Northern Graphite boosts production 59% despite financial challenges

Northern Graphite (TSXV:NGC; OTCQB:NGPHF), the continent’s only graphite producer, reported a 59% increase in production from the first to second quarter this year at its Lac des Iles mine in Quebec, but lower prices for the battery metal hurt income. 

Output hit 4,082 tonnes in the year’s second three months, up from 2,574 tonnes in the first quarter, the company said on Thursday. The boost in output, driven by the plant’s shift to a seven-day operation, resulted in US$5.5 million in revenue from the sale of 2,772 tonnes of graphite concentrate at an average price of $1,972 per tonne.

However, lower than anticipated graphite prices created a $3.5-million non-cash impairment loss which contributed to a net loss of $9.4 million for the quarter, the company said. It also failed to meet all agreements on its senior secured loan and royalty financing. This resulted in the reclassification of $22.4 million from non-current to current liabilities. The lender and royalty holder waived all defaults and discussions are ongoing to amend the loan terms, Northern Graphite said. 

“We took decisive action to manage our cash position to ease the strain on our working capital and provide us with greater flexibility to pursue our growth,” CEO Hugues Jacquemin said in a release. 

Shares in Northern Graphite closed flat at 7¢ apiece on Thursday but climbed 1¢ on Friday afternoon in Toronto to value the company at $10.5 million. 

New pit due

Operationally, mine revenue swung to $100,000 from a $500,000 loss in the first quarter. And it cut cash costs to $1,560 per tonne despite operational inefficiencies and weather-related shutdowns, Northern Graphite said. It’s working to open a new pit this year or early in 2025 and lengthen the mine’s life by eight years. 

Northern Graphite is planning a new drilling program this fall aimed at expanding resources and reducing the strip ratio. This program will be partly financed by a grant from Québec’s Ministère des Ressources Naturelles et des Forêts.

A recent resource estimate indicated 3 million tonnes of resources at an average grade of 6.4% graphitic carbon (Cg), containing around 213,000 tonnes of Cg. Inferred resources total 1.4 million tonnes at an average grade of 7.4% Cg. 

The company said it’s engaging with global battery manufacturers to position itself as a key supplier in the electric vehicle market. 

Northern Graphite has two more projects, in the Bisset Creek area of Ontario between Ottawa and North Bay, and in Nambia.