NORTHERN GRAPHITE (NGC – TSXV) RIGHT ASSETS AT THE RIGHT TIME BUT CAN THEY GET THEM TO MARKET

We are in a rare earth/critical mineral mania. Rare earth elements (REE) and critical mineral (CM) stocks have been on fire.

The VanEck Rare Earth and Strategic Metal ETF (REMX – NYSE) doubled in under 4 months prior to pulling back earlier this month.

Source: Stockcharts.com

As an “old-time investor” in mining stocks, let me share my perspective.

I’ve been in the mining stock game a long time. My business is centered around Vancouver, which is the HQ for many of the stocks screaming higher. I’ve known some of these teams for a long time.

That makes me of two minds watching this rally.

On the one hand, I get the excitement. Depending on China for critical metals and rare-earth elements (REEs) seems fraught. Developing supply in friendly jurisdictions simply makes sense.

On the other hand, while many of these companies are run by good teams trying to create value for shareholders, the valuations I’m seeing are just, oh my, just sooo expensive.

These same stocks, a few years ago, could have been had for a pack of gum!

I was reading a write up the other day justifying a $500M valuation on a company with a deposit and a process flow sheet. Another company went from potash to REE and is up 4x in a month! These are both legitimate companies, they could scale into real businesses. But $500M and 400%?
I’ve been around the block too many times not to be just a wee bit skeptical.

But that is where we are right now. It’s just a little bit crazy out there.
Which is why when I came across Northern Graphite (NGC – TSXv), I was not just interested, but a bit surprised.

Look, I am just going to tell it like it is: Northern Graphite has some hair on it.

There’s debt, there’s breached covenants and there is a capital call from a mine reclamation surety bond that needs to get paid. They also have a mine that needs to be expanded to find more ore, and isn’t cash flow positive.

Normally, that would be end of story for me.

Not in this market. It’s a bull market and the trend of stocks is up. Being in the right place at the right time can be enough to get a stock moving.

Because Northern Graphite has assets. And its price is a remarkably low (in this market) $20M market cap.

Here is what you get under all that hair:

1. The Lac-des-Iles graphite mine in Quebec and the nearby Mousseau graphite deposit
2. The Okanjande mine in Namibia
3. The advanced stage Bissett Creek graphite project in Ontario
4. Plans to build at least two BAM (battery anode material) plants – one in Canada, one in France.
5. The Battery Materials Group (NGCBM) headquartered in Germany
To sum that up: you are getting a producing mine of a critical mineral right here in North America.

You get another mine that has produced graphite in the past in Africa.

You get another project in Canada that has particularly high-quality graphite that could be producing in as little as two years (if they had the capital to fast track it).

And that doesn’t include NGCBM, the Battery Materials Group in Germany, that owns an industry differentiating state-of-the-art lab in Frankfurt and the team that has the expertise to build BAM plants.

In this market, that is enough to deserve a closer look.

THE LAC-DES-ILES GRAPHITE MINE

The Lac-des-Iles (LDI) mine is their flagship property. This is a graphite mine located about 150 km NW of Montreal.

LDI has been producing graphite (on and off) for 30 plus years.

Source: Technical Report on the Lac-des-Iles Graphite Mine

Northern Graphite purchased the mine in 2021–and the Okanjande mine in Namibia–from Imerys, a French company with 3.6B euro in annual sales, for US$40M.

LDI is a small mine. It has produced anywhere from 5,000 to 25,000 tonnes of graphite concentrate a year over the last 3 decades. Lately that has been on the lower end.

To give some comparison, the biggest graphite mine in the world is the Balama Mine in Mozambique. It has the capacity to produce 350,000 of graphite concentrate. In the last two years, Balama has been producing far less and losing money. It produced only 35,000 tonnes in 2024, due to civil unrest and market conditions.

Not surprisingly, LDI costs are also at the high end. The mine had cash costs in Q2 of US$1,337 per tonne. This was up YOY from $1,140/tonne. In Q3 2024 cash costs were US$1,035/t.

Compare that to Balama, where cash costs are sub-$500 per tonne. The 2nd and 3rd largest mines (outside of China) are in Madagascar, both with around $600 cash costs. In China a number of flake graphite mines have costs in the $400-$700 per tonne range.

Admittedly, none of this screens particularly well for LDI. BUT! And this is a big but – there is an important caveat:

According to the United States Geological Survey (USGS) Mineral Commodity Summaries 2024, China produced about 77% of the world’s natural graphite in 2023.

In May the US Commerce Dept imposed a preliminary decision to impose 721% tariffs on China for natural and artificial graphite anode.

In July they made a second preliminary decision to impose 93.5% anti-dumping tariffs on China active anode material.

Northern Graphite is a founding member of NAGA, the North American Graphite Alliance lobbying group that led to the tariffs being imposed.

Yes, the LDI mine is not particularly competitive against the world-class graphite producers in the world. However, those producers mainly exist in China – a country that is currently being extricated from the western trade of REE/CM.

A HIGH-COST ASSET, BUT A STRATEGIC ASSET

The big question is this: Is this asset worth a lot more than the numbers suggest because of its strategic value?

There are signs that this may be the case. For one, the Canadian Government has begun to recognize the importance of the mine.

Northern Graphite got $6.225M from the Canadian government in Sept 2025:

Source: Northern Graphite Q2 MD&A

The funding “will assist the corporation in avoiding putting LDI on care and maintenance”.

That’s right – care and maintenance. LDI is at a crossroads.

LDI is running out of ore from its existing pit. The ore is there in the surrounding land package, but Northern Graphite needs cash to develop the extension of the existing pit to continue to deliver ore to the mine.

Northern Graphite has been clear that it needs help if the government sees this mine as strategic.

The cash they got tells me the government doesn’t want LDI to mothball. Northern Graphite says the infusion will pay for 75% of the pit extension, which will cost $10M:

Source: Northern Graphite MD&A

The pit extension will extend the life of mine by 8 years.

Northern Graphite announced an updated mineral resource in January 2024. They believe the new resource could target a return to the 25,000 tonnes per year capacity of the operation that it saw in its first years of operation.

The mineral resource update showed 4.7Mt of ore grading 6-7% Graphite Carbon for a little over 300kt of Cg. From 2018 to 2021 the mined grade was 7.3% to 8.2%, so the resource grade is lower.

Source: Technical Report on the Lac-des-Îles Graphite Mine, Québec, Canada.

In October 2022 Northern Graphite acquired the Mousseau graphite project in Quebec. In October 2023, Northern Graphite announced a mineral resource estimate for the Mousseau project, adding nearly 3 million tonnes of measured and indicated resources with an average grade of 7.9%. The Mousseau project is strategically important because it is within trucking distance to the permitted Lac-des-Iles (LDI) plant, allowing Northern Graphite to potentially ship the material for processing to expand its production and extend LDI’s life.

If you think about it – Canada is desperate to drive major projects, Canada needs Northern Graphite to deliver something that the US and other Western nations need, and Canada needs to show it can help the US be less dependent on China.

It all starts to fit together how this might just be the start for LDI and Northern Graphite.

BUT WAIT, THERE’S MORE…

I hate using that headline. But in this case, there really is more.

First, Northern Graphite owns a second property, the Okanjande mine, in Namibia. The Okanjande deposit contains 1.3 Mt of measured and indicated resource at 5.33% graphite.

Source: Okanjande Mineral Resource Estimate Namibia

This mine could get up and running with a relatively small capital infusion of US$35M. The capacity of the mine is 31,000 tonnes of graphite concentrate per year, which is not bad.

Okanjande is a lot lower cost than LDI. The suggested production costs from the 2024 updated PEA was $682 per tonne over the life of the mine.

Northern Graphite did a PEA for Okanjande in 2023. That report showed an impressive 62% IRR.

Source: OKANJANDE GRAPHITE PROJECT Preliminary Economic Assessment Study Report

BISSETT CREEK – (FLAKE) SIZE MATTERS

Northern Graphites third in-the-ground asset, Bissett Creek, is in Ontario, Canada.

Bissett Creek is a much lower grade deposit then both LDI and Okanjande, with an inferred resource of 24 Mt at 1.74% Cg.

But those numbers are a little deceiving. When you are talking about graphite, the flake size matters as much as grade. And Bissett Creek has a much higher amount of large flake graphite.

The columns in the table below show percentage values of resource divided by flake size for Bissett Creek, LDI and two other resources. Bissett Creek has the largest flake size of the bunch by some margin. Those XXL flakes translate into a much higher price per tonne.

Source: Technical Report on the Lac-des-Îles Graphite Mine

A PEA was done on Bissett Creek in 2013. It showed decent, albeit modest, returns. We’d definitely need to see an updated study before drawing any further conclusions.

Source: Bissett Creek PEA

Last year, Northern Graphite was talking about bringing back Bissett Creek in 2026 but, not surprisingly, I don’t see a mention of that now.

We’d need to see the some “strategic value” put on the project to get it moving – something that isn’t out of the question in this environment.

GOING OUT WITH A “BAM”

You might say that the holy grail of a graphite producer is to not just digging graphite out of the ground but to make the battery grade material its going to be used for.

Graphite demand growth is largely about the growth of batteries, particularly lithium-ion batteries. The anode of a LiB battery contains significant amounts of graphite.

LiBs make up almost 50% of overall graphite demand. Even with the slower uptake of electric vehicles, that continues to grow as a piece of the pie.

With the growth of datacenters and the eventual demand for batteries their power hungry ways will create, demand is going higher regardless of how fast we move to electric vehicles.

Benchmark Mineral Intelligence (BMI), a market intelligence and price-reporting agency that specializes in the lithium-ion battery supply chain, estimates that by 2030, batteries will make up 80% of demand for graphite. What is needed is battery anode material (BAM), which refers to graphite that has been processed to a purity, flake size and surface whereby it can be used in the anodes of batteries. BMI also estimates that the supply of BAM is going to tight as far as you can see.

In January 2024 Northern Graphite acquired the assets and R&D team of the battery division from Germany’s Heraeus Group, a Fortune 500 company with over 31B euro in annual sales. The assets include a fully operational, state-of-the-art laboratory in Frankfurt and IP for Porocarb®, a high-performance porous hard carbon material used to enhance the efficiency and speed of energy storage in lithium-ion and solid-state batteries. NGCBM enables Northern to provide tailored solutions to EV battery makers and original equipment manufacturers (OEMs) and with the expertise for BAM production.

Northern Graphite has two enterprises targeting BAM production, both of them in the planning stage. I will reserve judgement for now, because I’m just not sure if anything will come of either of these.

Their first proposed BAM plant is in Baie Comeau, Quebec, and would use graphite coming from the LDI mine.

They had signed an LOI with the city of Baie-Comeau to purchase land for a greenfield 200,000 tonne per year plant in 2023.

In April of this year, they announced they were partnering with BMI Group and just completed a $1.4M raise, with BMI as the lead investor, to initiate the feasibility study on the planned Battery Anode Material (“BAM”) facility in Baie-Comeau, Québec.

The plant is expected to be done in modular phases. The first phase would cost $500M. They would target it for 2027.

In Namibia, Northern Graphite submitted a proposal to upgrade graphite to BAM to the EU and was selected as one among 47 critical raw material projects defined by the EU.

The targeted start date for the operation is by 2028 with an initial capacity of ~20,000 tonnes per year, which could rise to 50,000 tonnes per year.

The Namibia project to upgrade graphite to BAM would cost $244M. They would do pre-purification, milling and shaping in Namibia and coating in France.

PUT IT ALL TOGETHER

The problem that Northern Graphite has is that these projects add up to a lot of $’s.

It’s actually NOT a lot of $’s in the grand scheme of the money being thrown around in this sector right now. It’s just a lot of $’s for a $20M company without an abundant supply of them at the moment.

Which brings me to the rub. In another world, I’d be wary of the probability of Northern Graphite navigating through all this without either falling flat or being forced into a big dilution.

But in this environment, well… I have to wonder if they can find a way.
We always hear about “optionality”. It’s a WAY overused word. But that’s what this story is. OPTIONALITY.

If I was going to put it in a sound bite: Northern Graphite a high-risk / high-optionality upside small-cap that ticks al the right secular boxes (critical minerals, onshore supply, electricity supply chain) at the right time.

And its $20M bucks. Yes, there is another $40M of debt, I am not trying to tell you it’s a clean slate. But still, $20M is a small price in this market for that optionality.

This could go sideways quickly and soon. They run out of cash, the mine hits a hiccup, they are going to have it in tough.

But there is a path here to something significant. It may be worth a speculation, but only with your own $’s that you can afford to lose.