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Following the Nouveau Monde Highway to Battery Graphite

I have some recurring themes that I tend to write about. I have no idea if people like them or not so I will continue along in my own little vacuum and hope that at least some readers out there find the same things interesting that I do.

One of those themes I like to revisit is clean, sustainable resource acquisition. By that I mean, we can’t just pillage the earth for all the critical battery metals we require simply because it’s a means to an end….well, we can, and currently we do. But I feel that at some point in time, there will be as much scrutiny on how we source these materials as there is on phasing out fossil fuels and reducing overall carbon emissions. At least I’d like to think that’s the case, but who knows if policymakers will take that next step. To me, it seems the end goal of a greener economy is kind of pointless if we don’t look at the whole picture.

Bottom line, in my opinion, we need to be just as concerned about where and how we are acquiring all the copious amounts of raw materials required to transition to a cleaner, greener future or we’re simply trading in one problem for another. Whether companies are recognized for this today, or not for some time to come, I strongly believe they will eventually be rewarded.

That brings me to Nouveau Monde Graphite Inc. (NYSE: NMG | TSXV: NOU), a Québec-based company striving to become a key contributor to the sustainable energy revolution. The Company is working towards developing a fully integrated source of carbon-neutral battery anode material in Québec, Canada for the lithium-ion battery and fuel cell markets, and other value-added graphite products. With excellent 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.

The Company’s activities are focused on the planned Matawinie graphite mine and the planned commercial value-added Bécancour Battery Materials Plant, both of which are progressing concurrently toward commercial operations.

The Matawinie graphite property, owned 100% by the Company, consists of 246 mining claims spanning 13,214 hectares, located around 120 km north of Montréal, Québec. An updated feasibility study for this property indicates an annual processing rate of 2.55 million metric tonnes and average annual graphite production of 103,328 metric tonnes. In 2018, the Company began operating a demonstration plant in Saint-Michel-des-Saints to validate the quality and processes of its graphite products, and to serve as a foundation for its Phase-2 battery material plants. Nouveau Monde has initiated steps towards making the Matawinie Mine one of the first all-electric open-pit operations globally, working in collaboration with Caterpillar and governments to achieve electrification in mining and aiming to reduce over 300,000 tonnes of CO2 emissions over the mine’s lifespan.

At the same time, Nouveau Monde is progressing with its Battery Material Plant Project, producing spherical graphite at its Phase-1 facility, and leveraging a proprietary thermochemical purification process to yield graphite with purity levels surpassing 99.95%. The Company has a partnership with Olin Corporation for operational support and raw material supply, and has set up pilot plant purification modules at Olin’s Bécancour, Québec facility. Nouveau Monde owns land in Bécancour to build its own manufacturing plant, projected to produce approximately 46,000 tpa of advanced graphite materials. This is further strengthened by the Québec Government’s battery hub strategy, which has attracted significant industrial players to the area. The Company’s current commercial plans for its Phase-2 Bécancour Battery Material Plant are being advanced in line with a recent Feasibility Study.

Nouveau Monde’s latest quarterly operational update provides valuable insights into the progress being made on both fronts. The Company announced significant advancements in the development of its fully integrated value chain, with the aim of becoming one of the largest natural graphite sources in North America. As the company approaches its Phase-2 development, emphasis is being placed on securing optimal multiyear sales agreements, finalizing technical parameters for the Bécancour Battery Material Plant, enhancing commercial visibility, and ensuring long-term shareholder value. Collaborative testing is ongoing at the Company’s Phase-1 plants alongside potential customers, aiming to optimize process efficiency, inform Phase-2 facility plans, and mitigate risks. Significant partnerships have been established, including a technology collaboration with Caterpillar and a potential long-term agreement with Panasonic Energy. The Company secured US$22 million in a bought deal financing in April to finish Q2 with a cash position of C$59.8 million, while continuing to engage with governmental agencies to optimize project financing.

Despite a slower start to EV sales in 2023, the market saw a 36% YoY increase with further growth expected in the latter part of 2023. Benchmark Mineral Intelligence forecasts the global production capacity of lithium-ion batteries to reach 8,930 GWh by 2030, suggesting a significant growth in demand for battery materials, including graphite. Nouveau Monde’s comprehensive production model and strategic advantages, such as carbon-neutrality and regional benefits, place the company in a favorable position to cater to Western markets looking to decrease dependence on Chinese suppliers. It’s not just enough to supply a critical material anymore, it needs to be done sustainably.

Nouveau Monde Graphite Inc. trades at a market cap of C$235 million.




Electra Battery Materials is leading the ‘charge’ for battery materials with a signed cobalt supply agreement

South Korean LG Energy Solution Inc. (LGES), a leading global manufacturer of lithium-ion batteries for electric vehicles, mobility, IT, and energy storage systems, recently announced three agreements in a span of 24 hours with Canadian miners to source materials required to make batteries for EVs. It appears the Inflation Reduction Act, which requires that 40% of battery components be sourced from factories in the U.S. or its free trade agreement partners, and that Chinese components and minerals be phased out beginning in 2024, has lit a fire under those who want to lead the charge to manufacture EV batteries for North American built vehicles. This could be a very positive trend for North American miners and material processors/recyclers.

One of the “winners” of the LGES battery supply deals was Electra Battery Materials Corporation (TSXV: ELBM | NASDAQ: ELBM). Electra is a processor of low-carbon, ethically-sourced battery materials that is currently commissioning North America’s only cobalt sulfate refinery. Electra is executing a multipronged strategy focused on onshoring the electric vehicle supply chain. Keys to its strategy are integrating black mass recycling and nickel sulfate production at Electra’s refinery located north of Toronto, advancing Iron Creek, its cobalt-copper exploration-stage project in the Idaho Cobalt Belt, and expanding cobalt sulfate processing into Bécancour, Quebec. We’ve made several references to the Bécancour area in previous InvestorIntel articles as it also becomes a rapidly emerging center for producing the advanced materials needed for lithium-ion batteries.

Electra’s binding term sheet with LGES is a three-year agreement to supply LGES with 7,000 tonnes of battery grade cobalt from 2023 to 2025. Electra will supply 1,000 tonnes of cobalt contained in a cobalt sulfate product in 2023 and a further 3,000 tonnes in each of 2024 and 2025 under an agreed pricing mechanism. Cobalt sulfate provided under the term of the contract with LGES will be sufficient to supply up to 1.5 million full electric vehicles. In addition to the supply agreement, Electra and LGES have agreed to cooperate and explore ways to advance opportunities across North America’s EV supply chain, including, but not limited to, securing of sustainable sources of raw materials. In my opinion, this marks validation of Electra’s cobalt sulfate refinery as this is an actual binding agreement, not just a LOI or MOU or some other wishy washy type of agreement that makes great press but essentially means very little, at least initially.

Building on the momentum of the commercial agreement with LGES, Electra provided a September 28 update on the commissioning of its cobalt refinery, confirming that it remains on track to meet project timelines, including the launch of a black mass recycling demonstration. The Company anticipates launching the battery recycling demonstration plant at the Ontario refinery site this fall. Revenue generated from black mass recycling activities will be accretive to results expected from the sale of cobalt sulfate that is anticipated beginning in spring 2023 when the refinery is commissioned. Possibly even more critical to their operations in today’s environment, Electra will use a hydrometallurgical process to treat black mass to recover contained lithium, nickel, cobalt, copper and graphite. This process has a low carbon footprint and produces stable non-acid generating tailings, thereby reducing environmental impacts while meeting or exceeding water discharge effluent criteria as stipulated by both federal and provincial regulations.

However, Electra isn’t simply a material processor/refiner/recycler, they also have the Iron Creek Project located within their Idaho property. Iron Creek is one of several cobalt-copper resources and prospects within the Idaho Cobalt Belt, a prospective mineralized system that contains the largest primary resources of cobalt in the United States, according to the U.S. Geological Survey. Last week the Company announced a new cobalt zone following the receipt of assay results from drilling at its Ruby prospect. The Ruby target is a new zone of cobalt mineralization located approximately 1.5 km southeast of Electra’s flagship Iron Creek deposit. This project has the potential to become an important source of cobalt in the U.S. and reduce North America’s reliance on foreign supply.

Electra finished Q2/22 with over C$40 million of cash, has completed 85 percent of all procurement and 90 percent of detailed engineering for its cobalt sulphate refinery, and has a binding cobalt offtake agreement with LG Energy Solution. That seems like a pretty good combination to successfully move forward in the race to be relevant in the battery materials business in North America. Is the C$135 million market cap a little rich at the moment? I guess it depends if they are successful at hitting their 5,000 tonnes per annum battery-grade cobalt goal in 2023. With spot prices over US$50,000/t, that suggests an annual revenue stream of US$275 million. I guess a lot depends on what kind of margins there are in cobalt refining.

Disclaimer: The editor of this post may or may not be a securities holder of any of the companies mentioned in this column. None of the companies discussed in the above feature have paid for this content. The writer of this article/post/column/opinion is not an investment advisor, and is neither licensed to nor is making any buy or sell recommendations. For more information about this or any other company, please review all public documents to conduct your own due diligence. To access the InvestorIntel.com Disclaimer, click here




A triple play deal for battery materials between Canada and Korea prove critical minerals incentives work

When we started writing the Dean’s List series back in late July to highlight the burgeoning government support for critical minerals, supply chain and EV battery manufacturing, I had no idea how quickly that support would start turning into tangible deals for producer supply agreements. Sure, the first big facility announcement was way back in March with the Stellantis, LG Energy Solution C$4.9 billion electric vehicle battery plant in Windsor, Ontario, and there have been numerous deals announced in the interim both North and South of the 49th parallel for various multi-billion dollar facilities. But what happened on September 22 and 23 appears to have taken things to another level for the producers of the materials that go into EV batteries.

The aforementioned South Korean LG Energy Solution Inc. (LGES), a leading global manufacturer of lithium-ion batteries for electric vehicles, mobility, IT, and energy storage systems, announced three agreements in a span of 24 hours with Canadian miners to source materials required to make batteries for EVs. It appears the Inflation Reduction Act, which requires that 40% of battery components be sourced from factories in the U.S. or its free trade agreement partners and that Chinese components and minerals be phased out beginning in 2024, has lit a fire under those who want to lead the charge to manufacture EV batteries for North American built vehicles. Given where demand is forecast to go over the next 5 to 10 years, these three deals could just be the tip of the iceberg as other manufacturers follow suit.

The first “winner” of the LGES battery supply lottery was Electra Battery Materials Corporation (TSXV: ELBM | NASDAQ: ELBM). Electra is a processor of low-carbon, ethically-sourced battery materials who is currently commissioning North America’s only cobalt sulfate refinery. Their deal is a three-year agreement to supply LGES with 7,000 tonnes of battery grade cobalt from 2023 to 2025. Electra will supply 1,000 tonnes of cobalt contained in a cobalt sulfate product in 2023 and a further 3,000 tonnes in 2024 and 2025 under an agreed pricing mechanism. Cobalt sulfate provided under the term of the contract with LGES will be sufficient to supply up to 1.5 million full electric vehicles. In addition to the supply agreement, Electra and LGES have agreed to cooperate and explore ways to advance opportunities across North America’s EV supply chain, including, but not limited to, the securing of sustainable sources of raw materials.

Next up for LGES was a pair of lithium supply deals. We’ll explore the Avalon Advanced Materials Inc. (TSX: AVL |OTCQB: AVLNF) news first, mainly because it was the first company highlighted on the Dean’s List, so indulge me while I pat myself on the back. Avalon is a Canadian mineral development company specializing in sustainably produced materials for clean technology. Avalon is currently focusing on developing its Separation Rapids Lithium Project near Kenora, Ontario while continuing to advance other projects, including its 100%-owned Lilypad Cesium-Tantalum Lithium Project located near Fort Hope, Ontario. The Company signed a non-binding memorandum of understanding (MOU) with LGES to supply battery-grade lithium hydroxide starting in 2025. The MOU would see Avalon commit, for five years initially, to provide LGES with at least 50% of its planned initial lithium hydroxide production from its Thunder Bay facility (11,000 tons per year), with the potential to increase production as demand grows.

The second lithium, and third overall deal for LGES in a 24 hours span was with Snow Lake Resources Ltd. (NASDAQ: LITM). Snow Lake is committed to creating and operating a fully renewable and sustainable lithium mine that can deliver a completely traceable and carbon neutral product to the North American electric vehicle and battery markets. The Thompson Brothers Lithium Project now covers a 55,318-acre site and contains an identified-to-date 11.1 million metric tonnes indicated and inferred resource at 1% Li2O. Snow Lake signed a non-binding MOU with LGES to supply lithium hydroxide (20,000 tons per year) over a 10-year period once production starts in 2025. The deal between the two entities will see them collaborate to explore the opportunity to create one of Canada’s first lithium hydroxide processing plants in CentrePort, Winnipeg, Manitoba.

It should be noted that the Electra deal is a binding term sheet, while the other two are non-binding MOUs. Investors need to understand that there is a lot more certainty to the Electra deal than the other two which is likely why, as of yesterday’s close, Electra was still up 2% versus where it was trading before the LGES announcement while Avalon was down 6% and Snow Lake down 18% versus pre-LGES announcement trading. Not to take anything away from the non-binding deals, they are still very important and a positive sign for these companies, but the market isn’t very forgiving these days so there is definitely value in certainty. For Avalon that certainty is anticipated to come with a definitive supply agreement, which is intended to be finalized in no later than 6 weeks. I could not find confirmation of timing to firm up commitments in any of Snow Lake’s press releases.




The Dean’s List – Part 6: What cobalt companies could benefit from Canada’s commitment to critical minerals?

It’s time for Part 6 in our series that looks at Canadian companies in the mining sector that could be impacted by the many announcements with respect to critical materials, supply chain, EV battery manufacturing, etc. As a reminder the province of Ontario first announced in March its strategy for ‘critical minerals’ followed shortly by a C$4.9 billion electric vehicle battery plant in Windsor, Ontario, and then in mid-July, a new C$1.5 billion battery materials facility was announced for eastern Ontario. In April the Federal Government got on board with it’s Budget 2022 proposing up to C$3.8 billion in support over eight years to implement Canada’s first Critical Minerals Strategy followed in late June with a House of Commons Standing Committee on Industry and Technology report entitled: Positioning Canada as a Leader in the Supply and Processing of Critical Minerals.

On top of all this, the U.S. passing of the Inflation Reduction Act could also have a trickle down affect on Canadian miners. The Bill requires that 40% of battery components be sourced from factories in the U.S. or its free trade agreement partners (like Canada) to qualify for tax credits. It also states that Chinese components and minerals be phased out beginning in 2024. Hence the Dean’s List focus to date on critical minerals involved in EV battery production. So far we’ve covered all the primary components in current generation batteries except for one – cobalt, which is where we are headed today.

The initial company I was going to look at would have been a very efficient way of covering two critical minerals with one name, especially in light of uranium stocks getting a huge lift on news out of Japan on Wednesday. UEX Corporation (TSX: UEX | OTCQB: UEXCF) has several uranium and three cobalt-nickel exploration projects all located in the Athabasca Basin of northern Saskatchewan. However, on Monday UEX completed a transaction to sell to Uranium Energy Corp based in Texas, which may or may not reduce the likelihood of benefitting from Canadian Government financial support. Given the Canadian Government didn’t seem to care that a foreign company was purchasing a Canadian company with 3 commodities on the critical minerals list, I shouldn’t discount the likelihood that they could still benefit in some way. However, I’m going to be stubborn and stick to Canadian companies with Canadian assets.

So who’s next on my cobalt list? I guess it would make sense to go to Cobalt, Ontario and start looking around that area. Yes, there is a town called Cobalt and you can probably guess how it got its name. In 1908, the area was considered the world’s largest producer of silver and of cobalt which is a byproduct of the process. This led me to Canada Silver Cobalt Works Inc. (TSXV: CCW | OTCQB: CCWOF), a Canadian leader in the silver-cobalt space. The Company’s flagship silver-cobalt Castle mine and 78 sq. km Castle Property feature strong exploration upside for silver, cobalt, nickel, gold, and copper. CCW has an exceptional high-grade silver discovery at Castle East, a pilot plant to produce cobalt-rich gravity concentrates, a processing facility (TTL Laboratories) in the town of Cobalt, and a proprietary hydrometallurgical process known as Re-2Ox (for the creation of technical-grade cobalt sulphate as well as nickel-manganese-cobalt (NMC) formulations).

Two things stand out for me with Canada Silver Cobalt, first is the location – Ontario and Quebec (their Graal nickel, copper and cobalt project is getting a lot of attention from the Company of late). Quebec is another province looking to make its mark in the manufacturing space with BASF announcing plans to build a factory in Quebec to produce cathode active materials and General Motors Co. and South Korea’s POSCO Chemical having announced a deal to build a plant to produce material for batteries to be used in EVs both in Bécancour, Quebec, just to name a couple. Of note, Cobalt, Ontario is basically on the border with Quebec so CCW is located pretty strategically with its mining assets.

The second point that could make Canada Silver Cobalt a beneficiary of government support is their proprietary Re-2Ox technology. It is a closed-loop hydrometallurgical process that extracts metals without any discharge or smelting and conforms with EV manufacturers’ need for ethically sourced battery metals and strict environmental compliance. The Ontario Government has stated in its critical minerals strategy that it wants to expand domestic refining and processing capacity of minerals as well as support applied research projects to strengthen mining and mineral processing research and innovation. The Federal Government has also prioritized developing expertise in intermediate processing with the Committee on Industry and Technology report recommending Canada establish an intermediate processing sector and catalyze and support private sector adoption of a national sustainable capacity for critical minerals and the materials supply chain.

It seems to me that if you not only have the critical minerals, but are also willing to do a little extra homework on the processing of them, you might differentiate yourself from the rest of the herd. And if you are a shareholder of any of these companies, and they can extract any funding from governments of any level, then you will surely benefit from non-dilutive financings that hopefully add value. The only question is whether any of these politicians will “walk the walk”, given we all know how fond they are of “talking the talk”.

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Did you miss a previous edition? Check out….

The Dean’s List – Part 5: Which manganese companies could benefit from Canada’s commitment to critical minerals?
The Dean’s List – Part 4: What copper company could benefit from Canada’s commitment to critical minerals?
The Dean’s List – Part 3: What graphite company could benefit from Canada’s commitment to critical minerals?
The Dean’s List – Part 2: What nickel company will benefit from Canada’s commitment to critical minerals?
The Dean’s List – Part 1: What rare earths company will benefit from Canada’s commitment to critical minerals?