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NextSource Materials Inc.: The Future of Battery Materials

Canadian-based strategic materials development company, NextSource Materials Inc. (NEXT:TSX), is firmly establishing itself as the next global supplier of graphite, a critical battery and technology material that is essential in lithium-ion batteries. They have transitioned their Molo Project in Madagascar, one of the largest known and highest quality flake graphite deposits in the world, into an operational mine that is set to begin production in the coming weeks. Meanwhile, NextSource has announced downstream plans to begin construction of their own Battery Anode Facility (BAF) this year, which has the ability to upgrade their SuperFlake® graphite concentrate from the Molo mine into battery-grade graphite. This will position NextSource as a leading, sustainable and vertically integrated supplier of a battery material that is expected to see massive demand growth over the next decade as the world undergoes an energy transition to electrification.

With the demand for graphite expected to increase over 400 percent by the next decade due to lithium-ion batteries used primarily in electric vehicles (EVs), the need for companies like NextSource to meet this demand becomes crucial. NextSource is leading the way in becoming a substantial global supplier of this key battery material through the mining and value-added processing of graphite. NextSource has developed a staged approach; first having completed the all-modular construction of Phase 1 of its Molo Graphite Mine this past March, and subsequently announcing commissioning with the expectation that the mine will reach commercial production by June/July 2023 at an annual production capacity of 17,000 tonnes. With almost half of the Molo deposit containing the premium-priced large (+80 mesh) and jumbo (+50 mesh) sized flake, the Company’s SuperFlake® graphite can achieve 98% carbon purity through standard flotation alone, making it one of the few deposits globally that requires minimal upgrading to meet the 99.9+% carbon purity needed for battery applications.

With a world-class graphite deposit, NextSource attracted considerable attention from natural graphite buyers and 100% of Phase 1 production is already spoken for via two significant off-takes. Germany’s ThyssenKrupp Materials Trading GmbH, recognized as one of largest graphite trading companies in the world for refractories, has an off-take agreement for roughly 50% of the Company’s Phase 1 production, while a leading Japanese supplier of graphite to Japan’s largest battery anode processor has the remaining 50% of production.

What places NextSource far ahead in the critical minerals race, and in its quest to become a significant global player in the supply of natural graphite, is its preparation and readiness to rapidly deploy its next stage of growth.  Last year, the Company completed a preliminary economic assessment for its Phase 2 mine expansion in Madagascar, which was based on an additional 150,000 tpa of SuperFlake® production – a 10-fold expansion versus Phase 1.

In February 2023, NextSource announced results of its first Battery Anode Facility (BAF) which it plans to begin construction on this year in Mauritius, a location chosen for its proximity to the Molo Graphite Mine and on a strategic shipping route that supplies Asian markets. With production targeted to begin in 2024, it will provide the downstream, value-added portion of NextSource’s vertical integration product plan.  This first BAF will have an initial production of 3,600 tpa of CSPG and will be capable of additional production expansion of up to 14,400 tpa.

NextSource is planning a staged buildout of a series of BAFs in key markets such as Asia, North America, Europe and the UK, with each location designed with modular production capacities that can expand in lockstep with demand from automotive manufacturers (OEMs).

Each 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 in the supply of CSPG to major OEMs, including the Toyota and Tesla supply chains. The process of spheronizing and coating is quite technical and therefore difficult to execute. By leveraging its exclusive access to well-established and proprietary anode processing technology, NextSource can effectively demonstrate to OEMs and cell manufacturers that it will be a supplier that can execute and be a reliable and sustainable source of CSPG for companies looking to diversify their supply chains.

OEMs are facing critical shortages of natural graphite over the coming years. As of 2021, the annual global production of natural graphite was 1.1 million tonnes, however, according to Benchmark Mineral Intelligence, demand is projected to reach over 7 million tonnes per year by 2035 due to the growing demand for electrical vehicles. Therefore, there is an immense opportunity for those projects that can reach production by 2025 and be able to provide customers security of supply of flake graphite, which is the feed source required to produce CSPG. With its Molo mine reaching production imminently and its Battery Anode Facility expected to be in production next year, NextSource has firmly positioned itself as one of a very few companies that can meet the growing demand for graphite by OEMs worldwide.

The Company’s rapid ascent in the graphite space is due to its cornerstone investor, Vision Blue Resources, who in 2021 fully financed Phase 1 of the Molo mine with a US$29.5 million investment into NextSource Materials. Vision Blue Resources is a battery commodity/resource-focused investment company founded by the highly successful mining executive Sir Mick Davis, who has assembled a portfolio of significant investments in high-quality, responsibly managed, and proven battery material mining assets. NextSource was Vision Blue’s first investment and is the only graphite company in their portfolio. Vision Blue’s investment into NextSource exemplifies the quality of the Molo Project and the Company’s strategic plan to become a vertically integrated global supplier of battery materials through the mining and value-added processing of graphite and other minerals. Sir Mick Davis is also the Chairman of NextSource.

In February 2023, NextSource announced it had commenced the installation of a solar and battery facility for its thermal hybrid energy power plant which will be located adjacent to the Molo Graphite Mine. The hybrid power plant consists of a thermal facility, which is already in operation, and a solar and battery facility, consisting of a 2.6MW solar PV facility and a 1MWh battery energy storage system. The thermal facility currently supplies all of the plant’s power requirement, and once completed, the solar and battery facility will provide up to 33% of the mine’s total electricity needs using renewable energy.

Quietly, and seemingly out of nowhere, NextSource Materials in the past 24 months has vaulted to the top of the burgeoning battery materials world and is leading the way.  With commercial production of SuperFlake® graphite concentrate now just weeks away from its Molo mine in Madagascar and the expected start of construction this year of its first Battery Anode Facility in Mauritius, the company is leveraging its unique strengths and first-mover advantage to gain a significant presence in the graphite mining and processing sphere. It is the company’s strategic approach to its operations that has distanced itself from other graphite projects, and with the backing from its cornerstone investor Vision Blue Resources, NextSource Materials appears to be on an accelerated trajectory to being the go-to graphite company for the OEMs and cell manufacturers’ battery anode material needs.