Mr. Eric Desaulniers reports

NMG PROVIDES A QUARTERLY OPERATIONAL UPDATE: INTENSE COMMERCIAL ENGAGEMENT TO SECURE A ROBUST FOUNDATION FOR GROWTH

Nouveau Monde Graphite Inc. has made advancements on the development of its fully integrated value chain, from ore to battery materials, set to become one of North America's largest sources of natural graphite. Nouveau Monde Graphite is working to secure long-term sales agreements for its active anode material, and set up financial and operational conditions for the successful execution of its commercial plans comprising the phase 2 Matawinie mine and Becancour battery material plant.

Summary:

• Ahead of phase 2 development, company-wide focus on securing the best multiyear sales agreements to provide bankability confirmation to lenders, final technical parameters for detailed engineering of the Becancour battery material plant, commercial visibility for Nouveau Monde Graphite's business execution plan and long-term value for shareholders.
• Continuous progress on defining technical and commercial parameters for a long-term agreement with Panasonic Energy on the back of the MOU (memorandum of understanding) offtake.
• Advancement of parallel commercial discussions with a few selected Tier 1 battery and EV (electric vehicle) manufacturers for other potential offtake agreements.
• Continued extensive testing at Nouveau Monde's phase 1 plants in close collaboration with potential customers' technical teams to address process efficiency and challenges, help refine plans for phase 2 facilities, and reduce risks ahead of commercial operations.
• Definitive agreements signed with Caterpillar to collaborate on technology development, testing, and procurement of all-electric fleet and infrastructure for the phase 2 Matawinie mine, plus opportunities for Nouveau Monde Graphite to supply carbon-neutral graphite materials to Caterpillar for its sustainable battery supply chain.
• Underwritten public financing of $22-million (U.S.) in support of the advancement of the Matawinie mine and Becancour battery material plant toward the final investment decision and project financing.
• Advanced discussions with multiple governmental agencies and programs to optimize and lower the cost of the targeted capital structure for the project financing.
• Downward pressure on FOB (free on board) China prices of all key battery materials, with expected correction as EV adoption growth continues and forecasted global production of lithium-ion batteries now reaches 8,930 GWh (gigawatt-hours) by 2030 (Benchmark Mineral Intelligence, July, 2023).
• Continuing commitment to prioritize safety amidst a period of intense spring freshet, forest fires in northern areas and heavy rains. Year-to-date OSHA (Occupational Safety and Health Act) rate of 1.86 at Nouveau Monde Graphite's facilities and nil at contractors work site, with no major environmental incident.
• Period-end cash position of $59.8-million.

Arne H. Frandsen, chair of Nouveau Monde Graphite, declared: "Recent extreme weather events, here in Quebec and around the world, are emphasizing the urgency of decarbonization and the importance of environmental stewardship. Serving the energy transition is core to NMG's business model. To that end, the team is making meaningful progress towards scaling up its operations to bring to market carbon-neutral active anode materials for the battery and electric vehicle markets. Commercial, financial and operational building blocks are being aligned to form a solid foundation for the company's long-term success."

Eric Desaulniers, founder, president and chief executive officer of Nouveau Monde, added: "Time to market is vital to the realization of our growth plans. Current extensive efforts on product specifications and perfecting manufacturing parameters provide us with a wealth of technical knowledge that significantly derisks our phase 2 development, and bring us nearer to securing a, or many, long-term binding bankable offtakes. In addition, this optimization work through our phase 1 facilities offers greater assurance to our potential customers on the quality and performance of our graphite materials, while informing pricing and commercial discussions to adequately reflect the value of our production."

Setting strong commercial foundations for the company's phase 2 development

As it enters the remaining preparation stages for carrying out its phase 2 development, the company is channelling its efforts and resources, both at the operational and corporate levels, on securing the best multiyear sales agreements to provide bankability confirmation to lenders, final technical parameters for detailed engineering of the Becancour battery material plant, commercial visibility for its business execution plan and long-term value for its shareholders.

Nouveau Monde is focused on setting up critical financial and operational conditions for success through long-term agreements and a modular pricing mechanism that reflects the company's value-added (for example carbon neutrality guarantee, location, strong ESG (environmental, social and governance) profile, easy logistics et cetera) and potential for increased revenues as the market evolves.

To that end, Nouveau Monde Graphite's phase 1 operations continue to deliver samples, covering a variety of specifications to reflect each potential customer's requirements and of greater volumes as the company progresses through qualification processes. Nouveau Monde has demonstrated its capacity to reach specifications with positive results on sample testing both at the company's laboratory and at a leading third party facility.

Through testing and engagement with potential customers, Nouveau Monde Graphite is addressing process efficiency and challenges, and building models to efficiently produce samples of varying specifications, with short development and optimization duration. The maturation of operational and processing parameters directly feeds into the engineering of the phase 2 Becancour battery material plant initiated with engineering firm BBA.

On the basis of its memorandum of understanding on an offtake agreement, Nouveau Monde Graphite and Panasonic Energy Co. Ltd. are actively working together on product qualification and establishing a contemplated definitive offtake agreement. Regular meetings and on-site visits continue to advance technical and commercial components.

In parallel to negotiations with Panasonic Energy, the company is engaged in a number of commercial discussions with Tier 1 battery and EV manufacturers for potential offtake agreements. Sustained interest is supported by the supply of samples, quality checks, site visits to the company's phase 1 operations and ESG due diligence.

Phase 2 is advancing in parallel through detailed and environmental engineering of the Matawinie mine -- over all engineering now exceeding 70-per-cent completion, electrification planning supported by definitive agreements with Caterpillar Inc., as well as preparation of project's execution and contracting strategy, construction permit demands, and long-lead items tendering packages.

ESG commitment and corporate development

The achievement of standards demanded by potential customers is an essential prerequisite, as well as an important competitive advantage. Hence, the company is placing quality as a central component of its business with the implementation of an ISO 9001-compliant management system, and the fostering of a culture of excellence, continuous improvement and environmental stewardship.

Nouveau Monde aims to become the leading integrated natural graphite producer in North America, aligning with the growing call for an ethically and environmentally responsible energy transition. With a strong focus on sustainability and a climate-positive business model, the company continually works to maximize its impact in the sector. The company issued its 2022 ESG report on May 10, 2023, which presents its management approach, key programs, advancements, case studies and metrics. Nouveau Monde Graphite's established ESG disclosure practices should facilitate the transition to the International Sustainability Standards Board's (ISSB) new standards, IFRS (international financial reporting standards) S1 and IFRS S2, to be integrated into financial reporting.

While Quebec experienced intense spring freshet, forest fires in northern areas, and heavy rains in Q2 2023 and beyond, the company was able to maintain its operations and ensure safe working conditions. For the six-month period ended June 30, 2023, Nouveau Monde had an Occupational Safety and Health Administration recordable incident rate of 1.86 at its facilities and nil at its contractor work sites, with no major environmental incidents.

Nouveau Monde Graphite closed an underwritten public offering of $22-million (U.S.) to advance the development of the Matawinie mine and the Becancour battery material plant toward the final investment decision (FID) and project financing. To optimize its financing structure and reduce the associated cost of capital, the company is actively pursuing governmental levers at the provincial and federal levels.

The company's period-end cash position is $59.8-million.

Market outlook

Amid a context of near-term macroeconomic uncertainty, the prices (FOB-China) of essential battery materials such as lithium, cobalt, nickel and graphite experienced significant downward pressure in H1 2023. With cathode and anode manufacturers reducing existing inventories or exercising caution with new orders, critical battery material prices dropped between 20 per cent and 40 per cent -- 22 per cent in the case of graphite -- reported Benchmark Mineral Intelligence. The decline can be partly attributed to a slowdown in Chinese demand, new production capacity, as well as the United States and Europe's efforts to establish their own critical minerals supply chains.

Despite a slower start to EV sales in 2023, the market saw a year-over-year increase of 36 per cent and is expecting growth in H2 2023 (Rho Motion, June, 2023). The adoption of EVs in North America is currently being stimulated by the introduction of multiple new models by leading market participants and structuring partnerships to accelerate the deployment of charging networks.

Hence, analysts foresee a rise in graphite demand and an upward correction in pricing (Benchmark Mineral Intelligence, July, 2023). Nouveau Monde Graphite believes there is a disconnect between supply and demand dynamics in North America versus China, and that the long-term price in this market should namely reflect lower geopolitical risk, compliance with the U.S. Inflation Reduction Act requirements, a "greenium" price premium based on improved carbon footprint of North American graphite, as well as the simplified logistics and inventory costs.

To meet the increasing demand for EVs and cleantech applications, the lithium-ion battery industry is now targeting the development of 8,930 GWh of global production capacity by 2030 through 399 gigafactories (Benchmark Mineral Intelligence, July, 2023). Accordingly, the projected demand for battery materials is set to increase up to five-fold, with graphite outpacing the other metals at 10,537,000 tonnes per annum by the end of the decade (Benchmark Mineral Intelligence, July, 2023).

Nouveau Monde Graphite's turnkey ore-to-battery-materials production model and its strategic advantages, such as its localization, proprietary ecotechnologies, proven production capacity, carbon-neutral profile and favourable jurisdiction benefits, including clean hydropower, flexible logistics, and stability in fiscal and political environments, ideally position the company to serve Western markets seeking to reduce their reliance on Chinese supply chains.

About Nouveau Monde Graphite Inc.

Nouveau Monde Graphite is striving to become a key contributor to the sustainable energy revolution. The company is working toward developing a fully integrated source of carbon-neutral battery anode material in Quebec, Canada, for the growing lithium-ion and fuel cell markets. With enviable ESG standards, Nouveau Monde Graphite aspires to become a strategic supplier to the world's leading battery and automobile manufacturers, providing high-performing and reliable advanced materials while promoting sustainability and supply chain traceability.

We seek Safe Harbor.