Mr. Hugues Jacquemin reports

NORTHERN GRAPHITE ANNOUNCES THIRD QUARTER 2023 RESULTS

Northern Graphite Corp. has provided an operating and financial summary of results for the three and nine-month periods ended Sept. 30, 2023. The company's financial statements and management's discussion and analysis are available on SEDAR+ and on its website.

Operational and financial highlights for the third quarter:

• Revenue of $4.9-million generated on 2,587 tonnes of graphite concentrate sold at an average realized sales price of $1,907/tonne ($1,422 (U.S.)/tonne); sales volumes increased by 28.3 per cent in Q3 2023 compared with Q2 2023;
• Positive cash flow from operating activities of $1.7-million;
• Cash costs of $1,335 ($995 (U.S.)) per tonne of graphite concentrate sold;
• Income from mine operations of $700,000; operating loss of $2.1-million;
• Cash position improved to $2.2-million as at Sept. 30, 2023, compared with $700,000 as of June 30, 2023, as a result of working capital management measures, improved sales volumes and additional financing;
• As at Sept. 30, 2023, the company had working capital of $17.0-million (Dec. 31, 2022 -- $19.4-million) including $22.4-million in inventory valued at cost. Inventory includes 5,476 tonnes of graphite concentrate and 147,672 tonnes of ore stockpiles containing approximately 9,198 tonnes of recoverable graphite;
• A net loss of $6.8-million (five cents per share).

Chief executive officer Hugues Jacquemin commented: "Global graphite markets became more favourable in the third quarter. Customers who had been on the sidelines for much of the first half of the year became buyers again as China, the world's leading producer and exporter of graphite, reinstated EV subsidies and incentivized domestic demand. Global supply dynamics were further impacted after China announced new export controls for graphite on Oct. 20 and put a spotlight on Northern, the only natural graphite producer in North America. This added new vigour to our conversations with existing and prospective graphite customers, from EV battery makers to the industrial clients we have been supplying for over 20 years. Stronger demand continued into the fourth quarter and while we are cautious about the state of the global economy, we are hopeful that strong demand continues into next year."

Graphite markets

Sales volumes increased by more than 28 per cent during the third quarter of 2023 compared with the second quarter amid tightening global graphite markets after China reinstated subsidies on domestic EVs (electric vehicles) and less graphite was available for export. Markets tightened further after China announced that it would start imposing controls on certain graphite exports for battery-making as of Dec. 1. China is the world's largest producer of graphite, a key component of batteries for electric vehicles and widely used in industrial markets.

Lac des Iles mine

The Lac des Iles (LDI) mine and plant were temporarily shut down for the second and third quarters of 2023 while the company served customers and preserved cash by selling down inventories. As of Sept. 30, 2023, care and maintenance costs of $4.7-million were incurred. Inventories of finished goods have decreased by 2,419 tonnes to reach a total of 5,476 tonnes as of Sept. 30, 2023, as a result of increased sales combined with the care and maintenance program at the LDI site. As at Sept. 30, 2023, the company had produced 2,966 tonnes of graphite concentrate and sold 6,416 tonnes of graphite concentrate in the first nine months of the year. The company realized an average sales price of $2,009 per tonne in the period, with cash costs of $1,407 per tonne sold and mine operating income of $1.8-million. The plant was restarted on Oct. 30, 2023, and Northern currently plans to restart the mine in the spring of 2024 in order to meet increasing market demand.

After a detailed review of historical studies and mine plans and the results of an airborne geophysical survey, the company carried out a drill program to explore previously untested areas of the LDI property with the objective of extending the life of the mine. The program was financed from the proceeds of the company's $2.25-million charity flow-through private placement completed on April 27, 2023. The program, which consisted of 7,890 metres of drilling in 88 holes, identified significant, near-surface graphite mineralization which is still open at depth and confirmed the potential to extend the life of LDI. New resource and reserve estimates for LDI are expected to be available in the first quarter of 2024.

Namibia

On Aug. 28, 2023, the company published the results of a new PEA (preliminary economic assessment) that evaluated moving the processing plant for its Namibian operations, currently located at Okorusu, to the Okanjande mine site rather than rehabilitating the mill in its current location. The PEA indicated that economics remain attractive under the new plan, with higher capital costs but lower operating costs. In addition, greenhouse gas emissions are reduced, sustainability is improved and the expansion potential of the project is substantially enhanced.

Key results of the PEA included average annual production of 31,000 tonnes of graphite concentrate to be sold in United States and European markets, production costs of $666 (U.S.) per tonne, a post-tax IRR (internal rate of return) of 36 per cent, a post-tax NPV (net present value) of $70-million (U.S.) and a payback of under four years. Results were based on a 10-year mine life and a weighted average graphite price of $1,550 (U.S.)/tonne. A technical report in respect of the PEA was prepared in accordance with National Instrument 43-101 and was filed under the company's profile on SEDAR+.

The company is evaluating options to finance the Okanjande project through the use of a royalty/stream/debt structure with equity contributed by a strategic partner. In the interim, Namibian operations have been downsized to project mode, resulting in the retrenchment of 32 employees while 15 employees continue to advance the project. This resulted in care and maintenance expenses of $400,000. A full development schedule can be executed within 12 to 14 months once financing is available, with the intent to resume production by the end of 2024.

Increasing graphite resources and reserves is a key catalyst for Northern as the company executes on its strategy of becoming a long-term, sustainable, integrated, mine-to-market-to-battery supplier to North America's widescale EV revolution, energy transition and march to net zero 2050.

South Okak

The company elected not to make a payment of cash and shares required under the terms of its option agreement, which is therefore no longer in effect. The company is currently in the process of negotiating a new agreement.

Mine-to-market strategy

The company is working toward building a 200,000-tonne-per-year battery anode material (BAM) plant in Baie-Comeau, Que., which is a key component of its mine-to-market strategy. Discussions are continuing with automakers and EV battery manufacturers to secure long-term purchase agreements. In the third quarter, testing conducted by Heraeus Battery Technology demonstrated that BAM produced from LDI graphite samples has the potential to perform at or above the standards of commercially available reference materials.

Improved cash position

During the third quarter, the company improved its cash position, reporting cash and equivalents of $2.2-million as at Sept. 30, 2023, compared with $700,000 as of June 30, 2023, as a result of working capital measures, improved sales volumes and additional financing.

The company is pursuing a number of initiatives to raise financing for working capital and its development programs without having to go to the market at current share prices. On Sept. 27, 2023, Northern closed the sale of an additional 0.5-per-cent gross revenue royalty (GRR) on the Bissett Creek project for $950,000 in cash proceeds. Subsequent to Sept. 30, 2023, the company obtained additional financing of $3.0-million (U.S.) from Sprott Resources and Royalties for working capital purposes and to finance the restart of LDI milling operations in Q4 2023, with mining anticipated to restart in the second quarter of 2024. The financing consisted of:

• An increase in the amount of the existing Senior Secured loan by $1-million (U.S.) (from $12-million (U.S.) to $13-million (U.S.));
• An increase in the amount of the current royalty financing by $2-million (U.S.) (from $4-million (U.S.) to $6-million (U.S.)) through an additional 4-per-cent graphite sales revenue royalty on LDI, reducing to 0.25 per cent once the additional royalty has been paid on 45,000 tonnes of sales.

As at Sept. 30, 2023, the company held cash of $2.2-million (Dec. 31, 2022 -- $5.1-million), $1.9-million of restricted cash (Dec. 31, 2022 -- $2.1-million) and had working capital of $17.0-million (Dec. 31, 2022 -- $19.4-million). Working capital includes $22.4-million (Dec. 31, 2022 -- $18.3-million) in inventory, consisting of 5,476 tonnes of graphite concentrate (Dec. 31, 2022 -- 8,743 tonnes) and 147,672 tonnes of ore stockpiles as well as materials and supplies. The ore stockpile contains approximately 9,198 tonnes of recoverable graphite (Dec. 31, 2022 -- 2,251 tonnes).

About Northern Graphite Corp.

Northern is a Canadian, TSX Venture Exchange-listed company that is focused on becoming a world leader in producing natural graphite and upgrading it into high-value products critical to the energy transition, including anode material for lithium-ion batteries/EVs, fuel cells and graphene, as well as advanced industrial technologies.

Northern is the only graphite producing company in North America and will become the third-largest producer outside of China when its Namibian operations come back on-line. The company also has a large-scale development project, Bissett Creek, in Ontario that it expects will be a source of continued production growth in the future. All projects have battery-quality graphite and are located close to infrastructure in politically stable jurisdictions.

Qualified person

Gregory Bowes, BSc, MBA, PGeo, the chairman of Northern, is a qualified person as defined under National Instrument 43-101 and has reviewed and approved the content of this news release.

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