The head of Northern Graphite Corp. NGC-X is confident the company can raise additional funding to extend the life of North America’s only operational graphite mine after clinching a key financing package from Ottawa.
Last week, the federal government announced it was providing the Ottawa-based company with a $6.2-million interest-free loan that will allow it to move forward on its plans to extend the life of its Lac des Îles graphite mine in Quebec. Without the loan, Northern Graphite may have been forced to cease operations at the mine as the existing pit is due to run out before the end of the year. Lac des Îles went into operation in 1989 and the extension could add another 10 years to its life.
Graphite is one of several critical minerals used in low-carbon energy and is a key input in the defence sector. Prime Minister Mark Carney has repeatedly stressed that Canada must expand production of critical minerals in order to meet new NATO spending targets.
Northern Graphite sells the mineral to U.S. industrial customers who use it to produce brake pads, industrial lubricants, fuel cells and equipment in the defence industry.
In an interview, chief executive Hugues Jacquemin said the funding is a “watershed” moment for the company that will likely inspire other private sector investors to follow.
“With the support from the government, not only is it the dollars, but it also underpins our entire strategy. So it gives a lot of confidence to investors with what we are doing,” he said. “It really shows that Canada and Quebec are really stepping up and actually enabling a critical mineral strategy.”
The loan was provided by Natural Resources Canada and delivered through Canada Economic Development for Quebec Regions.
“This strategic investment in the Northern Graphite expansion project will enable the production of these minerals and strengthen our economy and security while keeping good jobs in Quebec,” Natural Resources Minister Tim Hodgson said in the government’s release on the funding last week.
Canada’s only graphite miner faces uncertain future as it holds out hope of government financing
Northern Graphite now has sufficient funds to cover 75 per cent of the mine extension program. For the rest, the company is turning to the private sector.
Mr. Jacquemin was in Japan and Korea last week as part of a trade trip and held more than 10 meetings with potential investors.
The company is also potentially poised to benefit from the closer economic ties recently forged between Germany and Canada, he said. Last week, Ottawa vowed to deepen co-operation with Berlin on securing critical mineral supply chains, including pledging to co-fund projects that feed into industries such as electric vehicle manufacturing, defence and aerospace.
Mr. Jacquemin said the Carney government is being much more proactive than the previous administration in raising both awareness and interest in Canada’s critical minerals companies.
“We are happy to see how the change in policy is starting to have an impact and providing more investor confidence in terms of what we’re doing,” he said.
“What’s been really hurting us over the last two years is that investors really didn’t have much confidence that the government was going to step out and help, and now that’s changed.”
Despite Northern Graphite securing much of the funding it needs for its mine extension, the company is still in a precarious financial situation. It is holding only $2.1-million in cash, and not generating enough revenue to service its debt, which stood at $41.4-million as of June 30.
A big part of that debt, a $26-million senior loan, is maturing next year. The company is in talks with Sprott Resource Streaming and Royalty Corp. to amend the terms of the loan, and a $15.4-million royalty financing.
Sprott did not respond to a request for comment. Mr. Jacquemin said that Sprott remains supportive of Northern Graphite, despite the company not currently making its royalty payments or interest instalments on its debt.
“It’s important for us to work with them to understand how we can push out the maturity of that debt, so we can continue to operate Lac des Îles and they can continue to benefit from the royalty,” he said.