,505 | ||||||
In October 2021, the Company issued 7,500,000 common shares following the conversion of all outstanding convertible bond held by Pallinghurst group, a related party.
| 14. | ASSET RETIREMENT OBLIGATION |
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Opening balance | 621 | 621 | ||||||
| New obligations | 383 | - | ||||||
| Accretion expense | 5 | - | ||||||
| Ending balance | 1,009 | 621 | ||||||
The asset retirement obligation that arose during year ended December 31, 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 3.62%, 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.
| 15. | EQUITY |
15.1 SHARE CAPITAL
Authorized share capital
Unlimited number of common shares voting and participating, with no par value.
| For the year ended December 31, 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 | 11,479,977 | - | ||||||
| Exercise of warrants | 7,821,700 | 872,291 | ||||||
| Exercise of options | 720,201 | 145,000 | ||||||
| Shares issued for conversion debt (convertible bond) | 7,500,000 | - | ||||||
| Shares issued for interest payment | 297,106 | - | ||||||
| Share based compensation | - | 103,760 | ||||||
| Shares issued at the end of period | 55,118,316 | 27,299,332 | ||||||
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NOUVEAU MONDE GRAPHITE INC. Notes to consolidated financial statements (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
On September 1, 2020, the Company issued an aggregate of 103,759 common shares at a price of $2 per common share, for an aggregate amount of $208 to 31 of its employees in settlement of an unpaid portion of wages resulting from a temporary measure in response to the COVID-19 pandemic.
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 an additional 155,175 common shares. 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, subscribed for the remainder of the common shares.
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. 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.
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 total proceeds of $18.3M. This financing was complemented in the context of the underwritten public offering agreement closed on June 23, 2021.
15.2 LOSS PER SHARE
Basic loss per share is calculated by dividing the net loss for the year by the weighted average number of ordinary shares outstanding during the year.
Since the Company reports a loss, the diluted net loss per common share is equal to the basic net loss share as there are no instruments that have a dilutive effect on earnings.
15.3 WARRANTS
| December 31, 2021 | December 31, 2020 | |||||||||||||||
Number | Weighted average exercise price $ | Number | Weighted average exercise price $ | |||||||||||||
| Opening balance | 7,853,439 | 2.26 | 2,676,614 | 3.80 | ||||||||||||
| Issued | - | - | 7,500,000 | 2.20 | ||||||||||||
| Exercised | (7,821,700 | ) | 2.25 | (872,291 | ) | 3.50 | ||||||||||
| Expired | (31,739 | ) | 3.50 | (1,450,884 | ) | 4.00 | ||||||||||
| Ending balance | - | - | 7,853,439 | 2.26 | ||||||||||||
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NOUVEAU MONDE GRAPHITE INC. Notes to consolidated financial statements (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
15.4 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.
The Company’s share options are as follows for the year ended December 31, 2021 and 2020:
| December 31, 2021 | 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 | 735,000 | 15.95 | 1,192,500 | 3.64 | ||||||||||||
| Exercised | (720,201 | ) | 3.06 | (145,000 | ) | 3.05 | ||||||||||
| Expired | (51,300 | ) | 7.00 | (230,000 | ) | 2.66 | ||||||||||
| Forfeited | (1,250 | ) | 16.84 | - | - | |||||||||||
| Cancelled | (10,000 | ) | 16.84 | - | - | |||||||||||
| Ending balance | 2,352,249 | 7.07 | 2,400,000 | 3.20 | ||||||||||||
| Options that can be exercised | 2,058,500 | 7.30 | 2,000,000 | 3.37 | ||||||||||||
The weighted average share price at the time of exercise for 2021 is $13.45 ($6.24 in 2020).
For the year ended December 31, 2021, the Company granted 245,000 options to officers, 375,000 to directors, 105,000 to employees, and 10,000 to consultants. The vesting period on option granted varies from vesting immediately to in four semi-annual tranche. Each option entitles the holder to subscribe to one common share of the Company, at an average price of $15.95 per common share, for a period of 5 years.
For the year ended December 31, 2020, the Company granted 505,000 options to officers, 207,500 to directors, 285,000 to employees, and 195,000 to consultants. Options granted have different vesting periods. Each option entitles the holder to subscribe to one common share of the Company, at an average price of $3.64 per common share, for an average period of 4.8 years.
The weighted average fair value of the share options granted were estimated using the Black-Scholes option pricing model based on the following average assumptions:
| 2021 | 2020 | |||||||
| Share price at date of grant | $ | 15.95 | $ | 3.64 | ||||
| Expected life | 5 years | 4.75 years | ||||||
| Risk-free interest rate | 0.82 | % | 0.39 | % | ||||
| Expected volatility | 67.86 | % | 54.68 | % | ||||
| Expected dividend | Nil | Nil | ||||||
The expected annualized volatility was based on historical data for the Company. The fair value of the share options is amortized over the vesting period, considering expected forfeitures. Share options issued are exercisable at the closing market price of the common shares of the day prior to their grant.
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NOUVEAU MONDE GRAPHITE INC. Notes to consolidated financial statements (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| December 31, 2021 | ||||||||||||
Expiration date | Total number | Total exercisable | Weighted average exercise price $ | |||||||||
| Year 2022 | 115,000 | 115,000 | 3.23 | |||||||||
| Year 2023 | 375,000 | 325,000 | 3.42 | |||||||||
| Year 2024 | 312,500 | 312,500 | 2.33 | |||||||||
| Year 2025 | 826,000 | 676,000 | 3.30 | |||||||||
| Year 2026 | 723,750 | 630,000 | 15.93 | |||||||||
| Ending balance | 2,352,250 | 2,058,500 | 7.07 | |||||||||
| 16. | EXPLORATION AND EVALUATION EXPENSES |
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Wages and benefits | 3,637 | 2,294 | ||||||
| Share-based compensation | 452 | 594 | ||||||
| Engineering | 1,856 | 3,964 | ||||||
| Professional fees | 190 | 506 | ||||||
| Materials, consumables, and supplies | 1,330 | 1,447 | ||||||
| Subcontracting | 1,454 | 1,706 | ||||||
| Geology and drilling | 143 | 389 | ||||||
| Utilities | 349 | 388 | ||||||
| Amortization | 217 | 320 | ||||||
| Other | 213 | 265 | ||||||
| Grants | (36 | ) | (164 | ) | ||||
| Tax credits | (1,443 | ) | (1,369 | ) | ||||
| Exploration and evaluation expenses | 8,362 | 10,340 | ||||||
The exploration and evaluation expenses relate to the Matawinie Mine in Quebec. The wages and benefits are net of the grant received as part of the Canada Emergency Wage Subsidy program of $473 in 2021 ($892 in 2020).
| 17. | BATTERY MATERIAL PLANT PROJECT EXPENSES |
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Wages and benefits | 754 | 768 | ||||||
| Share-based compensation | - | 112 | ||||||
| Engineering | 4,136 | 2,399 | ||||||
| Professional fees | 898 | 866 | ||||||
| Materials, consumables, and supplies | 686 | 130 | ||||||
| Subcontracting | 268 | 475 | ||||||
| Amortization | 177 | 27 | ||||||
| Other | 39 | 43 | ||||||
| Grants | (718 | ) | (1,678 | ) | ||||
| Tax credits | (264 | ) | (231 | ) | ||||
| Battery Material Plant project expenses | 5,976 | 2,911 | ||||||
The battery material plant project expenses relate to the costs incurred in anticipation of the development of advanced materials plant in Bécancour, Québec.
The wages and benefits are net of the grant received as part of the Canada Emergency Wage Subsidy program of $81 in 2021 ($189 in 2020).
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NOUVEAU MONDE GRAPHITE INC. Notes to consolidated financial statements (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 18. | GENERAL AND ADMINISTRATIVE EXPENSES |
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Wages and benefits | 4,883 | 2,920 | ||||||
| Share-based compensation | 6,224 | 1,323 | ||||||
| Professional fees | 2,635 | 1,168 | ||||||
| Consulting fees | 1,476 | 220 | ||||||
| Travelling, representation and convention | 627 | 397 | ||||||
| Office and administration | 6,747 | 727 | ||||||
| Stock exchange, authorities, and communication | 872 | 111 | ||||||
| Depreciation and amortization | 699 | 854 | ||||||
| Loss on asset disposal | 5 | 2 | ||||||
| Other financial fees | 35 | 48 | ||||||
| General and administrative expenses | 24,203 | 7,770 | ||||||
Included in the office and administration expenses are $1.2M in connection with the settlement of a litigation in September 2021.
| 19. | NET FINANCIAL COSTS |
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Foreign exchange loss (gain) | (985 | ) | 15 | |||||
| Interest income | (327 | ) | (40 | ) | ||||
| Interest expense on lease liabilities | 113 | 28 | ||||||
| Accretion and interest on borrowings and bond | 2,196 | 1,213 | ||||||
| Accretion of issue costs | 9 | 25 | ||||||
| Loss of fair value on investment | - | 22 | ||||||
| Net financial costs | 1,006 | 1,263 | ||||||
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 20. | INCOME TAXES |
The income tax expense attributable to earnings differs from the amounts computed by applying the combined federal and provincial statutory income tax rate of 26.5% (26.5% in 2020) to loss before income taxes as a result of the following:
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Loss before income taxes | (39,490 | ) | (17,978 | ) | ||||
| Tax recovery computed at applicable statutory tax rate | 26.50 | % | 26.50 | % | ||||
| Tax expense at combined statutory rate | (10,465 | ) | (4,617 | ) | ||||
| Increase (decrease) in income taxes resulting from: | ||||||||
| Temporary difference not recorded | 8,937 | 4,268 | ||||||
| Share-based payments | 1,769 | 538 | ||||||
| Non-deductible expenses | 406 | - | ||||||
| Non-taxable mining duties | (219 | ) | (217 | ) | ||||
| Other | (28 | ) | 28 | |||||
| Income tax | 400 | - | ||||||
| Composition of deferred income taxes in the income statement: | ||||||||
| Taxes payable | 400 | - | ||||||
| Income tax | 400 | - | ||||||
As at December 31, 2021 and 2020, temporary differences and unused tax losses for which the Company has not recognized deferred tax assets are as follows:
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| FEDERAL | ||||||||
| Exploration and evaluation expenses | 37,787 | 24,034 | ||||||
| Property and equipment | 2,253 | 3,898 | ||||||
| Equity investment | 646 | 646 | ||||||
| Asset retirement obligation | 1,009 | 621 | ||||||
| Share issue expenses | 5,990 | 629 | ||||||
| Research and development expenses | 16,700 | 12,946 | ||||||
| Non-capital losses | 46,371 | 16 | ||||||
| Other | 74 | 30,747 | ||||||
| 110,830 | 73,537 | |||||||
| PROVINCIAL | ||||||||
| Exploration and evaluation expenses | 35,058 | 22,296 | ||||||
| Property and equipment | 2,253 | 3,881 | ||||||
| Equity investment | 646 | 646 | ||||||
| Asset retirement obligation | 1,009 | 621 | ||||||
| Share issue expenses | 293 | 629 | ||||||
| Research and development expenses | 19,447 | 14,427 | ||||||
| Non-capital losses | 45,943 | 16 | ||||||
| Other | 74 | 30,791 | ||||||
| 104,723 | 73,307 | |||||||
The ability to realize the tax benefits is dependent upon several factors, including the future profitability of operations. Deferred tax assets are recognized only to the extent that it is probable that sufficient taxable profits will be available to allow the asset to be recovered.
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
As at December 31, 2021, the Company’s accumulated non-capital losses for tax purposes which can be used to reduce taxable income in future years as follows:
| Year incurred | Expiration date | Federal | Provincial | |||||||
| 2021 | 2040 | 18,535 | 18,515 | |||||||
| 2020 | 2040 | 10,836 | 10,546 | |||||||
| 2019 | 2039 | 5,381 | 5,457 | |||||||
| 2018 | 2038 | 4,137 | 4,044 | |||||||
| 2017 | 2037 | 2,526 | 2,578 | |||||||
| 2016 | 2036 | 1,447 | 1,361 | |||||||
| 2015 | 2035 | 873 | 844 | |||||||
| 2014 | 2034 | 662 | 644 | |||||||
| 2013 | 2033 | 747 | 738 | |||||||
| 2012 | 2032 | 765 | 757 | |||||||
| 2011 | 2031 | 61 | 59 | |||||||
The Company has investment tax credit carryovers of $2,693 ($1,915 in 2020) that expire between 2036 and 2040, which are available to reduce income taxes payables in future years.
| 21. | ADDITIONAL CASH FLOW INFORMATION |
| December 31, 2021 $ | December 31, 2020 | |||||||||||
| Grants receivable and other current assets | 10 | (111 | ) | (596 | ) | |||||||
| Deferred grants | 10 | (1,511 | ) | 1,511 | ||||||||
| Mining tax credits | (1,707 | ) | (1,406 | ) | ||||||||
| Sales taxes receivable | (1,266 | ) | (68 | ) | ||||||||
| Prepaid expenses | (2,553 | ) | 85 | |||||||||
| Accounts payable and accrued liabilities | 9 | 3,901 | 339 | |||||||||
| Total net change in working capital | (3,247 | ) | (135 | ) | ||||||||
| Items not affecting cash | ||||||||||||
| Property and equipment included in accounts payable and accrued liabilities. | 5,068 | 944 | ||||||||||
| Share issue costs included in accounts payables and accrued liabilities | 49 | - | ||||||||||
| Shares issued for interest payment | 2,697 | - | ||||||||||
| 22. | RELATED PARTY TRANSACTIONS |
| December 31, 2021 $ | December 31, 2020 $ | |||||||
| Key management personnel of the Company | ||||||||
| Employee benefit expenses | 1,158 | 1,238 | ||||||
| Share-based payments | 3,435 | 398 | ||||||
| Directors of the Company | ||||||||
| Board fees | 643 | 91 | ||||||
| Share-based payments | 2,333 | 305 | ||||||
In addition to transactions with Pallinghurst disclosed elsewhere in the financial statements and in accordance with IAS 24 Related Party Disclosures, key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company.
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
As at December 31, 2021, Pallinghurst owns 20,94% of the Company’s issued and outstanding common shares and has significant influence over the Company (2020 – 19.18%).
In 2021, the Company issued 297,106 shares in repayment of accrued interests of $2,697 on the convertible bond due to 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 15.1).
In October 2021, the Company issued 7,500,000 common shares following the conversion of all outstanding convertible bond held by Pallinghurst group, a related party. In addition, and pursuant to the terms of the convertible bond, the Company has elected to settle the accrued and unpaid interest of $1,900 by issuing an additional 220,471 common shares at $8.62 per share.
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 and purchased all of the 1,978,750 common shares issued as part of the financing closed on July 23, 2021.
Severance
The Company has commitments under certain management contracts with key executives. Minimum commitments under these contracts are approximately $1,554. These contracts require additional minimum payments of approximately $3,139 to be made upon the occurrence of certain events, such as a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these consolidated financial statements.
| 23. | INFORMATION DISCLOSURE ABOUT CAPITAL MANAGEMENT |
The Company monitors capital based on the carrying amount of equity, borrowings, leases and convertible bond which totals $110,147 as at December 31, 2021 ($12,036 as at December 31, 2020).
The objective of the Company’s capital management is to preserve its ability to continue its operations and its program of acquisition, exploration, evaluation and development of mineral properties and the value-added product plant. It manages its capital structure and adjusts based on economic conditions and risk characteristics of underlying assets.
The Company is not subject to externally imposed capital requirements. Changes in capital are described in the consolidated statements of changes in equity and notes 11 and 12.
The properties in which the Company currently has an interest are in the development stage; as such, the Company is dependent on external financing to fund its activities. To carry out the planned development and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed.
| 24. | FINANCIAL INSTRUMENTS AND RISK MANAGMENT |
CLASSIFICATION AND CARRYING AMOUNT OF FINANCIAL INSTRUMENTS
The Company’s financial instruments as at December 31, 2021 and 2020 consist of the following:
| As at December 31, 2021 | ||||||||||||||||
At
fair value through | Amortized cost $ | Total $ | ||||||||||||||
| FINANCIAL ASSETS | ||||||||||||||||
| Cash | - | 62,355 | 62,355 | |||||||||||||
| Grants receivable and other current assets | 10 | - | 3,096 | 3,096 | ||||||||||||
| Total financial assets | - | 65,451 | 65,451 | |||||||||||||
| FINANCIAL LIABILITIES | ||||||||||||||||
| Account payables and accrued liabilities | 9 | - | 15,193 | 15,193 | ||||||||||||
| Borrowings | 12 | - | 2,129 | 2,129 | ||||||||||||
| Total financial liabilities | - | 17,322 | 17,322 | |||||||||||||
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| As at December 31, 2020 | ||||||||||||||||
At
fair value through | Amortized cost $ | Total $ | ||||||||||||||
| FINANCIAL ASSETS | ||||||||||||||||
| Cash | - | 4,520 | 4,520 | |||||||||||||
| Grants receivable and other current assets | 10 | - | 829 | 829 | ||||||||||||
| Total financial assets | - | 5,349 | 5,349 | |||||||||||||
| FINANCIAL LIABILITIES | ||||||||||||||||
| Account payables and accrued liabilities | 9 | - | 6,988 | 6,988 | ||||||||||||
| Borrowings | 12 | - | 1,793 | 1,793 | ||||||||||||
| Convertible bond | 13 | - | 14,505 | 14,505 | ||||||||||||
| Total financial liabilities | - | 23,286 | 23,286 | |||||||||||||
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 other 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.
Management believes that without additional funding, the Company does not have sufficient liquidity to pursue its planned expenditures over the next twelve months. These circumstances indicate the existence of material uncertainties that cast substantial doubt upon the Company’s ability to continue as a going concern and accordingly, the appropriateness of the use of IFRS applicable to a going concern (see note 1).
As at December 31, 2021, all of the Company’s short-term liabilities totalled $15,730 ($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.
| As at December 31, 2021 | ||||||||||||||||||||
| Carrying amount | Contractual cash flow | 0 to 12 months | 12 to 24 months | more than 24 months | ||||||||||||||||
| Account payables and accrued liabilities | 15,193 | 15,193 | 15,193 | - | - | |||||||||||||||
| Lease liabilities | 2,323 | 2,795 | 428 | 413 | 1,954 | |||||||||||||||
| Borrowings | 2,129 | 2,607 | 276 | 1,777 | 554 | |||||||||||||||
The Company has one variable lease agreement that is indexed to the consumer price index, on March 31 of each year.
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NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
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.
Currency risk
Foreign currency risk is the risk that the Company’s financial performance could be affected by fluctuations in the exchange rates between currencies. Some of the Company’s expenditures are denominated in U.S dollars and since August 2021, the Company holds balances in cash denominated in U.S dollars. As such, the Company is exposed to gains or losses on foreign exchange.
Currently, the Company has no hedging contracts in place and therefore has exposure to the foreign exchange rate fluctuations. The strengthening of the U.S. dollar would positively impact the Company’s net income and cash flows while the strengthening of the Canadian dollar would reduce its net income and cash flows.
As at December 31, 2021 and 2020, the balances in U.S. dollars held by the Company were as follows:
As
at December 31, 2021 | As at December 31, 2020 $ | |||||||
| Cash in US dollar | 11,435 | - | ||||||
| Canadian dollar equivalents | 14,497 | - | ||||||
| Accounts payables in US dollar | 1,044 | - | ||||||
| Canadian dollar equivalents | 1,322 | - | ||||||
Based on the balances as at December 31, 2021, a 5% fluctuation in the exchange rates on that date (with all other variables being constant) would have resulted in a variation of net loss of approximately $659 in 2021.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates.
The Company’s interest rate risk on financial assets is primarily related to cash, which bear interest at variable rates. However, as these investments come to maturity within a short period of time, the impact would likely be not significant.
Financial liabilities are not exposed to interest rate risk since they are non-interest-bearing liabilities or bear interest at a fixed rate.
| 25. | ADDITIONAL SEGMENT INFORMATION |
| December 31, 2021 | ||||||||||||||||
| Matawinie Mine Project | Battery Material Plant project | Corporate | Total | |||||||||||||
| Total property, plant and equipment | 18,032 | 18,886 | 5,185 | 42,103 | ||||||||||||
| Total liabilities | 7,570 | 6,320 | 6,764 | 20,654 | ||||||||||||
| December 31, 2020 | ||||||||||||||||
| Matawinie Mine Project | Battery Material Plant project | Corporate | Total | |||||||||||||
| Total property, plant and equipment | - | 1,206 | 3,001 | 4,207 | ||||||||||||
| Total liabilities | 2,397 | 2,689 | 21,408 | 26,494 | ||||||||||||
31
|
|
NOUVEAU MONDE GRAPHITE INC. |
| Notes to consolidated financial statements | |
| (Amounts expressed in thousands of Canadian dollars, except per share amounts) |
| 26. | COMMITMENTS |
In the normal course of business, the Company enters into contracts that give rise to commitments. As at December 31, 2021, the Company had issued $3,024 of purchase orders for the acquisition of assets and $2,936 in relation to the operations.
Royalty
The Company issued a 3% net smelter royalty over the Matawinie graphite property to Pallinghurst for an aggregate purchase price of $4,306. For a period of three years following issuance thereof, the royalty is subject to a 1% buy back right in favour of the Company for a buy-back price of $1,306 plus an amount equal to interest accrual at a rate of 9% per annum from and after the closing of the royalty transaction up to the buyback date.
Matawinie Property
A large part of the property is subject to a 0.10% NSR, which can be purchased by the Company for $200.
Collaboration and sharing of benefits.
On January 23, 2020, the Company signed a benefit-sharing agreement with the municipality of Saint-Michel-des-Saints as part of the Matawinie mining project. Through this agreement and throughout the mine’s commercial operating life, the Company will contribute up to 2% of its net future positive cash flow after taxes to the municipality.
| 27. | SUBSEQUENT EVENTS |
On January 21, 2022 the Company filed a prospectus supplement establishing a new at-the-market equity offering (“ATM Offering”). The ATM Offering will allow the Company to offer for sale and issue up to US$75 million (or the equivalent in Canadian dollars) of common shares of the Company from time to time, at the Company’s discretion. The Common Shares will be distributed at the market prices prevailing at the time of the sale.
From January 1, 2022 to the issuance of the financial statement, the Company granted 225,000 options to officers, 40,000 to employees, and 175,000 to consultants.
32
Exhibit 99.2
MANAGEMENT
DISCUSSION & ANALYSIS
For the year ended December 31, 2021
TABLE OF CONTENTS
| TABLE OF CONTENTS | 1 |
| Preamble | 3 |
| Period covered | 3 |
| Forward-Looking Statements | 3 |
| Technical Information And Cautionary Note To U.S. Investors | 5 |
| Market And Industry Data | 5 |
| The Company | 6 |
| Corporate structure | 6 |
| Value proposition | 6 |
| 2021 highlights | 7 |
| Delivering a new generation of battery materials | 7 |
| Developing the mine of the future | 7 |
| Driving the transition to a green future | 8 |
| Striving to reach NMG’s full potential | 8 |
| Business lines | 8 |
| Battery Material Plant project | 9 |
| Battery Material Demonstration Plants | 9 |
| Bécancour Battery Material Plant | 10 |
| Matawinie Mine Project | 11 |
| Resource | 11 |
| Matawinie Mine Demonstration Plant (Phase 1) | 13 |
| Matawinie Mine (Phase 2) | 13 |
| Commercial strategy | 14 |
| Sales | 14 |
| Partnerships, research and development | 15 |
| Market update | 16 |
| Responsibilities | 16 |
| Human capital | 17 |
| Health & Safety | 17 |
| Employment, Diversity & Inclusion | 17 |
| Training | 17 |
| Environment | 17 |
| Carbon neutrality | 18 |
| Social | 19 |
| governance | 19 |
| Leadership | 19 |
| Risks | 20 |
| Financing | 21 |
| Quarterly results | 22 |
| Fourth quarter results | 23 |
| annual financial information | 23 |
| Selected annual information | 23 |
| Exploration and Evaluation expenses | 24 |
| Battery Material Plant project expenses | 25 |
| General and administrative expenses | 26 |
| Net financial costs | 26 |
| Management Discussion and Analysis | 1 |
| Liquidity and funding | 27 |
| Operating activities | 28 |
| Investing activities | 28 |
| Financing activities | 28 |
| Additional information | 29 |
| Related party transactions | 29 |
| Off-balance sheet transactions | 29 |
| Critical accounting estimates, new accounting policies, judgements and assumptions | 29 |
| Change in accounting policy | 30 |
| Financial instruments and risk management | 30 |
| Contractual obligations and commitments | 30 |
| Capital structure | 30 |
| Subsequent events to December 31, 2021 | 30 |
| Additional information and continuous disclosure | 30 |
| Management Discussion and Analysis | 2 |
Preamble
This Management Discussion and Analysis (“MD&A”) dated March 23, 2022, has been prepared according to Regulation 51-102 of the continuous disclosure requirements and approved by the Board of Directors of Nouveau Monde Graphite Inc. (“the Company” or “NMG”).
This MD&A should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2021, and December 31, 2020 and related notes included therein. The Company’s consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”), as published by the International Accounting Standards Board (“IASB”). All monetary amounts included in this MD&A are expressed in thousands of Canadian dollars (“CAD”), the Company’s reporting and functional currency, unless otherwise noted.
Period covered
This MD&A report is for the year ended December 31, 2021, with additional information up to March 23, 2022.
FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, contained in this MD&A including, but not limited to, those relating to the “Value Proposition” paragraph which essentially describes the Company’s outlook and objectives, the expected unfolding of construction and commissioning as well as the anticipated start of production at the Company’s Matawinie and Bécancour projects, the Company’s future results, the Company’s development activities and production plans, including the intended construction and commissioning timeline of the Matawinie Mine (as defined herein), the Bécancour Battery Material Plant (as defined herein), the coating demonstration plant, the shaping demonstration plant and the intended operation and performance of the shaping demonstration plant, the purification demonstration plant and the flake demonstration plant, the economic performance and product development efforts, as well as the Company’s achievement of milestones, the impact of the COVID-19 pandemic (“COVID-19”) on the Company’s operations, the future outlook, corporate development and strategy of the Company, the Company’s environmental, social and governance (“ESG”) initiatives, the realization of the expected economics of the construction and operation of the Matawinie Mine Project (as defined herein) and the Battery Material Plant Project (as defined herein), the ability to obtain sufficient financing and the permitting required for the development of the Matawinie Mine Project and the Battery Material Plant Project, the results and operational highlights of the feasibility study covering the West Zone deposit of the Tony Claim Block, the updated pit constrained Mineral Resource Estimate, the electrification strategy and its intended results, the benefits of the Atomic Layer Deposition-coating technologies (“ALD”) technologies, the intended capacity and output of the Battery Material Plant Project and Matawinie Mine Project, the completion of the integrated feasibility study, graphite demand growth and trends, and any information as to the future plans and outlook for the Company, constitute ''forward-looking information'' or ''forward-looking statements'' (collectively, “forward-looking statements”) within the meaning of applicable Canadian and United States securities legislation, 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 are based upon various underlying factors and assumptions, including general business and economic conditions; there being no direct operational impacts resulting from infectious diseases or pandemics such as the ongoing COVID-19; the limited financial resources available to the Company, the uncertainty regarding regional and global financial stability; the outbreak of war between Russia and Ukraine; the dependence of the Company’s operations on an uninterrupted supply of production inputs, and other supplies and resources; the supply and demand for, deliveries of, and the level and volatility of prices for graphite products; the speculative nature of mineral exploration and development; changes in mineral production performance, exploitation and exploration successes; the risk that exploration data may be incomplete and additional work may be required to complete further evaluation, including but not limited to drilling, engineering, and socioeconomic studies and investment; the timing of the receipt of necessary regulatory and governmental permits and approvals for the Matawinie Mine Project and Battery Material Plant Project; the availability of financing for the Company’s development of its properties and construction of its facilities and installations on reasonable terms; the ability to procure equipment and operating supplies in sufficient quantities and on a timely basis; increased costs, delays, suspensions and technical challenges associated with the development of the Matawinie graphite property and the Battery Material Plant Project; the ability to attract and retain skilled staff; development and production timetables; competition and market risks; pricing pressures; the accuracy of the Company’s mineral resource and mineral reserve estimates (including, with respect to size, grade and recoverability) as well as the geological, operational and price assumptions on which they are based; the fact that certain business improvement initiatives are still in the early stages of evaluation, and additional engineering and other analysis is required to fully assess their impact; the fact that certain of the initiatives described in this MD&A are still in the early stages and may not materialize; business continuity and crisis management; current technological trends; the business relationship between the Company and its stakeholders; the ability to operate in a safe and effective manner; the timely delivery and installation of the equipment supporting the production; the Company’s business prospects, opportunities and estimates of the operational performance of the equipment and such other assumptions and factors as set out herein and in the Company’s most recent annual information form available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov, and such statements are not guarantees of future performance.
| Management Discussion and Analysis | 3 |
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.
Forward-looking 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 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 COVID-19 and the governments’ responses thereto, general economic conditions, as well as earnings, capital expenditure, cash flow and capital structure risks, general business risks, and those factors discussed in the section entitled “Risks” in in this MD&A. Unpredictable or unknown factors not discussed in this cautionary statement could also have material adverse effects on forward-looking statements.
| Management Discussion and Analysis | 4 |
The above list is non-exhaustive and non-exclusive. 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.
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.
TECHNICAL INFORMATION AND CAUTIONARY NOTE TO U.S. INVESTORS
Scientific and technical information in this MD&A has been reviewed and approved by Eric Desaulniers, MSc, Géo., President & CEO for NMG and Antoine Cloutier, Géo, Chief Geologist for NMG, each a Qualified Person as defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). Further information about the Matawinie Mine Project, including a description of key assumptions, parameters, methods and risks, is available in the NI 43-101 technical report, “NI 43-101 Technical Feasibility Study Report for the Matawinie Graphite Project”, dated effective July 10, 2018, that was filed with the securities regulatory authorities in each of the provinces of Canada on December 10, 2018, and available on SEDAR. The mineral resource and mineral reserve estimates contained in this MD&A have been prepared in accordance with the requirements of securities laws in effect in Canada, including NI 43-101, which governs Canadian securities law disclosure requirements for mineral properties. These standards differ from the requirements of the U.S. Securities and Exchange Commission (“SEC”) and resource and reserve information contained in this report may not be comparable to similar information disclosed by domestic United States companies subject to the SEC’s reporting and disclosure requirements.
MARKET AND INDUSTRY DATA
Market and industry data presented throughout this MD&A was obtained from third-party sources and industry reports, publications, websites and other publicly available information. The Company believes that the market and industry data presented throughout this MD&A is accurate, but there can be no assurance as to the accuracy or completeness thereof. The accuracy and completeness of the market and industry data presented throughout this MD&A are not guaranteed and the Company does not make any representation as to the accuracy of such data. Actual outcomes may vary materially from those forecast in such reports or publications, and the prospect for material variation can be expected to increase as the length of the forecast period increases. Although the Company believes it to be reliable, the Company has not independently verified any of the data from third-party sources referred to in this MD&A, analyzed or verified the underlying studies or surveys relied upon or referred to by such sources, or ascertained the underlying market, economic and other assumptions relied upon by such sources. Market and industry data are subject to variations and cannot be verified due to limits on the availability and reliability of data inputs, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey.
| Management Discussion and Analysis | 5 |
The Company
Corporate structure
The Company was established on December 31, 2012, under the Canada Business Corporations Act. NMG’s registered office is located at 481 Brassard Street, Saint-Michel-des-Saints, Québec, Canada, J0K 3B0.
The Company’s shares are listed under the symbol NMG on the New York Stock Exchange (“NYSE”), NOU on the TSX Venture Exchange (“TSXV”), and NM9A on the Frankfurt Stock Exchange.
The Company’s consolidated financial statements have been prepared using accounting principles applicable to a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business as they come due. In assessing whether the going concern assumption is appropriate, management considers all available information about the future, which is at least, but not limited to, the next twelve months.
Management believes that without additional funding, the Company does not have sufficient liquidity to pursue its planned expenditures over the next twelve months. These circumstances indicate the existence of material uncertainties that cast substantial doubt upon the Company’s ability to continue as a going concern and accordingly, the appropriateness of the use of IFRS applicable to a going concern.
The Company's ability to continue future operations and fund its development and acquisition activities is dependent on management's ability to secure additional financing in the future, which may be completed in a number of ways including, but not limited to, the issuance of debt or equity instruments, expenditure reductions, or a combination of strategic partnerships, joint venture arrangements, project debt finance, offtake financing, royalty financing and other capital markets alternatives. While management has been successful in securing financing in the past, there can be no assurance it will be able to do so in the future or that these sources of funding or initiatives will be available for the Company or that they will be available on terms which are acceptable to the Company.
These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities, expenses and financial position classifications that would be necessary if the going concern assumption was not appropriate. These adjustments could be significant.
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
NMG is a Québec-based company who is striving to become a key contributor to the sustainable energy revolution. The Corporation is working towards developing a fully integrated source of carbon-neutral battery anode material in Québec, Canada for the growing lithium-ion battery and fuel cell markets, and other value-added graphite products. With low-cost operations and enviable ESG standards, the Company aspires to become a strategic supplier to the world’s leading battery and auto manufacturers, providing high-performing and reliable advanced materials while promoting sustainability and supply chain traceability.
| Vision | Drive the transition to a green future through sustainable zero-carbon solutions. |
| Management Discussion and Analysis | 6 |
| Mission | Provide the greenest advanced graphite materials with a carbon-neutral footprint for a sustainable world. |
| Values | Safety, responsibility, openness, integrity, and entrepreneurial spirit. |
The Company activities are focused on the planned Matawinie graphite mine (the “Matawinie Mine”) and the planned commercial value-added graphite products transformation plant (the “Bécancour Battery Material Plant”), both of which are progressing concurrently towards commercial operations. Underpinning these projects are NMG’s world-class Matawinie graphite deposit, its proprietary technologies, and clean hydroelectricity powering its operations.
2021 highlights
| » | Safe operations with NMG’s Zero-Harm Philosophy being top of mind to protect the environment, as well as the health and safety of its employees, contractors, and communities. |
| » | Continued engagement with its communities, First Nations, shareholders, and stakeholders to guide its growth and create shared value. |
Delivering a new generation of battery materials
| » | Construction, commissioning, and start of production at its Phase-1 purification facility. Samples produced at 99.99% purity have confirmed the high-quality, battery-grade specifications of the material. |
| » | Addition to Phase-1 operations of a second commercial-scale shaping module and commencement of construction of a coating line for a nameplate capacity of 2,000 tonnes per annum (“tpa”) of coated spherical purified graphite (“CSPG”). |
| » | Building and commissioning of an advanced laboratory and research and development (“R&D”) facility with the in-house capacity for testing anode material and providing customized specifications to battery and electric vehicle (“EV”) manufacturers. |
| » | Production of meaningful battery-grade samples, including B-samples for advancing the product qualification process with battery and EV manufacturers, to support NMG’s commercial discussions. |
| » | Strategic acquisition of the 200,000-m² land for the Phase-2 expansion of advanced manufacturing in the Bécancour industrial park, across the street from Phase-1 operation, and carrying out of a Front-End Loading feasibility study (“FEL-3”) to reflect NMG’s integrated business model for a comprehensive planning, cost projection, and development framework. |
| » | Signing of a collaboration agreement with Lithion Recycling (“Lithion”) to advance the recovery and value-added transformation of recycled graphite for reuse as anode material. |
| » | Patent application for the Company’s proprietary thermochemical purification ecotechnology, free of hydrofluoric acid and harnessing clean hydropower. |
Developing the mine of the future
| » | Authorization by the Québec Government of the Matawinie Mine following a rigorous environmental review and public consultation. |
| » | Continuous advancement of detailed engineering of the Matawinie concentrator and mining infrastructure – progress at year-end of overall engineering was estimated at 55%. |
| » | Earthworks at the Matawinie Mine : construction of a nearly 8-km access road completed and commencement of civil works for the industrial platform. |
| Management Discussion and Analysis | 7 |
| » | Signing of a historical agreement with Caterpillar Inc. (“Caterpillar”) for the development, testing, and deployment of Cat® zero-emission machines for the Matawinie Mine fleet – that is projected to be the world’s first all-electric open-pit mine. |
Driving the transition to a green future
| » | Continued commercial engagement with potential tier-1 customers in the EV and battery sector supported by production at NMG’s Phase-1 operations and participation in key forums dedicated to advanced battery technology. |
| » | Commitment to past, present, and future carbon neutrality thanks to the environmentally-focused design of NMG’s projects and processes, historical compensation of its emissions, and climate action strategy. |
| » | Issuing of an inaugural ESG Report providing shareholders and other shareholders with an overview of NMG’s core commitments, anchor initiatives and performance indicators with a view to contributing to global sustainability goals. |
| » | Admission to the Global Battery Alliance, a World Economic Forum’s initiative regrouping leading players of the industry for helping establish a circular and sustainable battery value chain. |
Striving to reach NMG’s full potential
| » | Successful listing of the Company’s common shares on the New York Stock Exchange, the world’s largest stock market, under the symbol “NMG”. |
| » | Over $130M raised through public offerings, the exercise of warrants, private placements, and financial levers from governments to support our current operations and the advancement of NMG’s key projects. |
| » | Strengthened governance with the addition of strategic expertise at the Board of Directors and enhanced structures, policies, and programs to guide the Company’s development. |
| » | Nomination as Entrepreneur of the Year by the Québec Mineral Exploration Association in recognition of the Company’s momentum in developing its integrated and sustainable “ore-to-battery-material” value chain. |
Business lines
NMG 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 coated spherical purified 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 is carrying out a phased-development plan for its Matawinie Mine and Bécancour Battery Material Plant (respectively, the “Matawinie Mine Project” and “Battery Material Plant Project”), to derisk its projects and advance toward commercial operations.
| Management Discussion and Analysis | 8 |
| Battery Material Plant Project | ||
| Phase 2 – Bécancour Battery Material Plant | Feasibility study underway, scheduled to be completed in Q2-2022. | |
| Phase 1 – Battery Material Demonstration Plants | ||
| Shaping Demonstration Plant | Since February 2020, the Company has been operating one commercial scale shaping unit. A second unit is scheduled to be added in H1-2022. | |
| Purification Demonstration Plant | The purification demonstration unit is currently in production with a 2,000 tpa nameplate capacity. | |
| Coating Demonstration Plant | The Company is currently building its first coating module with a 2,000 tpa nameplate capacity. Commissioning is expected to commence in H1-2022. | |
| Matawinie Mine Project | ||
| Phase 2 – Matawinie Mine | Civil works started in Q3-2021; the access road has been completed along with some earthworks. | |
| Phase 1 – Matawinie Mine Demonstration Plant | ||
| Flake Demonstration Plant | Since September 2018, the Company has been operating a flake concentration demonstration plant. | |
Battery Material Plant project
In the last year, the Company has made considerable progress with respect to its Battery Material Plant Project thanks to production results at Phase-1 facilities and the engineering advancement of its Phase-2 development plans.
Battery Material Demonstration Plants
The shaping equipment (Phase 1) continues to produce spherical graphite; samples have attested to the performance of the secondary transformation process developed by NMG. The successful results have led NMG to purchase another commercial-scale module, hence tripling its production capability. The new state-of-the-art unit should further elevate the products’ quality and provide customers with a greater variety of specifications.
| » | Site preparation has started at the Company’s shaping demonstration plant ahead of the delivery and installation. The equipment commissioning is expected to be carried out by the end of H1-2022 for a production start and ramp up during 2022. |
The Company is also leveraging its proprietary thermochemical purification process to complete its market offering of products with purity greater than 99.95%. On October 27, 2020, NMG announced a five-year agreement with Olin Corporation (“Olin”) which covers the manufacturing space for operations, site services and the supply of certain raw materials to support the commercialization of NMG’s advanced graphite materials.
| Management Discussion and Analysis | 9 |
| » | The Company’s first two commercial-scale pilot plant purification modules (Phase 1) have been constructed within existing space at Olin’s facility in Bécancour, Québec. The scalable furnaces have a nameplate capacity of 2,000 tpa of purified battery-grade graphite. |
| » | In H2-2021, NMG produced spherical purified graphite (“SPG”) demonstrating the performance of its proprietary purification ecotechnology; samples confirmed purity of +99.99%, above the level required for energy applications. |
| » | Through incremental production, NMG is testing the furnaces’ optimal capacity, derisking commercial operation through informed parallel engineering, and generating battery-grade SPG volumes. |
Determined to develop the entire value chain from mine to anode material to provide a traceable and carbon-neutral source to battery manufacturers, NMG 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.
| » | NMG has successfully completed the detailed engineering study for its Phase-1 2,000 tpa nameplate capacity coating production line. Although some have been delayed due to the worldwide logistics disturbances, most of the deliveries have arrived at the coating demonstration plant over Q4-2021 and Q1-2022. Construction is underway, on budget, for a targeted commissioning in H1-2022. |
| » | In addition, the Company has signed an important collaboration agreement for the use of Forge Nano’s proprietary ALD. Tests are being conducted using ALD technologies to enhance the performance of NMG’s graphite as part of the lithium-ion battery system. |
Bécancour Battery Material Plant
NMG purchased a 200,000 m2 land in the Bécancour industrial park adjacent to Olin’s facility, to build an integrated manufacturing plant with a projected annual production volume of 45,000 tpa of anode material and purified jumbo flakes (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 pre-feasibility study (“FEL-1”) for its large-scale Bécancour Battery Material Plant. The Bécancour Battery Material Plant is designed to receive approximately 60 kilotonnes per annum (“ktpa”) of flake graphite from NMG’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.
| » | 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, NMG has commenced a Front-End Loading feasibility study (“FEL-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 this FEL-3 for the Phase 2 Bécancour Battery Material Plant, building on the FEL-1. |
| » | NMG’s integrated business model will be reflected in its NI 43-101-compliant feasibility study for the Phase-2 Bécancour Battery Material Plant to update planning, cost projection, and development framework in a unified structure with the Matawinie Mine. |
| Management Discussion and Analysis | 10 |
| » | BBA and associated firms continue to advance the process design criteria, flow diagrams, and engineering. Tests and production at the Phase-1 purification facility have enabled to update process parameters for the Phase-2 Bécancour Battery Material Plant and perform value engineering. The study is progressing on budget, with an estimated 48% completion rate. |
| » | Detailed planning for the permitting process has started. |
Matawinie Mine PROJECT
The Matawinie graphite property includes 392 mining claims covering 21,750 hectares as of the date of this MD&A, in which the Company owns a 100% interest. The Tony Claim Block is located approximately 120 km north of Montréal, Québec, Canada, in Saint-Michel-des-Saints. This block is easily accessible via the dedicated access road connecting to the local highway and is close to high-quality infrastructure, including paved roads and high-voltage power lines, and the community which counts skilled laborers and contractors. The project is located close to the Montréal metropolitan area, which also has a considerable pool of nearby labor and suppliers of goods and services.
On October 25, 2018, the Company announced the results of a feasibility study covering the West Zone deposit of the Tony Claim Block, which is part of its Matawinie graphite property. The feasibility study performed by Met-Chem, a division of DRA Americas Inc., in compliance with NI 43-101, demonstrated the project’s potential on the following operational highlights:
| » | 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. |
The Matawinie Mine’s economics are being updated as part of the feasibility study for the Bécancour Battery Material Plant, in alignment with NI 43-101 standards, in order to reflect the Company’s integrated business model for comprehensive planning, cost projection, and development framework.
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. 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.
The Current Resource is summarized below and compared to the previous pit-constrained Mineral Resource Estimate (the “Previous Resource”).
| Management Discussion and Analysis | 11 |
Pit-Constrained Mineral Resource Estimate for the West Zone (1)
| CURRENT RESOURCE (March 19, 2020) 8 | ||||||||||||
| RESOURCE CATEGORY 2 | Tonnage (Mt) 5, 7 | Grade
(% Cg) 3 | Cg
(Mt) | |||||||||
| Measured | 24.5 | 4.27 | 1.05 | |||||||||
| Indicated | 95.8 | 4.26 | 4.08 | |||||||||
| Measured + Indicated 9 | 120.3 | 4.26 | 5.13 | |||||||||
| Inferred 4 | 4.5 | 4.43 | 0.20 | |||||||||
| 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: NMG 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; NMG 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. |
Open-Pit Mineral Reserves Estimate for the West Zone (1)
| CURRENT RESERVE (July 10, 2018) 6 | ||||||||||||
| RESERVE CATEGORY 2 | 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. |
| Management Discussion and Analysis | 12 |
Matawinie Mine Demonstration Plant (Phase 1)
Since 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 tonnes of graphite concentrate are being produced on an annual basis with the materials extracted from the West Zone Deposit of the Matawinie graphite property with grades between 94-98% Cg (as per technical requirements). Production serves as the feedstock for the Company’s Phase-1 battery material demonstration plants and as samples for potential customers interested in high-purity flake graphite.
Matawinie Mine (Phase 2)
The ministerial decree authorizing the project now supports the technical feasibility and commercial viability of the Matawinie Mine and provides NMG 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, NMG 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. |
| » | Optimization of facilities, preparation of architectural specifications and plans, mechanical engineering, and equipment selection advance in parallel. The mining plan is also progressing based on the latest drilling campaign. Overall advancement of engineering is estimated at 55%. |
| » | Results from the experiment co-disposal test cells are positive, validating the co-disposal technology developed by NMG. |
NMG 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.
| » | Initial tree clearing was completed before the nesting season to limit impacts to avifauna. Wood harvested as part of the preliminary works was 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 8-km access road and was completed on December 17, 2021. |
| » | Tree clearing activities resumed in Q1-2022 to prepare the site for the next phase of civil works. |
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, NMG signed an agreement with Caterpillar Inc. on June 22, 2021.
| Management Discussion and Analysis | 13 |
| » | Caterpillar will develop, test and produce Cat® “zero-emission machines” for the Matawinie Mine with a view to becoming the exclusive supplier of an all-electric mining fleet for deployment at NMG’s Matawinie Mine by 2028. |
| » | Caterpillar’s and NMG’s technical teams have initiated work and are actively engaged in the planning and development of the fleet. |
NMG has been selected as the first mining partner of the Canadian and Quebec governments as they roll out their electrification strategy. Through a collaborative endeavor bringing together research and industry leaders, the Company also supports the development and testing of electric systems and rapid recharging infrastructure for heavy vehicles adapted to open-pit mining.
| » | The technological development and conversion of the equipment are being finalized with the project partners; tests are projected to be conducted at NMG’s site in H2-2022. |
Furthermore, the Company has mandated Hydro-Québec, the state-owned corporation that produces, transports, and delivers power, to develop, install and operate a 120-kV electrical line that will supply the mine site and help meet its carbon-neutrality target. A dedicated line will connect the Matawinie Mine and concentrator to Hydro-Québec’s hydropower network that will enable the full electrification of its operations.
Commercial strategy
Sales
As part of its marketing and commercialization program, NMG is actively engaged with tier-1 EV and battery manufacturers in its efforts to negotiate a long-term cornerstone supply agreement. Thus far, these manufacturers, with whom the Company is engaged in commercial discussions and/or have signed memorandums of understanding and non-disclosure agreements, represent a total projected yearly production capacity of approximately 1 TWh by 2030 that would correspondingly require over 1 million tpa of battery-grade graphite.
| » | The Company’s Phase-1 operations support technical marketing and product qualification efforts in the lithium-ion battery, traditional and niche sectors. Production at the Phase-1 facilities and testing at NMG’s new state-of-the-art laboratory enable the supply of graphite products in a variety of specifications to meet the individual requirements of each manufacturer. |
| » | In addition, samples have been and continue to be provided to potential customers as part of sales discussions. NMG has advanced into the qualification process with several battery manufacturers, now providing A & B samples. Sustained interest from top-tier potential customers is supported by quality checks, site visits to the Company’s Phase-1 operations and requests for information. |
The Company is actively strengthening its quality assurance and quality control with the implementation of an ISO 9001-compliant system.
NMG joined the marketplace at two large trade shows on advanced battery manufacturing in H2-2021. North America’s and Europe’s Battery Show are forums dedicated to advanced battery technology for electric and hybrid vehicles, utility and renewable energy support, portable electronics, medical technology, military, as well as telecommunications. The Company met onsite key industry players and examined some of the latest technologies that could complement NMG’s operations.
With commercial discussions intensifying with European automakers for NMG’s battery anode material, the Company opened a London-based sales office to readily respond to the growing enquiries from local customers and stakeholders.
| Management Discussion and Analysis | 14 |
On February 14, 2019, the Company entered into a Binding Offtake and Joint Marketing Agreement with Traxys for flake graphite concentrate to be produced at the Company’s Saint-Michel-des-Saints facilities.
| » | Traxys will market flake graphite concentrate from the Company’s currently operating graphite demonstration plants for customer product prequalification purposes. |
| » | For each of the first five years of the Company’s commercial production, 25,000 tonnes of flake graphite product will be sold through Traxys by NMG. |
| » | Traxys will have the exclusive right to market, distribute and resell the flake graphite products to its customer base. |
Partnerships, research and development
NMG has submitted a patent application for its proprietary thermochemical purification technology, a greener and more sustainable alternative to that currently used in the traditional anode material production, to the U.S. Patent and Trademark Office as part of its intellectual property strategy.
NMG is commissioning its state-of-the-art laboratory at its battery material demonstration plants, an addition to the Company’s existing quality testing facilities. This expansion is triggered by NMG’s commitment to catering to the market’s requirements for high-performing and environmentally responsible battery materials that can be tailored to a variety of specifications.
The Company has partnered with Hydro-Québec to research and develop graphite anode material for lithium-ion batteries. 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 NMG’s technological developments and commercialization activities.
| » | NMG 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.
| » | NMG is working with materials engineering expert Philippe Ouzilleau, a professor at McGill University, and his research team to develop new types of precursors and coating technologies to reduce the environmental footprint of its graphite advanced products, optimize production costs, and improve the properties for existing performance. |
NMG has signed a collaboration agreement with Lithion for the recovery and value-added transformation of recycled graphite for reuse as anode material for lithium-ion batteries. The partnership aims at leveraging NMG’s and Lithion’s proprietary processes and expertise to promote graphite circularity and better position both companies in the evolving global market.
As one of the first battery materials producers, NMG has been admitted as an active member of the Global Battery Alliance, a World Economic Forum’s initiative dedicated to helping establish a sustainable battery value chain.
| Management Discussion and Analysis | 15 |
Market update
Global market parameters and trends remain very attractive as economies and governments invest 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. NMG is set to become the first fully integrated source of green battery anode material in North America, benefiting in this respect.
| » | With a projected 5,454 GWh of global lithium-ion battery production capacity by 2031, demand for advanced materials is set to increase up to fivefold, with graphite outpacing the other battery metals (Benchmark, February 2022). |
| » | As demand continues to rise, analysts evaluate that the supply of battery materials is likely to remain constrained and prices to stay high. In fact, the end of 2021 saw an increase in graphite prices as a result of energy shortages in some Chinese provinces and major logistics disruptions (Roskill, October 2021). |
Technological trends and new greenhouse gas (“GHG”) policies have pushed the graphite market, mainly with regard to lithium-ion batteries and fuel-cell technologies, into an accelerated growth curve. Benchmark 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. |
| » | 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. NMG is ideally positioned to respond to this growing trend thanks to its green, carbon-neutral and traceable materials.
Responsibilities
From mining to advanced manufacturing, NMG strives to drive greater sustainability along its value chain. The Company embedded leading ESG principles in its business model alongside carbon-neutral operations and traceability of its value chain. Sustainability guided the development of the Matawinie Mine Project from day one through extensive stakeholder engagement and pioneering design choices to protect the environment, and was carried over in the engineering of the Battery Material Plant Project.
On a foundation of accountability with a view to contributing to global environmental and sustainability goals, NMG published its inaugural ESG Report on October 14, 2021, to disclose its managerial approach to addressing material topics and highlight significant sustainability milestones and indicators. The Company is committed to engaging in this transparency exercise yearly to provide its stakeholders with a comprehensive set of data on its ESG performance.
In an independent assessment of the Company’s sustainability performance, Moody’s ESG Solutions has provided a Sustainability Rating of A2 (‘Robust’), the second-highest grade on its rating scale, to NMG. The rating can be consulted on the Company’s website.
| Management Discussion and Analysis | 16 |
Human capital
Health & Safety
The Company is committed to providing a safe work environment to its staff and business partners. For the year ended December 31, 2021, NMG had an Occupational Safety and Health Administration (“OSHA”) Recordable Incident Rate of 2.61 as a result of two incidents at the demonstration plants.
| ̶ | In each instance, 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. |
With the start of construction of the Matawinie Mine, the Company also tracks the contractor’s health and safety performance onsite; the OSHA Recordable Incident Rate is at 0, for the year ended December 31, 2021.
In relation to the COVID-19 pandemic, NMG 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.
Employment, Diversity & Inclusion
As the Company advances the Matawinie Mine Project and the Battery Material Plant Project, recruitment of key personnel continues both at the operational and corporate levels. NMG regards diversity as an important driver of strategy, creative thinking, and business performance. The Company promotes local and Indigenous recruitment opportunities to maximize benefits within its communities and strive to ensure representation of its milieu.
NMG recognizes that attraction, hiring, and retention of human capital pose challenges in today’s tight labor market. Hence, NMG is actively working to position itself as an employer of choice and a purpose-driven company in its communities, industries, and academic circles.
Training
To facilitate employment and bolster communities’ socioeconomic fabric, NMG has launched initiatives to train and hire local workers in collaboration with industrial, institutional, and business partners.
| ̶ | Diploma of Vocational Studies in Production Equipment Operation: Five cohorts of this on-the-job training program leading graduates to a position as an operator at the Matawinie Phase-1 demonstration plants have now been launched; a sixth 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 resumed following the pandemic-imposed pause; the launch is now targeted for Q2-2022. |
Environment
The Company is developing its projects to extract and transform natural graphite while limiting its environmental footprint, preserving ecosystems, maintaining its carbon-neutral status and maximizing its products’ contribution to global decarbonization efforts. Dedicated to stringent sustainable development standards, NMG is committed to adopting a fully electric operating model – both at the mining and advanced manufacturing facilities – leveraging Québec’s renewable hydropower.
| Management Discussion and Analysis | 17 |
Responsible Mining
NMG has integrated innovative environmental initiatives to limit the Matawinie Mine’s potential impact on the natural and human milieu. On April 15, 2019, the Company officially filed its Environmental and Social Impact Assessment (“ESIA”) for the Matawinie Mine with the Government of Québec. Following its analysis by 25 provincial agencies and ministries, the Québec Ministère de l’Environnement et de la Lutte contre les changements climatiques gave the Bureau d’audiences publiques sur l’environnement (“BAPE”) the mandate to launch a public consultation. Public hearings held in January and February 2020 informed the commission’s report, which was tabled in June 2020.
| » | The Commission recognized the economic justification, environmental innovations, integration measures and social benefits associated with the mining project and identified avenues for enhancement. |
| » | Following a rigorous environmental review complementary to the BAPE’s analysis, the Québec Government issued a ministerial decree on February 10, 2021, authorizing NMG’s Matawinie Mine for a 100,000-tpa high-purity graphite concentrate production. |
To protect the environment and the well-being of the community, NMG has developed an environmental surveillance and monitoring program to oversee the construction, operation, and closure activities of the Matawinie Mine.
| » | In 2021, NMG had no major environmental incidents as per the Global Reporting Initiative’s definition. Through its work protocols, continuous monitoring, and environmental program, it responsibly conducted its operations and worked to diligently address and mitigate any minor incident at its sites. |
Mine tailings represent a significant environmental responsibility. NMG has put forward innovative design criteria by prioritizing the desulphurization of tailings, the gradual backfilling of the pit, and the co-disposal of waste rock and tailings. An experimental cell was built in 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.
Carbon neutrality
Taking responsibility for its GHG footprint, the Company has taken concrete steps to avoid, reduce, and fully offset its emissions, confirming its carbon-neutral status and mapping its transition to Net Zero by 2030. On February 24, 2022, NMG released its Climate Action Plan detailing efforts for the Company’s embedded emissions around transparent reporting, reduction of its climate impact, transition to Net Zero, research and development for low-carbon materials and activities, as well as industry leadership. NMG’s targets are based on, but not limited to, all Scope 1, Scope 2, and some Scope 3 emissions, including business travel, direct emissions associated with the facilities construction, deforestation related to the Company’s direct operations, and the transportation of goods between sites.
| ̶ | For 2021, the Company reported GHG emissions of 1,546 tonnes of CO2 equivalent for carrying out its operations at its Phase-1 demonstration plants and corporate offices. NMG has purchased verified carbon credits to offset this balance. |
| Management Discussion and Analysis | 18 |
SOCIAL
NMG strives to develop business activities that are supported by its communities and contribute to the overall development and advancement of the areas where the Company operates.
The Matawinie Mine is located in the municipality of Saint-Michel-des-Saints, approximately 120 km North of Montréal, Québec. In keeping with its environmental and ethical development goals, the Company has launched many initiatives since the Matawinie graphite deposit was discovered in 2015 to align the project with the realities, concerns and values of the local community. Information events, consultations as part of the ESIA, a community office with a dedicated Community Relations Manager, a Monitoring Committee, public communication platforms and a social responsibility program ensure local communities are consulted early and often throughout the development process.
| » | A collaboration and benefit-sharing agreement with the municipality of Saint-Michel-des-Saints was signed in 2020 to set out a concrete social, economic and environmental development partnership through financial and participatory mechanisms. |
Respect for the rights, culture, aspirations, and interests of Indigenous peoples guides the development of NMG’s sustainable business practices. The Company has consulted and continues to engage with the Atikamekw First Nation in the Manawan community (85 km North of the Saint-Michel-des-Saints) and with the Band Council in the development of the Matawinie Mine.
| » | NMG signed a framework agreement (2018) and a pre-development agreement (2019) with the Atikamekw First Nation to provide a guideline for negotiating an Impact and Benefit Agreement for the Matawinie Mine Project. |
| » | NMG is actively engaged in discussions with the First Nation to advance the Impact and Benefit Agreement with a view to maximize opportunities. |
NMG’s open and proactive engagement approach also extends to its Bécancour Battery Material Plant in Bécancour, Québec. The Company’s site is located in one of the largest industrial parks in Canada with access to a deep-water international port on the St. Lawrence River. The Company initiated outreach activities in early 2022 and intends to continue as it makes progress in terms of project development.
NMG 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.
governance
Leadership
The Company’s management team and Board of Directors recognize the value of good corporate governance and the need to adopt best practices in terms of social, economic, and environmental responsibility. The Company’s Code of Conduct and key policies can be found on NMG’s website.
The Company’s directors have vast expertise in mining development and exploration; health, environment, and safety; legal and intellectual property; finance, investor relations and financing; business administration and corporate governance; technology development and innovation; sustainability, diversity and inclusion; manufacturing and construction; indigenous relations; as well as sales and marketing.
| Management Discussion and Analysis | 19 |
| » | On April 1, 2021, NMG 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. |
| » | 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 nominees to the Board of Directors. |
NMG recognizes that a diverse and inclusive environment that values the diversity of thought, background, skills, and experience facilitates a broader exchange of perspectives and improves oversight, decision-making and governance in the best interests of the Company. The Human Resources, Nominating and Compensation Committee, which is responsible for recommending director nominees to the Board of Directors, seeks to attract high-quality directors. In assessing potential candidates, the Committee considers their merit based on a balance of skills, abilities, personal qualities, educational qualifications, and professional experience.
To reflect the development and growth nature of the Company, the Board of Directors reorganized its committees in 2021 to enhance governance practices. The following committees now support the Board of Directors’ activities: the Audit Committee; the Human Resources, Nomination and Compensation Committee; the Governance, Compliance and Legal Committee; the Safety, Health and Well-Being Committee; the Projects and Development Committee; as well as the ESG, Community, Sustainability and Diversity Committee.
NMG’s management team, leaders with distinctive skillsets, management qualities and a shared sense of enthusiasm towards the Company’s vision, steers its development. In January 2022, Bernard Perron was appointed to the position of Chief Operating Officer, overseeing Nouveau Monde’s engineering, procurement, construction, operations, as well as environmental, health and safety management.
Risks
The Company operates in an industry that contains various risks and uncertainties. For a more comprehensive discussion of these inherent risks, see “Risk Factors”’ in the Company’s most recent annual information form and its prospectus supplements no. 1 and no. 2 on file with the Canadian provincial securities regulatory authorities and on SEDAR and on EDGAR.
Financing
During the second quarter of 2021, NMG completed an underwritten public offering of its common shares for aggregate gross proceeds of $72.9 million. This financing was subsequently complemented by a private placement of $18.3 million with Investissement Québec, acting as mandatory for the government of Québec, subscribing for the full amount which closed on July 23, 2021.
From the period since the prospectus supplement no. 1 dated June 18, 2021, was filed and up to December 31, 2021, NMG spent approximately the following amounts towards the Matawinie Mine Project and the Battery Material Plant Project.
| Management Discussion and Analysis | 20 |
| Use of proceeds | Planned in prospectus supplement no. 1 (Note A) | Spent as at December 31, 2021 | Variance | |||||||||||
| Matawinie Mine | Phase 1 – Flake Demonstration Plant | 3.7 | 4.2 | (0.5 | ) | |||||||||
| Project | Phase 2 – Matawinie Mine | 22.2 | 15.7 | 6.5 | ||||||||||
| Battery Material | Phase 1 – Battery Material Demonstration Plants | 22.2 | 9.9 | 12.4 | ||||||||||
| Plant Project | Phase 2 – Bécancour Battery Material Plant | 11.1 | 5.1 | 6.0 | ||||||||||
| Total | 59.2 | 34.8 | 24.4 | |||||||||||
Note A: The above figures were disclosed in the prospectus supplement no.1 in United States Dollars and were converted in CAD amounts using the exchange rate of 1.2341 which represents the closing rate of June 18, 2021.
The Company is materially tracking to the use of proceed forecast and there are currently no indications that the variances observed will cause any impact on the Company’s ability to achieve its business objectives.
Quarterly results
During the three-month period ended December 31, 2021, the Company recorded a net loss of $10,608 ($8,229 in 2020) and a net loss per share of $0.25 ($0.31 in 2020).
| Description | Q4-2021 (note a) $ | Q3-2021 (note b) $ | Q2-2021 (note c) $ | Q1-2021 (note d) $ | ||||||||||||
| Revenue | - | - | - | - | ||||||||||||
| Net loss | (10,623 | ) | (8,945 | ) | (12,878 | ) | (7,444 | ) | ||||||||
| Loss per share | (0.25 | ) | (0.19 | ) | (0.34 | ) | (0.22 | ) | ||||||||
| Description | Q4-2020 $ | Q3-2020 $ | Q2-2020 $ | Q1-2020 $ | ||||||||||||
| Revenue | - | - | - | - | ||||||||||||
| Net loss | (8,229 | ) | (501 | ) | (4,008 | ) | (5,240 | ) | ||||||||
| Loss per share | (0.31 | ) | (0.02 | ) | (0.15 | ) | (0.20 | ) | ||||||||
| a) | The net loss in Q4-2021 increased by $2.4M compared to Q4-2020 mainly due to an increased in engineering fees related to the Battery Material Plant Project expensed during 2021. |
| b) | The net loss in Q3-2021 increased by $8.4M compared to Q3-2020, mainly due to the net smelter royalty transaction that has been concluded with the Pallinghurst group and the increase in activities. |
| c) | The net loss in Q2-2021 increased by $8.9M compared to Q2-2020, mainly due to non-cash share-based compensation expenses arising from the grant of options to key management personnel in 2021 as well as higher insurance expenses following the NYSE listing in May 2021 (the “NYSE Listing”). |
| d) | The net loss in Q1-2021 increased by $2.2M compared to Q1-2020, mainly due to higher headcount leading to higher wages and benefits expenses as well as higher legal fees in connection with the NYSE Listing. |
| Management Discussion and Analysis | 21 |
Fourth quarter results
The major variances that occurred in the fourth quarter to 2021 is due to the difference hereunder.
| Q4-2021 $ | Q4-2020 $ | VARIATION $ | ||||||||||
| General and administrative expenses (a) | 5,128 | 3,371 | 1,757 | |||||||||
| Exploration and Evaluation expenses (b) | 1,225 | 3,345 | (2,120 | ) | ||||||||
| Battery Material Plant Project expenses (c) | 3,771 | 855 | 2,916 | |||||||||
| a) | The General and administrative expenses increased by $1.8M in the fourth quarter of 2021 vs 2020, mainly because of an increase in wages and benefits due to a higher headcount level and higher insurance fees following the NYSE Listing. This is partially offset by higher share-based compensation in Q4 2020 due to options being granted to key management personnel and grants received from the Canada Emergency Subsidy program (“CEWS”) during Q4 2020. |
| b) | The Exploration and evaluation expenses decreased by $2.1M in the fourth quarter of 2021 vs 2020 mainly because of the capitalization of detailed engineering expenses that relates to the development of the Matawinie Mine and concentrator project subsequent to April 1, 2021, while in 2020, the expenditures for this project were recorded as expenses. |
| c) | The Battery Material Plant Project expenses increased by $2.9M in the fourth quarter of 2021 vs 2020 mainly because of the progress of the feasibility study for the Phase-2 Bécancour Battery Material Plant. |
annual financial information
Selected annual information
Annual information for the years ended December 31, 2021, 2020, and 2019.
| Description | 2021 | 2020 | 2019 | |||||||||
| Other revenues | 57 | - | - | |||||||||
| Net loss | 39,890 | 17,978 | 17,045 | |||||||||
| Basic and diluted loss per share | (0.93 | ) | (0.68 | ) | (0.75 | ) | ||||||
| Total assets (a) | 126,349 | 21,156 | 17,394 | |||||||||
| Non-current liabilities (b) | 4,924 | 15,907 | 771 | |||||||||
| A) | The increase of $105,193 in total assets between 2021 and 2020 is mainly explained by an increase of $37,896 in property, plant and equipment following the advancement made to the Phase-2 Matawinie Mine and the battery material demonstration plants. Furthermore, a net increase of $57,835 in cash at year end resulting from the various financing done throughout the year. |
| B) | The decrease of $10,983 in non-current liabilities between 2021 and 2020 is mainly explained by the conversion of its outstanding convertible bond held by Pallinghurst Group in October 2021. For more details, refer to note 13 of the audited consolidated financial statements. |
| Management Discussion and Analysis | 22 |
Exploration and Evaluation expenses
| Description | December 31,
2021 $ | December 31,
2020 $ | Variation $ | |||||||||
| Wages and benefits (a) | 3,637 | 2,294 | 1,343 | |||||||||
| Share-based compensation | 452 | 594 | (142 | ) | ||||||||
| Engineering (b) | 1,856 | 3,964 | (2,108 | ) | ||||||||
| Professional fees (c) | 190 | 506 | (316 | ) | ||||||||
| Materials, consumables, and supplies | 1,330 | 1,447 | (117 | ) | ||||||||
| Subcontracting | 1,454 | 1,706 | (252 | ) | ||||||||
| Geology and Drilling | 143 | 389 | (246 | ) | ||||||||
| Utilities | 349 | 388 | (39 | ) | ||||||||
| Amortization | 217 | 320 | (103 | ) | ||||||||
| Other | 212 | 265 | (53 | ) | ||||||||
| Grants | (36 | ) | (164 | ) | 128 | |||||||
| Tax credits | (1,443 | ) | (1,369 | ) | (74 | ) | ||||||
| Exploration and Evaluation Expenses | 8,362 | 10,340 | (1,978 | ) | ||||||||
| a) | The increase of $1,343 in wages and benefits for the year ended December 31, 2021, is mainly due to $892 in grants received from the CEWS during 2020 vs $473 in 2021, since the participation for this program stopped in the beginning of the third quarter of 2021. Furthermore, a temporary closure of the demonstration plants that occurred in the second 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 2021 compared to 2020, to support the Company’s growth phase. |
| b) | The decrease of $2,108 in engineering fees for the year ended December 31, 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 of $316 in professional fees for the year ended December 31, 2021 is mainly due to services rendered in connection with the public hearing (BAPE) that occurred in 2020. |
| Management Discussion and Analysis | 23 |
Battery Material Plant project expenses
| Description | December 31, 2021 $ | December 31, 2020 $ | Variation $ | |||||||||
| Wages and benefits | 754 | 768 | (14 | ) | ||||||||
| Share-based compensation | - | 112 | (112 | ) | ||||||||
| Engineering (a) | 4,136 | 2,399 | 1,737 | |||||||||
| Professional fees | 898 | 866 | 32 | |||||||||
| Materials, consumables and supplies (b) | 686 | 130 | 556 | |||||||||
| Subcontracting (c) | 268 | 475 | (207 | ) | ||||||||
| Amortization | 177 | 27 | 150 | |||||||||
| Other | 39 | 43 | (4 | ) | ||||||||
| Grants (d) | (718 | ) | (1,678 | ) | 960 | |||||||
| Tax credits | (264 | ) | (231 | ) | (33 | ) | ||||||
| Battery Material Plant Project expenses | 5,976 | 2,911 | (3,065 | ) | ||||||||
| a) | The increase of $1,737 in engineering expenses for the year ended December 31, 2021, is due to the progress of the feasibility study for the Battery Material Plant. These expenses are partially offset by the capitalization of engineering studies relating to the construction of the demonstration plant for the year ended December 31, 2021. During 2020, the Battery Material Plant Project was still in the research phase, therefore all the engineering fees were expensed. |
| b) | The increase of $556 in materials, consumables, and supplies fees for the year ended December 31, 2021 is due to new activities in connection with the Battery Material Plant Project as well as a temporary shutdown of the plant in the second and third quarter of 2020 due to COVID-19. |
| c) | The decrease of $207 in subcontracting fees is mostly due to non recurrent external fees incurred in 2020 in relation to the shaping process. |
| d) | The decrease of $960 in grants for the year ended December 31, 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 | 24 |
General and administrative expenses
| Description | December 31, 2021 $ | December 31, 2020 $ | Variation $ | |||||||||
| Wages and benefits (a) | 4,883 | 2,920 | 1,963 | |||||||||
| Share-based compensation (b) | 6,224 | 1,323 | 4,901 | |||||||||
| Professional fees (c) | 2,635 | 1,168 | 1,467 | |||||||||
| Consulting fees (d) | 1,476 | 220 | 1,256 | |||||||||
| Travelling, representation and convention | 627 | 397 | 230 | |||||||||
| Office and administration (e) | 6,747 | 727 | 6,020 | |||||||||
| Stock exchange, authorities, and communication (c) | 872 | 111 | 761 | |||||||||
| Depreciation and amortization | 699 | 854 | (155 | ) | ||||||||
| Loss/(gain) on asset disposal | 5 | 2 | 3 | |||||||||
| Other financial fees | 35 | 48 | (13 | ) | ||||||||
| General and administrative expenses | 24,203 | 7,770 | 16,433 | |||||||||
| a) | The wages and benefits increased by $1,963 for the year ended December 31, 2021, which is due to an increased headcount to support the Company’s growth phase combined with the grants received from the CEWS in 2020 being greater than in 2021. |
| b) | There was an increase in share-based compensation expenses of $4,901 for the year ended December 31, 2021, mostly due to new options being granted to employees, directors, consultants, and officers during the second quarter of 2021. |
| c) | The increase of $1,467 in Professional fees as well as $761 in stock exchange, authorities, and communication for the year ended December 31, 2021, compared to 2020 is due to fees in connection with the NYSE Listing. |
| d) | The increase of $1,256 in consulting fees for the year ended December 31, 2021 is mainly explained by higher financial advisory services and system deployment assistant. Also, there is an increase in IT development cost. |
| e) | The increase of $6,020 in office and administration fees for the year ended December 31, 2021 compared to 2020 is mainly due to higher insurance fees following the NYSE Listing as well as $1.2M in legal fees in connection with the settlement of a litigation in September 2021, related to the buyback of a 1.8% net smelter return. |
Net financial costs
The decrease of $257 in financial costs is mostly due to an unrealized foreign currency exchange gain on cash in 2021 and an increase in interest income due to cash held following the financing in Q2. This is partially offset by the accrued interest on the convertible bond until the conversion of the outstanding convertible bond held by Pallinghurst Group in October 2021.
| Management Discussion and Analysis | 25 |
Liquidity and funding
As at December 31, 2021, the difference between the Company’s current assets and current liabilities was $58,449 including $62,355 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.
Management believes that without additional funding, the Company does not have sufficient liquidity to pursue its planned expenditures over the next twelve months. These circumstances indicate the existence of material uncertainties that cast substantial doubt upon the Company’s ability to continue as a going concern.
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 December 31, 2021, all of the Company’s short-term financial liabilities in the amount of $15,730 ($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.
| As at December 31, 2021 | ||||||||||||||||||||
| Carrying amount | Contractual cash flow | 0
to 12 months | 12
to 24 months | more
than 24 months | ||||||||||||||||
| Account payables and accrued liabilities | 15,193 | 15,193 | 15,193 | - | - | |||||||||||||||
| Lease liabilities | 2,323 | 2,795 | 428 | 413 | 1,954 | |||||||||||||||
| Borrowings | 2,129 | 2,607 | 276 | 1,777 | 554 | |||||||||||||||
For the year ended December 31, 2021, the Company had an average monthly cash expenditure rate of approximately $5,742 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. Significant additional financing will be needed to bring the Matawinie Mine and the Bécancour Battery Material Plant to commercial production.
| Cash flows provided by (used in) | December 31, 2021 $ | December 31, 2020 $ | ||||||
| Operating activities before the net change in working capital items | (31,078 | ) | (17,914 | ) | ||||
| Net change in working capital items | (3,247 | ) | (135 | ) | ||||
| Operating activities | (34,325 | ) | (18,049 | ) | ||||
| Investing activities | (34,578 | ) | (661 | ) | ||||
| Financing activities | 125,731 | 19,153 | ||||||
| Effect of exchange rate changes on cash | 1,007 | - | ||||||
| Increase in cash and cash equivalents | 57,835 | 443 | ||||||
| Management Discussion and Analysis | 26 |
Operating activities
For the year ended December 31, 2021, cash outflows from operating activities totalled $34.3M, while there were $18M of cash outflows for the same period in 2020. The cash outflows were higher due to the decrease in the working capital items of $3.2M, 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 21 of the audited consolidated financial statements.
Investing activities
For the year ended December 31, 2021, cash used in investing activities totalled $34.6M whereas for the same period in 2020 investing activities were of $661. The major variance is explained by the progress of the Battery Material Plant Project construction, combined with the start of the construction phase of the Matawinie Mine in the second quarter of 2021.
Financing activities
For the year ended December 31, 2021, the Company had net cash receipts related to financing activities of $125.7M, mainly due to the public offering following the NYSE Listing of $72.9M, combined with the private placement offering and bought deal public offering of $41.3M, and $17.6M related to warrants exercised in the first quarter of 2021.
Additional information
Related party transactions
The related parties of the Company include key management personnel, directors, and significant shareholders.
| For the years ended | ||||||||
| Description | December 31, 2021 $ | December 31, 2020 $ | ||||||
| Key management personnel of the Company | ||||||||
| Wages and benefits expenses | 1,158 | 1,238 | ||||||
| Share-based compensation | 3,435 | 398 | ||||||
| Directors of the Company | ||||||||
| Board fees | 643 | 91 | ||||||
| Share-based compensation | 2,333 | 305 | ||||||
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, and purchased all the 1,978,750 common shares issued as part of the financing closed on July 23, 2021.
Pallinghurst owns 20.94% of the Company’s issued and outstanding common shares and has significant influence over the Company (2020 – 19.18%). The transaction with Pallinghurst in 2021 are the following:
In 2021, the Company issued 297,106 shares in repayment of accrued interests of $2,697 on the convertible bonds due to Pallinghurst.
| Management Discussion and Analysis | 27 |
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.
In October 2021, the Company issued 7,500,000 common shares following the conversion of the outstanding convertible bond held by Pallinghurst Group. Also, the Company has elected to settle the accrued and unpaid interest of $1,900,463 by issuing an additional 220,471 common shares
Off-balance sheet transactions
There are no off-balance sheet transactions.
Critical accounting estimates, new accounting policies, judgements and assumptions
The preparation of annual financial statements in conformity with IFRS requires management to apply accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. There is full disclosure of the Company’s critical accounting policies and accounting estimates in notes 3,4 and 5 of the audited consolidated financial statements for the year ended December 31, 2021.
Change in accounting policy
There is no change in accounting policy for the year ended December 31, 2021.
Financial instruments and risk management
Refer to note 24 in the audited consolidated financial statements.
Contractual obligations and commitments
Refer to note 26 in the audited consolidated financial statements.
Capital structure
| As at March 23, 2022 | ||||
| Common shares | 55,216,717 | |||
| Options | 2,700,500 | |||
| Total common shares fully diluted | 57,916,717 | |||
Subsequent events to December 31, 2021
Refer to note 27 in the audited consolidated financial statements.
Additional information and continuous disclosure
The Company is required to comply with National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings. The certification of annual filings requires us to disclose in the MD&A any changes in our internal controls over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. We confirm that no such changes were made to the internal controls over financial reporting during year ended December 31, 2021. The Chief Executive Officer and Chief Financial Officer have signed form 52-109F1, certification of annual filings, which can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
| Management Discussion and Analysis | 28 |
Additional information on the Company is available through regular filings of press releases, financial statements, and the most recent annual information form on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov). These documents and other information about NMG may also be found on our website at www.nmg.com
March 23, 2022
| (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 | 29 |
Exhibit 99.3
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statement on Form F-10 (No. 333-256340) of Nouveau Monde Graphite Inc. of our report dated March 23, 2022 relating to the consolidated financial statements, which appears in Exhibit 99.1 to Nouveau Monde Graphite Inc.’s current report on Form 6-K, filed with the U.S. Securities and Exchange Commission on March 24, 2022.
/s/PricewaterhouseCoopers LLP
Montréal, Canada
March 24, 2022
Exhibit 99.4
CONSENT OF Eric Desaulniers
March 24, 2022
VIA EDGAR
United States Securities and Exchange Commission
| Re: | Nouveau Monde Graphite Inc. (the “Company”) |
I, Eric Desaulniers, hereby consent to
| 1. | the inclusion in this Current Report on Form 6-K of the Company of the scientific and technical information contained in the Company’s Management’s Discussion and Analysis for the year ended December 31, 2021 (the “December 31, 2021 Technical Information”) being filed with the United States Securities and Exchange Commission (the “SEC”) under cover of Form 6-K; |
| 2. | the filing of this consent under cover of Form 6-K with the SEC and of the incorporation by reference of this consent, the use of my name and the December 31, 2021 Technical Information into the Company’s the registration statement (No. 333-256340) on Form F-10 incorporating by reference the Company’s Management’s Discussion and Analysis for the year ended December 31, 2021. This consent extends to any amendments to the Form F-10, including post-effective amendments. |
| /s/ Eric Desaulniers | |
| Eric Desaulniers |
Exhibit 99.5
CONSENT OF Antoine Cloutier
March 24, 2022
VIA EDGAR
United States Securities and Exchange Commission
| Re: | Nouveau Monde Graphite Inc. (the “Company”) |
I, Antoine Cloutier, hereby consent to
| 1. | the inclusion in this Current Report on Form 6-K of the Company of the scientific and technical information contained in the Company’s Management’s Discussion and Analysis for the year ended December 31, 2021 (the “December 31, 2021 Technical Information”) being filed with the United States Securities and Exchange Commission (the “SEC”) under cover of Form 6-K; |
| 2. | the filing of this consent under cover of Form 6-K with the SEC and of the incorporation by reference of this consent, the use of my name and the December 31, 2021 Technical Information into the Company’s the registration statement (No. 333-256340) on Form F-10 incorporating by reference the Company’s Management’s Discussion and Analysis for the year ended December 31, 2021. This consent extends to any amendments to the Form F-10, including post-effective amendments. |
| /s/ Antoine Cloutier | |
| Antoine Cloutier |
Exhibit 99.6
FORM 52-109F1 CERTIFICATION OF ANNUAL FILINGS
FULL CERTIFICATE
I, Eric Desaulniers, President and Chief Executif Officer of Nouveau Monde Gra-phite Inc., certify the following:
1. Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the "annual filings") of Nouveau Monde Graphite Inc. (the "issuer") for the financial year ended December 31, 2021.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual 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, for the period covered by the annual filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual 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 annual filings.
4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in Regulation 52-109 respecting Certification of Disclosure in Issuers’ Annual and Interim Filings (c. V-1.1, r. 27) , for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, 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.
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control-Integrated Frame-work (2013) (COSO framework) published by The Committee of Sponsoring Organiza-tions of the Treadway Commission (COSO).
| 5.2 | ICFR – material weakness relating to design: N/A |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Evaluation: The issuer’s other certifying officer(s) and I have |
(a) evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and
(b) evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A
(i) our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation;
| (ii) | N/A |
7. Reporting changes in ICFR: The issuer has disclosed in its annual MD&A anyc hange in the issuer’s ICFR that occurred during the period beginning on October 1, 2021 and ended on December 31, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
8. Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR.
| Date: 24 March 2022 | |
| /s/ Eric Desaulniers | |
| Éric Desaulniers, | |
| President and Chief Executive officer |
Exhibit 99.7
FORM 52-109F1 CERTIFICATION OF ANNUAL FILINGS
FULL CERTIFICATE
I, Charles-Olivier Tarte, Chief Financial Officer of Nouveau Monde Graphite Inc., certify the following:
1. Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the "annual filings") of Nouveau Monde Graphite Inc. (the "issuer") for the financial year ended December 31, 2021.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual 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, for the period covered by the annual filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual 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 annual filings.
4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in Regulation 52-109 respecting Certification of Disclosure in Issuers’ Annual and Interim Filings (c. V-1.1, r. 27) , for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the financial year end
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, 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.
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control-Integrated Frame-work (2013) (COSO framework) published by The Committee of Sponsoring Organiza-tions of the Treadway Commission (COSO).
| 5.2 | ICFR – material weakness relating to design: N/A |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Evaluation: The issuer’s other certifying officer(s) and I have |
(a) evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and
(b) evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer’s ICFR at the financial year end and the issuer has disclosed in its annual MD&A
(i) our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation;
| (ii) | N/A |
7. Reporting changes in ICFR: The issuer has disclosed in its annual MD&A anyc hange in the issuer’s ICFR that occurred during the period beginning on October 1, 2021 and ended on December 31, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
8. Reporting to the issuer’s auditors and board of directors or audit committee: The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer’s auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer’s ICFR.
| Date: 24 March 2022 | |
| /s/ Charles-Olivier Tarte | |
| Charles-Olivier Tarte, | |
| Chief Financial Officer |