NextSource Materials Inc. is a battery materials development company based in Toronto, Canada that is intent on becoming a vertically integrated global supplier of battery materials through the mining and value-added processing of graphite and other minerals to power the sustainable energy revolution. The company has built up one of the biggest graphite deposits globally which sits in Madagascar.
The company’s Molo graphite project in Madagascar is one of the largest known and highest-quality projects globally, and the only one with SuperFlake® graphite. Phase 1 of the Molo mine is in the final stages of completion and approaching first production.
The company’s Executive Vice President Brent Nykoliation spoke with The Market Herald’s Simon Druker about its latest developments.
TMH: Can you give investors unfamiliar with NextSource Materials an overview of the company?
BN: NextSource Materials was incorporated in 2007 and we have been in Madagascar since 2010. In 2012 we discovered two critical battery material assets on our property, graphite and vanadium, both of which are discrete projects located about 12 kilometres from each other. While the vanadium was our first discovery and delineated resource, we pivoted to developing the graphite deposit due to the burgeoning demand that graphite was experiencing both for its role in refractories in steel making and for its critical role in lithium-ion batteries. Fast forward to today, we have just commissioned our Molo Graphite Mine and will likely be the only graphite project in production this year outside of China. Very few graphite mines, ex-China, have been brought into production in the past 20 years and very few projects have been able to demonstrate to the market that they are economical and be able to attract financing, so NextSource has achieved something quite significant and enviable. We are in a rarefied space.
TMH: Let us talk about the Molo Mine in Madagascar. You recently initiated commissioning and are now ramping up to production, with installation of a solar and battery facility for the hybrid power plant is now in progress. This sets NextSource to a global graphite producer this quarter. Tell us why this puts you in such a great position with the current global graphite landscape.
BN: We expect to start producing graphite in May, and when the ramp-up phase is completed, we expect to be at our nameplate run-rate for a production capacity of 17,000 tonnes per annum. While Madagascar has always been known to be one the highest quality graphite jurisdictions in the world, historically it has exported relatively small amounts of graphite. China possesses approximately 70% of the world’s graphite resources and processes virtually 100% of the world’s graphite into battery-grade graphite. What we have seen over the past 24 months is a significant trend towards customers insisting on non-Chinese feed sources and end-processing of critical battery materials. The difficult thing for customers that want sourcing optionality when it comes to graphite is China’s dominance of it in the battery supply chain, and the lack of economic and/or quality deposits that are not in foreign countries of concern that can reach production in the timelines required. For NextSource, this provides us a major opportunity in the eyes of OEMs and the other graphite offtakers since we are now in the production phase and rapidly developing our battery anode facility plans to be a vertically integrated graphite supplier – from the mine to the battery so to speak. What sets us apart from the competition is that NextSource has two offtakes that account for 100% of our Phase 1 volume. Half of our production will go to thyssenkrupp GmbH of Germany for the refractory side and our other offtake is with the primary supplier of spheronized and purified graphite (SPG) to Japan’s largest battery anode processor that supplies CSPG to the Toyota and Tesla supply chains.
TMH: You recently announced your global anode expansion strategy, what are some of the highlights?
BN: Our SuperFlake® graphite concentrate that we will produce from the mine in Madagascar has to undergo 3 additional value-add steps in order to go into a lithium battery – spheronizing, purification and coating. Coated, spheronized, purified graphite (CSPG) is the formof graphite that OEMs and cell manufacturers want to buy. These processes are very technical, with the spheronizing being the most technically difficult of the three and it requires roughly 2.5 tonnes of flake graphite to make one tonne of CSPG. We announced to the market in February that our first battery anode facility (BAF) will be Mauritius. We expect to start construction this summer and begin production in 2024. We are planning a staged buildout of a series of BAFs in key geographic locations, each designed with modular production capacities that can expand in lockstep with OEM demand from key markets in Asia, North America, Europe and the UK.
Each of our BAF’s innovative design will be based on a proprietary and well-established processing technology that NextSource has exclusive license to, and is currently used to supply CSPG to major OEMs, including the Toyota and Tesla supply chains. In other words, NextSource avoids the costly research and development and long “trial and error” phase of trying to produce CSPG – we have acquired the IP and expertise to produce CSPG right out of the gate.
TMH: Establishing your first BAF to be in production next year in Mauritius fast tracks you ahead of competing projects as a vertically integrated global supplier of critical battery metals, correct?
BN: Yes. With the energy transition upon us, OEMs are preparing for the biggest product switch in a century. An EV battery has both a cathode and an anode. Graphite makes up the anode, the negative side of the battery and is the largest raw material by volume in that battery – roughly 40%. Regardless of which cathode chemistry (i.e. NMC, LFP) dominates the battery, graphite is always required in the anode and in significant quantities. This is what OEMs realize and the critical importance of having security of supply to match their forecasted demand growth. A ghigh quality source of graphite that is reliable, long-lasting and not in jurisdictions that are a concern.
TMH: Your Molo mine in Madagascar was built fully modular that gave you several advantages. Can you reiterate what those were and how that benefited the company?
BN: We used a unique approach. NextSource built a fully modular mine, where we built the entire mine offshore, factory acceptance tested it, and then dismantled it, shipped it to Madagascar and then re-assembled it at site. This allowed us to build it for a very low capital cost, on budget and in half of the usual construction time that mines are typically built in. As far as we know, NextSource is the first company in the mining space that has actually constructed a mine that’s fully modular. The mine itself consists of 45 modules, all of which can were containerized and that allowed us to quickly fabricate the mine once it arrived on site. The longest part of the construction phase in Madagascar was the civils and earth works to prepare the site for the concrete pad and the foundations that the plant modules rest on. Once those were complete, we reassembled the plant in 28 days with only 30 personnel. The plant uses dry stack tailings and has a very small footprint, which we provides us with a lower environment footprint.
As a company, we are focused on ESG and are always looking at ways to be the best environmental stewards we can be. To augment our mine further, we have begun the installation of the solar field that will generate roughly 33% of the mine’s power from renewable energy .It only sits in a roughly a 30 metre by 60 metre footprint and we were able to do that for an incredibly low capital cost. It was only 21 million for us to build that plant and as well, one of our largest shareholders is Vision Blue Resources, which is founded and headed up by Sir Mick Davis and again, Sir Mick Davis is our chairman of our company and has been a very active chairman and in terms of making sure that our trajectory now has been accelerated. So that’s one of the reasons why we are as well advancing the CSPG Anode Facility. We call it the Battery Anode Facility in Mauritius to upgrade our material for lithium ion batteries and the fact that we chose Mauritius is the fact that it’s very close to Madagascar. So very quick shipping route and then Mauritius is also right now a major hub for shipping into the Asian markets, specifically Japan and South Korea, where our technical customers right now will be.
TMH: You recently added Dr. Markus Reichardt to your Senior Management Team. How will he help further integrate ESG into your projects?
BN: It is of no surprise to any investors reading this that ESG is a critical responsibility for any company. We are fortunate to have added to our management team a reputable expert in the industry as our VP of Sustainability. Dr. Marcus Reichardt has over 25 years of experience in ESG and across the mining space in critical materials and in graphite. His role is to make sure that we implement all of our CSR policies as we ramp up a mine into production. It is critical and our responsibility as stewards of the environment that we make sure that we adhere to all the steps that are required and that we deliver on those principles. We are very fortunate to have the in-house expertise that we do in Dr. Reichardt and he’s a great asset to our team.
TMH: What do the next 6 months look like for NextSource Materials?
BN: It will be busy. It was a great accomplishment for us to commission the world’s next graphite mine outside of China and now rapidly advancing our battery anode facility in Mauritius, which we intend on starting construction this year pending a successful raise of the funding required and reaching production in 2024. We are also expecting to have our feasibility study out on Phase 2 expansion of the Molo mine in Madagascar which was based on an additional 150,000 tons of expansion. This represents an almost tenfold expansion and demonstrates to the market that NextSource is already readying ourselves for the next stage of growth. Like Phase 1, any Phase 2 expansion will utilize the modular build approach which provides us a significant advantage versus our peers. This strategy will serve us well with the various OEMs and off take partners that are looking for those critical battery mineral companies that have the capability and expertise to expand to the volumes and meet their demand requirements for graphite.
NextSource is well positioned to be a global supplier of graphite and in the quantities required by major customers.
Brent Nykoliation is the Executive Vice President of NextSource Materials.
The company is listed on the Toronto Stock Exchange (TSX) under the symbol “NEXT” and on the OTCQB under the symbol “NSRCF.”
You can also visit www.nextsourcematerials.com for more information.
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