Graphite market report and forecast for Nouveau

Monde Graphite
October 2018

Prepared by Benchmark Mineral Intelligence

Introduction

• Nouveau Monde Graphite is developing the Matawinie Graphite production area in Quebec, Canada, for which it is preparing 43-101 report in order to support
further financing.
• This report has been prepared for Nouveau Monde Graphite in order to assist with its financing efforts and presents Benchmarks independent forecasts for
graphite demand, supply and pricing.
• The report will cover the following:
1. Introduction and Forecast Assumptions
2. Long Term Supply Forecasts for Natural Flake and Synthetic Graphite to 2040
3. Natural Flake Graphite Price Forecasts
4. Premium Graphite Markets Outlook and Prices

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 2

1. Introduction and Forecast Assumptions
1. Introduction and Forecast Assumptions

• This section will look at the current and future supply chain for graphite, with a focus on the burgeoning li-ion battery market. We will also highlight the current
announcements and investments being made in the supply chain, including government policy, investment in battery manufacturing plants and announced investments
from the automotive sector.
• We will also show our demand forecast methodology, flowing from government policy to EV penetration to battery demand and graphite consumption in Li-ion batteries
and the outlook of other end-use markets.
• Graphite plays a critical role in the lithium-ion battery supply chain, as the main input for the anode material. At present roughly half of anode material is sourced from
natural graphite, the other 50% comes from synthetic graphite, demand from this sector in 2018 is estimated at 161,000 tonnes.
• In terms of total graphite demand, our current base case shows graphite consumption increasing from 723,000 tonnes in 2018 to 1.9m tonnes in 2025, excluding
inventory build, and shows a structural supply gap opening in natural flake graphite markets.

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 4

1. Introduction and Forecast Assumptions

• The chart below outlines the key drivers of demand for lithium-ion batteries over the forecast period. As can be seen the major growth area is for EVs, followed by
stationary (grid) applications. In our base case scenario we expect that demand will be approximately 134,000 MWH in 2018, reaching 760,000 MWH by 2025 and
4M MWH by 2035.

‘000 MWH
5,000
Upside Base Case MWH Compound Annual Growth Rate by sector,
2018-2035
4,500 Downside
Other Electric vehicles 24%
4,000 3,918
Stationary
Stationary 33% 3,526
3,500 Electric Vehicles
Other – includes electronics, 4% 3,135
3,000 portable batteries
2,743
Total Li-ion battery demand 22%
2,500 2,351
2,155
1,959
2,000
1,567
1,500
1,175
949
1,000 760
585
500 444
254 339
105 134 153 191
72 92
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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1. Introduction and Forecast Assumptions

• The chart below outlines the development of demand for graphite over the forecast period to 2035, broken down by broad end-use sector. As can be seen battery
demand broadly reaches parity with other industrial demand by 2025-2026 given the level of growth forecast for both sectors. By the end of the forecast period we
expect that graphite demand will reach 5.9 million tonnes, growing at a CAGR of 13% over the forecast period.

‘000 tonnes Base Case Compound Annual Growth Rate by sector, 2018-2035
6,000 5,886
Battery demand 22%
Other industrial demand
5,500 5,393
Battery demand Other industrial demand 4% 1,184
5,000 4,900

4,500 4,407

4,000 3,915
+13% 3,659
3,500 3,402

2,912 1,073
3,000

2,500 2,421
2,129 4,702
2,000 1,902
1,608
1,500 1,361
1,164 991 2,586
997
1,000 775 873
635 664 723
588
500 561 911

0 161
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 6

 1. Introduction and Forecast Assumptions

• There are a number of factors underpinning the expected growth in EV penetration, notably government transport emission policies, and Original Equipment
Manufacturer (OEM) strategy. We examine these in more detail on the following slides, and supply alternate EV penetration scenarios to examine how this will
impact on overall battery demand.
Million units sold
120 Total light duty vehicle including EV
Total Electric Vehicles Sold - Base 111
110 105 106
Total Electric Vehicles Sold - Upside 102 104
98 98 99 100
100 Total Electric Vehicles Sold - Downside 96
91 91 90 91
90 87 89 89
85
81 83
80 78

70

60

50

40

30

20

10

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 7

1. Introduction and Forecast Assumptions

Global policy statements by governments supporting EV adoption

Norway and Netherlands:
Proposal to end ICE sales
by 2025, Germany by 2030
Canada: Target of 30%
penetration of electric
vehicle sales by 2030

UK and France:
Proposal to end
USA: No Federal target ICE sales by
set, California has set 2040
nominal state level
targets for size of EV Italy: Target of Japan and South Korea:
fleet 30% penetration Target of 30% penetration
of electric of electric vehicle sales by
vehicle sales by 2030
Mexico: Target of 30%
2030 China: Target of 5%
penetration of electric
vehicle sales by 2030 penetration of electric
vehicle sales by 2020, 20%
India: Proposal to
by 2025 Passenger Car and LDV sales, 2017, M units
end ICE sales by 2030 30
Brazil: Target of 30%
penetration of 25
electric vehicle sales 20
by 2030 15
10
5
0

France
USA
Japan

Canada
India
China

Brazil
Italy

South Korea

Norway
UK

Mexico
Germany

Other
Netherlands
BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 8
1. Introduction and Forecast Assumptions

Major passenger car and light duty vehicle OEM EV strategy announcements

Total annual vehicle VW group plans to invest

more than $24bn in zero-
Chinese OEMs
production expected to emission vehicles by 2030.
Will develop 80 EV models
comply with
20% EV by 2025, wants to offer an
penetration rate electric version of each of its Toyota has set a sales
ruling by 2025 300 models by 2030 target of around 1m EVs
GM planning to and fuel-cell vehicles
Launching 12 EV
introduce at least 20 (FCVs) by 2030,
10-12M models by 2022
EVs by 2023 investment $13 billion to
develop and make
batteries

Aiming to develop 8
5-9m EV models by 2025,
with 30 panned by
Ford is planning
to invest $11Bn 2030 Has set a target of
in EVs by 2022, two thirds of vehicle
and will have 40 sales EV by 2030
hybrid and full
EV models PSA aims to develop
at least 40 electric
1-4M Daimler will bring
BMW plans to deliver
12 pure EVs by 2025
vehicles by 2025
10 pure EVs to the
market by 2022

2022 2025 2030

EV strategy timeline
BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 9
 1. Introduction and Forecast Assumptions

For our base case scenario, in 2018 we expect battery demand, expressed in Mega Watt Hours, will be in the region of 82,000 MWH. By 2025, we expect this to grow to
405,000 MWH, by 2030 to 1.9M MWH.

‘000 MWH
4,200
4,000 Base case
3,800 Upside
3,600 Downside
3,372
3,400
3,200 3,039
3,000
2,800 2,707
2,600
2,374
2,400
2,200
2,012
2,000 1,846
1,800 1,708
1,600
1,375
1,400
1,200
986
1,000
787
800 619
600 478
400 356
263
126 185
200 29 46 57 82 95
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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 1. Introduction and Forecast Assumptions

• In order to meet higher battery demand new Giga-factory capacity will need to be added. In this slide we summarise by country where new mega-factory supply is
likely to be added, as we can see the majority of capacity will be added in China and North America.
• As can be seen, based on current mega-factory capacity expansion announcements and our outlook for battery demand we are projecting a shortage by 2028 of
649 GWH. We do expect that further capacity projects will be announced in order to fill this gap, especially given the level of pledged investment from automotive
manufacturers.
GWH Mega-factory capacity by region, 2016-2028
750 726
Japan
700
Australia
650
South Korea
600
North America
550 Europe
500 China
450
401
400
350
300
250
200
150
100
64
50
0
Annual Cap 2016 (GWh) Gwh by 2023 Gwh by 2028

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 11

 9
Panasonic Suminoe

1
Panasonic Kasai

2016
2028

4
AESC Zama

4
Lithium Energy Japan (GS Yuasa technology)

5
LG Chem Michigan Inc.

5
Youlion Battery Inc

14
BYD China LFP

8
SK Innovation

8
SK Innovation Europe

8
LG Chem Wroclaw Energy Sp. z o.o.

8
Dynavolt, Fujian 16

BAK
10

CALB
12

Nanjing LG Chem New Energy Battery Co., Ltd.

10

BYD China NCM

10

Guanzhou Great Power Energy & Technology

20

GXGK
15

BEI/Magnis, Townsville, Australia

Gigawatt Hours

15

Imperium3 (BEI/Magnis)
1. Introduction and Forecast Assumptions

18

Samsung SDI Xian

25

LG Chem Korea
20

Samsung SDI Korea

Mega-factory capacity by company, 2016-2028

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018

18

GSR Capital, Sweden

20

AESC, Zhenjiang, Jiangsu

20

AESC Jiangsu
23

Panasonic Dalian
25

Great Wall
30

Lishen
30

Panasonic Himeji
32

Northvolt
34

Terra E Holding

CATL
100

Tesla / Panasonic Energy of North America

150

Page 12
1. Introduction and Forecast Assumptions

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 13

1. Introduction and Forecast Assumptions

The chart below outlines our forecast for graphite material for use as an input to anodes in the lithium-ion battery supply chain, we expect that graphite by battery
type will remain stable throughout the forecast period

Million tonnes
5.0
LMO LCO 4.7
4.5 LMNO LFP 4.2
LTO NCA
4.0 3.8
Other NCM
3.5 3.3

3.0 2.8
2.6
2.5 2.4

2.0 1.9

1.5 1.4
1.1
1.0 0.9
0.7
0.5
0.5 0.3 0.4
0.2 0.2 0.2
0.1 0.1 0.1
0.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

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2. Long Term Supply Forecasts for Natural Flake and
Synthetic Graphite to 2040
2. Long Term Supply Forecasts for Natural Flake and
Synthetic Graphite to 2040
• This analysis will examine the outlook for supply, identifying key capacity changes among existing market players and new entrants. We will review existing capacity
and provide an outlook for both likely mine expansion projects, as well closures over the forecast period, also provided in an Excel database format.
• Graphite is mined in several countries around the world, the main sources of flake graphite for batteries are Brazil, Mozambique and China. Nearly all of this
material is currently processed to uncoated spherical (anode precursor) and coated spherical (anode) in China. Battery cell manufacture also takes place in China,
as well as Japan, Korea, Poland and the US.
• At present roughly 60% of total graphite supply comes from synthetic production, based in China, India, Europe and the US, we expect this share to fall over time
owing to the relatively high cost of production, and an expansion in natural graphite capacity

Imerys, Lac-des-îles, QC mine closing Q4 2018

Nouveau Monde Graphite,

Matawinie, QC mine

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2. Long Term Supply Forecasts for Natural Flake and
Synthetic Graphite to 2040
Overview and outlook for synthetic graphite
• Synthetic graphite is produced using high temperature treatment of amorphous carbon materials, notably petroleum coke, also know as needle or green coke, a by-product
of crude oil production. The production process is described in the flow diagram below.

• Synthetic graphite production has the advantage of producing consistently high quality graphite (90%+ C) suitable for battery applications, however owing to the energy
intensity of production it is a very high cost source of supply. In addition the principal feedstock, needle coke, has increased in price dramatically in recent years, from a
long-term average of roughly $800 per tonne to $8,000 per tonne. Further, given that needle coke is a by-product of crude oil production supply is subject to movements
in oil output, affecting both price and availability.

• At present synthetic graphite is manufactured in China, India, Europe and the US. In China the main producers are Fangda Carbon New Material Technology Co Ltd, Jilin
Carbon Co Ltd, Sunstone Development Co Ltd, Hongte Group and Jinzhou Petrochemical Co Ltd. Outside of China the main producers are SGL, Graftech, Imerys and Showa
Denko.

• Given the higher cost of production of synthetic graphite and the relative availability of cheaper natural flake graphite, we do not expect that new synthetic graphite
capacity will be added in the coming years. That, coupled with the expansion of natural graphite supply will see the market share for synthetic graphite contract markedly
in the forecast period
BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 17
2. Long Term Supply Forecasts for Natural Flake and
Synthetic Graphite to 2040
• The charts below illustrate our forecasts for the breakdown of graphite supply for all end-uses in both 2018 and 2025. As can be seen, we expect that significant new capacity
will come online from both incumbent natural graphite miners and new entrants

• In the following slides we detail how we expect this to happen, beginning with brownfield capacity expansions at existing operations and then looking at mining projects.

Natural Flake and Synthetic graphite supply-balance 2018 Natural Flake and Synthetic graphite supply-balance 2025
(‘000 tonnes) (‘000 tonnes)
1,606 2,758

706 1,061

900

Synthetic graphite 797

market share - 900
60%

Synthetic graphite
market share - 33%

Total Supply Mined - Existing Synthetic Total Supply Mined - Existing Mined - New Synthetic
producers producers Entrants
BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 18
 2. Long Term Supply Forecasts for Natural Flake and
Synthetic Graphite to 2040
Natural flake capacity expansions, 2018-2040
• At any time there are a number of brownfield and greenfield graphite capacity projects announced and undergoing development, however there are a number that
will either never come to fruition and some that proceed at a faster or slower pace than projected.
• The factors that determine how likely a project is to come online are often related, below we group individual issues by type and show linkages between them:

Resource geography factors Resource geology factors Financial factors

Political risk – resources located in Resource size – Resource size will Access to financing – securing
territories with an unstable political determine the likely capex for the financing is a crucial stage in project
situation are less likely to secure financing project as well as the mine life and development, and linked to several
or necessary human resources to proceed capacity factors as shown

Resource costs – Capex factors such as Resource quality – the distribution of Price forecasts – consensus price
land values and opex factors such as flake sizes and quality, and suitability for forecasts determine a projects forecast
labour, transport and energy costs will processing to battery grades are crucial revenue and are therefore vital in
largely be determined by resource for securing buyers and premium securing financing
geography pricing
Off-take agreements and strategic
Resource costs – the resource type and partnerships – the likelihood a project
Access to key markets – transportation
quality will largely determine the capex coming online is massively boosted by
costs and lead times often feature heavily
and operating mining costs for the securing off-take agreements and/or
in a projects ability to be competitive
project and likelihood of securing involvement of an end-user
financing

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 2. Long Term Supply Forecasts for Natural Flake and
Synthetic Graphite to 2040
Brownfield natural flake capacity expansions, 2018-2040
• In this slide we outline expected capacity expansions at existing graphite producers over the forecast period. Over the period to 2040 we 55,000 55,000
expect that there will be nearly 900,000 tonnes of brownfield capacity expansions by existing producers, notably in China, the Ukraine and 46,000
Mozambique 40,000
Norway - Skaland Graphite AS - LNS Group 32,000
Russia - Ural Graphite
Ukraine - Zavalivskiy Graphite
Imerys, Lac-des-îles, QC mine closing Q4 2018

2018 2025 2030 2035 2040

Grafite do Brasil - Extractiva 468,000 472,400

477,500 453,600 472,400
Nacional do Grafite
209,000 209,000

157,000

100,000
90,000

2018 2025 2030 2035 2040

Inner Mongolia, Shanxi
2018 2025 2030 2035 2040 Other provinces Hubei, Hebei, Henan, Sichuan
Shandong
871,000 871,000 81,500 81,500 81,500 Heilon Jiang
779,000 73,000
Tamil Nadu
Zimbabwe - AMG Mining - Government JV Odisha
436,000 42,000
Madagascar - Bass Metals Jharkhand
Namibia - Imerys Graphite and Carbon/Gecko Jv
Mozambique - Syrah Resources 102,000

2018 2025 2030 2035 2040 2018 2025 2030 2035 2040

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 2. Long Term Supply Forecasts for Natural Flake and
Synthetic Graphite to 2040
Greenfield natural flake capacity expansions, 2018-2040
• In the flow chart below we outline the main development stages for the development of a greenfield graphite mining project.
• At present we are tracking numerous projects that we classify as ‘Highly probable, ‘Probable’ and ‘Possible’ based on their current stage of
development and likely progress to production. In the following slide we outline the current stage of development for a number of major
greenfield projects
Typical project development milestones

Route to development for a greenfield mining project • Scoping: initial financing to undertake preliminary exploration of a
deposit
Greenfield development timeline
• Resource estimation: scoping results used to raise further finance
Mineral lease for sufficient drilling to publish NI 43-101 and/or JORC compliant
Exploration
resource estimates1
• Pre-feasibility study: preliminary engineering plans and economic
Environmental
viability to determine whether to proceed to a full feasibility study
Infrastructure • Feasibility study: presentation of plans for extraction and
Head Frame/Shaft Sinking
processing and full assessment of a project’s geological profile and
economic viability
Mine development/ Ramp up
• Financing: subsequent to feasibility study financing is secured for
Engineering and design project construction
Construct mill • Construction: final development of project to completion
Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

1. NI 43-101 is the mineral project disclosure standard for companies listed on Canadian Stock
Exchanges, JORC is the equivalent for Australian-listed companies

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2. Long Term Supply Forecasts for Natural Flake and
Synthetic Graphite to 2040
Development phases for key greenfield graphite mining projects

Key: DR. – Drilling, Expl. – Exploration, Feas. – Feasibility, Cons. – Construction, Prop. St. Up – Proposed started Up, Ph. – Phase

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 22

 2. Long Term Supply Forecasts for Natural Flake and
Synthetic Graphite to 2040
• In the chart below we outline our forecast for the development of natural flake capacity over time. As can be seen there is a significant pipeline of new capacity
coming online for graphite over the next decade. There will need to be further greenfield and brownfield capacity expansions in the period beyond 2028 in order to
meet rising demand, even in our downside demand scenario

Million tonnes Operational supply

2.4 Highly Probable additonal tonnes 2.32 2.33 2.33 2.34 2.34 2.34 2.34 2.34 2.34
2.27
Probable additonal tonnes
2.2 2.17
Possible additonal tonnes 2.07
2.0 1.96 1.97
1.92
• Factors in a 5% supply disruption allowance from stated capacity
• Does not include synthetic supply 1.75 1.77
1.8

1.6
1.44 1.43
1.4

1.2 1.15

1.0 0.91
0.84
0.8 0.71
0.65 0.67
0.59
0.6

0.4

0.2

0.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

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 2. Long Term Supply Forecasts for Natural Flake and
Synthetic Graphite to 2040
There is a significant pipeline of new capacity coming online for graphite over the next decade. There will need to be further greenfield and brownfield capacity
expansions in the period beyond 2028 in order to meet rising demand, even in our downside demand scenario

Million tonnes
3.8
Demand - Base Case
3.6
Operational supply
3.4
Highly Probable additonal tonnes
3.2
Probable additonal tonnes
3.0 Potential supply deficit once planned
Possible additonal tonnes capacity and projects come online
2.8
2.6
2.4
2.2 • Includes non-battery demand 2.17
• Factors in a 5% supply disruption allowance from stated capacity 2.07
1.92 1.96 1.97
2.0 • Does not include synthetic supply
1.75 1.77
1.8
1.6
1.44 1.43
1.4
1.2 1.15
1.0 0.91
0.84
0.8 0.65 0.67 0.71
0.59
0.6
0.4
0.2
0.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 24

3. Natural Flake Graphite Price Forecasts
3. Natural Flake Graphite Price Forecasts

• In this section we provide a price forecast for each grade that Matawinie project will produce, on a delivered North America basis and also a weighted basket price
forecast including all grades.
• The Matawinie project has high carbon contents, 97-98%, with the following flake size distribution for natural flake graphite:

Natural flake graphite (97-98% C) flake size Product weighting

+100 mesh 17%

+50 mesh 31%

+80 mesh 12%

-100 mesh 40%

• In order to arrive at a final forecast for each grade that Matawinie project will produce, on a delivered North America basis we look first at the drivers of graphite
pricing, including price differences between grades, and we use the benchmark China Fob reference price as the basis for the forecast. We then add a location
premium for a delivered North America price for the grades Matawinie will produce.

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3. Natural Flake Graphite Price Forecasts

Introduction to natural flake graphite pricing

There are two key determinants of achieved prices for flake graphite:
• Flake size – larger flake sizes dictate a premium over smaller flake sizes
• Carbon content – higher carbon content is at a premium to lower grades
Flake Graphite Pricing, 2015-2018
USD per tonne, China FOB
2,500

2,000 +50 mesh flake sizes achieved an average

premium of approximately $750 per
tonne in 2017 over -100 mesh grades of
1,500
equivalent C content. The premium has
been rising, and has been over $900 per
1,000 tonne since August 2017

The higher carbon content in -100 mesh

500 96-97% C material over 90-93% C
graphite of the same mesh size
commanded a premium of roughly $200
0
per tonne in 2017

+50 mesh 96-97% C -100 mesh 96-97% C -100 mesh 90-93% C

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3. Natural Flake Graphite Price Forecasts

Benchmark Graphite price forecast methodology

• Our medium and long-term price forecast methodology for lithium considers the following factors:

• Balance of supply and demand – Based on our analysis of the development of demand over time, and our understanding of the pipeline of new greenfield and
brownfield capacity, we are able to make an assessment of the extent of over and under supply in the market over time, and how this is likely to impact prices

• Production costs for the marginal cost producer – Long run pricing in commodity markets is often determined by the level at which the highest cost producer
needed to supply the market can continue to operate; for graphite this would be at a cash cost level of around USD900 per tonne. For the forecast we expect this will
be less of a factor, due to the ongoing need to incentivise new projects prices will be well above this level

• Incentive pricing for new greenfield and brownfield capacity investment – There will be an ongoing requirement for new greenfield capacity over the course of the
forecast period. We have conducted an Initial Rate of Return (IRR) analysis for a ‘Typical’ greenfield natural flake graphite project, which suggests that at a price level
of USD2,000 per tonne for a basket of graphite grades the IRR would be 27%. This is approximately the level that junior miners are using for their assessment of
project economics, and reflects the fact that as the lower cost new supply comes online there will be a need for the development of higher capex projects over time.

IRR assumptions for a ‘Typical’ greenfield graphite project IRR at different graphite long run pricing

Output at full capacity (tonnes per annum) 40,000 Graphite long run pricing long run price Indicative IRR
assumption
Mine Life (years) 30 USD1,500 per tonne 22%
Capital Expenditure (USD Million) 200 USD2,000 per tonne 27%

Operating Cost (USD per tonne) 450 USD1,000 per tonne 15%

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 3. Natural Flake Graphite Price Forecasts

Graphite industry cash cost* curve 2035

USD per tonne (Real 2018)
900 China Canada Zimbabwe Ukraine Norway
Mozambique Brazil Namibia India The marginal producer operates USD875 per tonne
800
Tanzania Madagascar Russia United States of America
700
*Excludes capital repayments and royalties
600

500

400

300

200

100

0
Heilon Jiang (Low Cost) Montepuez Mahenge Lac Guéret, QC Balama Pedro Azul Bunyu Skaland
Heilon Jiang (High Cost) Graphmada Large Flake Graphite Mine Ancuabe Coosa
Lynx, Nr Karoi Epanko Tamil Nadu
Molo Otjiwarongo Maiquinique
Itapecerica Salto Da Divisa Odisha
Lindi Jumbo Graphite Jharkhand
Lac Knife Zavalivskiy
Shandong Taiginka
Other provinces Hubei, Hebei, Henan, Sichuan
Inner Mongolia, Shanxi

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 3. Natural Flake Graphite Price Forecasts

Graphite industry cash cost* curve 2035

USD per tonne (Real 2018)
900
Operating Probable Brownfield expansion *Excludes capital repayments and royalties
800
Highly Probable Possible
700
The vast majority of new brownfield and greenfield capacity will operate at or below $450 per tonne
600

500

400

300

200

100

0
Heilon Jiang (Low Cost) 2018 Mahenge Balama 2018 Balama Pedro Azul 2018 Bunyu Skaland
Heilon Jiang (Low Cost) Lac Guéret, QC Pedro Azul Ancuabe Coosa
Montepuez Graphmada Large Flake Graphite Mine 2018 Epanko Tamil Nadu
Heilon Jiang (High Cost) Graphmada Large Flake Graphite Mine Otjiwarongo Tamil Nadu 2018
Lynx, Nr Karoi Otjiwarongo 2018 Maiquinique
Lynx, Nr Karoi Salto Da Divisa Maiquinique 2018
Molo Salto Da Divisa 2018 Odisha
Itapecerica 2018 Itapecerica Odisha 2018
Lindi Jumbo Graphite Jharkhand
Lac Knife Jharkhand 2018
Shandong Zavalivskiy
Other provinces Hubei, Hebei, Henan, Sichuan Zavalivskiy 2018
Inner Mongolia, Shanxi Taiginka
Taiginka 2018
BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 30
3. Natural Flake Graphite Price Forecasts

Natural flake graphite historical pricing 2015-2018

• In the charts below we illustrate the price history for high carbon graphite grades since 2015, and the industry supply and demand balance over the same period.
• There has been a marked increase in graphite pricing over the last two years, especially for higher flake sizes, as a response to a tightening in the market over the
same period, and this trend has accelerated in 2018 as the market has moved into a supply deficit despite brownfield expansions from existing producers.

High carbon (96-97% C) natural flake graphite pricing history, 2015-2018 Graphite supply and demand balance, 2015-2018
USD per tonne, FOB China ‘000 tonnes
2,000 800
+100 mesh +50 mesh +80 mesh -100 mesh Operational supply Demand - Base Case

700

1,500 600

500

1,000 400

300

500 200

100

0 0
2015 2016 2017 2018 2015 2016 2017 2018

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3. Natural Flake Graphite Price Forecasts

Natural flake graphite price forecast 2019-2026

• In the ‘medium term’ to 2026 we will see continued brownfield expansions, and from 2021 new capacity coming online from greenfield projects.In the middle of this
period it is likely that the market will move into slight oversupply for a number of years as new capacity ramps up faster than demand growth. The market quickly
moves back into deficit towards the end of the period however, as the pipeline of new capacity projects is exhausted and demand continues to grow.
• As a result there will need to be incentivise new projects to come online from 2025 onwards, which would mean they begin development in 2019 or 2020, therefore
we do not anticipate a significant price reduction in this period

High carbon (96-97% C) natural flake graphite price forecast, 2019-2026 Graphite supply and demand forecasts, 2019-2026
USD per tonne, Real 2018, FOB China ‘000 Tonnes Operational supply
2,500 2,500 Highly Probable additonal tonnes

Thousands
Includes non-battery demand Probable additonal tonnes
Possible additonal tonnes
Demand - Base Case
2,000 2,000

1,500 1,500

1,000 1,000

500 +100 mesh +80 mesh 500

+50 mesh -100 mesh

0 0
2019 2020 2021 2022 2023 2024 2025 2026 2019 2020 2021 2022 2023 2024 2025 2026

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3. Natural Flake Graphite Price Forecasts

Natural flake graphite price forecast 2027-2040

• From 2027 until the end of the forecast period at 2040 the market remains in deficit and will continue to need new supply coming online in order to meet demand.
Prices will therefore need to be high enough to incentivise demand.
• As we stated the main determinant of long term prices for graphite over the forecast period will be the need to incentivise new supply to make up this deficit. Based
on our IRR calculations and our consideration of the typical cost of capital for greenfield mining projects of this type, we estimate that the average price for high
carbon grades (96-97% C) will be USD2,000 based on the range of pricing in the chart on the left below.

High carbon (96-97% C) natural flake graphite price forecast, 2027-2040 Graphite supply and demand forecasts, 2027-2040
’000 Tonnes
USD per tonne, Real 2018, FOB China
9,000 Operational supply
2,600
Highly Probable additonal tonnes
2,400 8,000 Probable additonal tonnes
2,200 Possible additonal tonnes
7,000
2,000 Demand - Base Case

1,800 6,000
1,600 5,000
1,400 Includes non-battery demand
1,200 4,000

1,000 3,000
800
2,000
600
400 1,000
+100 mesh +50 mesh +80 mesh -100 mesh
200
0
0 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
2028 2030 2032 2034 2036 2038 2040

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 3. Natural Flake Graphite Price Forecasts

High carbon (96-97% C) natural flake price history and forecast, 2015-2040
USD per tonne, Real 2018, FOB China

2,600
Forecast
2,400

2,200

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400
+100 mesh +80 mesh
200 +50 mesh -100 mesh

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 34

3. Natural Flake Graphite Price Forecasts

• In order to arrive at a price forecasts for the Matawinie project on a delivered North America basis we add a location premium to the benchmark China Fob prices
on the previous slides, as a well as adjustments for grades based on the expected output of the operation.
• The premium varies by grade, and there is some variance over time. For the purposes of this forecast we will use the following premiums by grade:

Natural flake graphite (96-97% C) flake size Location premium, USD per tonne

+150 mesh 100

+50 mesh 150

+80 mesh 120

-100 mesh 110

• We also provide a weighted average of the price forecast based on Matawinie’s planned product mix.

Natural flake graphite (96-97% C) flake size Product weighting

+150 mesh 27.7%

+50 mesh 14.8%

+80 mesh 33.4%

-100 mesh 24.1%

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 3. Natural Flake Graphite Price Forecasts

High carbon (96-97% C) natural flake price history and forecast, 2022-2047
USD per tonne, Real 2018, North America CFR

3,500

3,000

2,500

2,000

1,500

1,000
+50 mesh
+80 mesh
500 +150 mesh
-150 mesh
Matawinie basket
0
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047

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4. Premium Graphite Markets Outlook and Prices
4. Premium Graphite Markets Outlook and Prices

• Nouveau Monde is currently developing second transformation processes in order to serve higher value-added markets. In this section we will provide an overview
and market size breakdown for the following processed, premium graphite products, including:
• Spherical uncoated and coated graphite for anodes
• Expandable graphite
• Purified micronized graphite

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 38

4. Premium Graphite Markets Outlook and Prices

Coated and uncoated spherical graphite overview Coated spherical graphite

• Spherical graphite is formed by processing flake graphite through consecutive

milling steps. This is an energy-intensive process, with a yield of 30 to 50%. In
the case of Natural Graphite, the shaping must be preceded by purification,
most commonly through chemical leaching.

• The current price for uncoated spherical (anode precursor) material is in the
region of USD3,500 per tonne, while coated spherical (anode) currently sells for
USD9,000 per tonne.

• Spherical shapes usually measure between 10 to 40 micron and generally have

a carbon content of 99.95% C or above. This process increases the surface area
and conductivity making it ideal for use as the anode material for battery
technologies.

• As such demand growth is linked to the development of the battery market. On

the following slide we detail our expectations for both coated and uncoated
demand over the forecast period

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 4. Premium Graphite Markets Outlook and Prices

Uncoated spherical graphite (anode precursor) demand forecast, 2015-2040 Coated spherical graphite (anode) demand forecast, 2015-2040
Million tonnes Million tonnes
4.0 6.0
5.5
3.5
5.0
3.0 4.5
4.0
2.5
3.5
+19%
2.0 +19% 3.0
2.5
1.5
2.0
1.0 1.5
1.0
0.5
0.5
0.0 0.0
2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

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4. Premium Graphite Markets Outlook and Prices

Purified micronized graphite overview

• Purified micronized graphite is subjected to the same chemical leaching process

to achieve the required grades as is crushed and ground to achieve a size of less
than 30 microns, with a carbon content of 99.9% C.

• It is used as a feedstock for spherical material and is suitable for a range of

applications including traditional alkaline batteries, polymers, lubricants,
powder metallurgy. As such we expect that demand for purified micronized
graphite will grow at a similar pace to total graphite demand over the life of the
forecast, at a compound annual growth rate (CAGR) of 12%, with the majority
of this growth being driven by battery demand growth.

• Prices for Purified micronized graphite are reported at USD3,000 per tonne

BENCHMARK MINERAL INTELLIGENCE – NOUVEAU MONDE GRAPHITE – OCTOBER 2018 Page 41

 4. Premium Graphite Markets Outlook and Prices

Purified micronized graphite demand forecast, 2015-2040

Tonnes
600,000

550,000

500,000

450,000

400,000

350,000 +12%
300,000

250,000

200,000

150,000

100,000

50,000

0
2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

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 4. Premium Graphite Markets Outlook and Prices

• Expandable graphite is produced by a process in which an intercalant

material is inserted in between the graphene layers of flake graphite.

Flake Graphite
(unexpanded)
Typically the feedstock for expandable graphite is flake graphite with
particle size distribution of +80 mesh.
• A number of chemical compounds can be used to intercalate graphite
materials. The most common process is the insertion of sulphate
compounds to create ‘graphite bi-sulphate’
• This material is manufactured by treating highly crystalline natural flake
graphite with a mixture of sulphuric acid and other oxidizing agents which
aid the sulphate intercalation. The final carbon content of this material is
very high at up to 99.9% C
• The resultant product is a highly intumescent form of graphite that useful
in applications that include fire retardants, high performance gaskets,
conductive fillers, electromagnetic pulse and radiation shielding, foundry
products.

Expanded Graphite
• Benchmark estimates that the market for expandable graphite at present
stands at roughly 60,000 tonnes per annum, the bulk of which is for use in
fire retardants.
• he markets for expanded graphite, in particular for fire retardants, are
forecast to exceed industrial and GDP growth in the coming years as fire
safety regulations are expected to become more stringent in all major
economies. We anticipate a 6% CAGR for expandable graphite demand
over the life of the forecast.
• At present the market price for expanded graphite is in the region of
USD2,700-USD3,200 per tonne depending on the purity of material

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 4. Premium Graphite Markets Outlook and Prices

Tonnes Expandable graphite demand forecast, 2015-2040

200,000

150,000
+6%

100,000

50,000

0
2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

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