Exhibit 99.4











NEXTSOURCE MATERIALS INC.


145 Wellington Street West, Suite 1001, Toronto, Ontario, Canada
M5J 1H8





NOTICE OF THE 2019 ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS





I am
pleased to give you notice that the 2019 annual and special meeting
(the “Meeting”)
of holders (the “Shareholders”) of common shares
(the “Shares”)
of NextSource Materials Inc. (the “Company”) will be held at the
offices of Cassels Brock & Blackwell LLP, Scotia Plaza, 21st
Floor, Toronto, Ontario, M5H 3C2 on December 2, 2019 at 10:00 a.m.
(Toronto time) for the following purposes:





1.
 Toreceive the financial statements
of the Company for the fiscal year ended June 30, 2019 and the
Auditors’ Report thereon.





2.
 To elect seven
directors of the Company, each to hold their offices until the next
annual meeting of the Shareholders or until their successors have
been duly elected and qualified or until the earlier of their
resignation, removal or death. The
Board of Directors recommends that Shareholders vote
“FOR” each Director.





3.
 To approve the
re-appointment of MNP LLP, Chartered Accountants, as the
Company’s auditors for the fiscal year ending June 30, 2020
and to authorize the Board of Directors to fix their remuneration.
The Board of Directors recommends
that the Shareholders vote “FOR” this
proposal.





4.
 To approve an
amendment to the articles of continuance of the Company, to be
completed at the Board’s sole discretion, to effect a share
consolidation (reverse stock split) of the Company’s
outstanding Shares in a ratio of between one-for-five and
one-for-ten at any time prior to the one year anniversary of the
Meeting, without further Shareholder approval; provided that all
fractional Shares as a result of the share consolidation shall be
automatically rounded up to the next whole Share. The Board of Directors recommends that the
Shareholders vote “FOR” this
proposal.





5.
 To transact other
business as may properly come before the Meeting or any
adjournments thereof.





Particulars
of the foregoing matters are set forth in the accompanying
management information circular of the Company dated October 23,
2019 (the “Circular”).





The
Board of Directors has fixed the close of business on October 23,
2019 at 5:00 p.m. (Toronto time) as the record date for the
Meeting. Only registered Shareholders at such time are entitled to
notice of, and to vote at, the Meeting.





Regardless
of the number of Shares you own or whether you plan to attend the
Meeting, it is important that your Shares be voted.





If you
hold your Shares directly and will attend the Meeting, remember to
bring a form of personal identification with you and, if acting as
a proxy for another Shareholder, bring written confirmation from
that Shareholder that you are acting as a proxy. If you hold your
Shares directly (that is, as a registered Shareholder) and are
unable to attend the Meeting in person, complete, date, sign and
return the accompanying form of proxy in the enclosed envelope to
the TSX Trust Company, 100 Adelaide Street West, Suite 301,
Toronto, Ontario, Canada, M5H 4H1, Attention: Proxy Department , by
10:00 a.m. ET on November 28, 2019.





If you
hold your Shares in "street name" (that is, as a non-registered
Shareholder through a broker, bank or other nominee (such as CDS
&Co.)) and will attend the Meeting, bring a form of personal
identification with you and proof of beneficial ownership. If you
hold your Shares in "street name" and are unable to attend the
Meeting, complete, date and sign the voting instruction form that
has been provided by your broker, bank or other nominee and return
it in the enclosed envelope in accordance with the instructions
provided by your broker, bank or other nominee.





1





The Company will be using the notice-and-access model
provided under National Instrument 54-101 –Communication with Beneficial Owners of
Securities of a Reporting Issuer (“Notice and Access”) for the
delivery of the Circular, the financial statements of the Company
for the fiscal year ended June 30, 2019, and other related
materials of the Meeting (the “Meeting Materials”) to
Shareholders. Under Notice and Access, instead of receiving printed
copies of the Meeting Materials, Shareholders receive a package in
the mail containing: (i) information on the Meeting date, location
and purpose; (ii) a form of proxy or voting instruction form so
Shareholders can vote their Shares; and (iii) information on how
they may electronically access the Meeting Materials. However, the
Company will mail paper copies of the Meeting Materials to those
registered and non-registered Shareholders who have previously
elected to receive paper copies of the Meeting
Materials





The
Meeting Materials will be available at
https://docs.tsxtrust.com/2084 on or about November 8, 2019 and
will remain on the website for one full year thereafter. Meeting
Materials are also available upon request, without charge, by
e-mail at TMXEInvestorServices@tmx.com or by calling toll-free
1-866-600-5869, or can be accessed online on SEDAR at www.sedar.comon
or about November 8, 2019.





To
receive the Meeting Materials in advance of the proxy deposit date
and Meeting date, requests for printed copies must be received at
least five business days (i.e. by November 21, 2019) in advance of
the proxy deposit date and time set out in the accompanying form of
proxy or voting instruction form. Shareholders may make this
request by following the instructions on their form of proxy or
voting instruction form.





The
Meeting for which this notice is given may be adjourned without
further notice other than announcement at the Meeting or any
adjournment thereof. Any business for which notice is hereby given
may be transacted at any such adjourned Meeting.





BY
ORDER OF THE BOARD OF DIRECTORS


(signed) “Craig Scherba”


Craig
Scherba,


President and Chief
Executive Officer





2








NEXTSOURCE MATERIALS INC.


145 Wellington Street West, Suite 1001, Toronto, Ontario, Canada
M5J 1H8


Tel: (416) 364-4911; Fax: (416) 364-2753





MANAGEMENT INFORMATION CIRCULAR


FOR THE 2019 ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS





INTRODUCTION





This
Circular is being furnished to holders (the “Shareholders”) of Shares (the
“Shares”) of
NextSource Materials Inc. (the “Company”) in connection with the
solicitation by or on behalf of management of the Company by its
Board of Directors (the “Board”) in connection with the
2019 annual and special meeting of Shareholders (the
“Meeting”).
Unless otherwise stated, the information contained in this Circular
is as of October 23, 2019.





The
Company is listed on the Toronto Stock Exchange
(“TSX”) in
Canada (ticker: NEXT), on the OTCQB in the United States of America
(ticker: NSRC) and on the Frankfurt, Germany Stock Exchange
(ticker: A1CXW3). Our principal business office is located at 145
Wellington Street West, Suite 1001, Toronto, Ontario, Canada M5J
1H8.





All
dollar amounts referenced herein, unless otherwise indicated, are
expressed in United States dollars and Canadian dollars are
referred to as “CAD”.





Date, Time and Place of the Meeting





This
Circular is being sent to Shareholders in connection with the
solicitation of proxies by the management of the Company for use at
the Meeting to be held at the offices of Cassels Brock &
Blackwell LLP, Scotia Plaza, 21st Floor, Toronto, Ontario, M5H 3C2
on December 2, 2019 at 10:00 a.m. (Toronto time), or at any
adjournment or postponement thereof.





The
proxy cut-off date for Shares to be voted in advance of the Meeting
will be on November 28, 2019 at 10:00 a.m. (Toronto time). Proxies
will be solicited primarily by mail but may also be solicited
personally, by telephone or by facsimile or electonically by the
regular employees of the Company at nominal costs. In accordance
with National Instrument 54-101 – Communication with Beneficial Owners of
Securities of a Reporting Issuer (“NI 54-101”), arrangements
have been made to forward proxy solicitation materials to the
non-registered Shareholders. The costs of solicitation will be
borne by the Company.





Record Date





Registered
Shareholders at the close of business on October 23, 2019, the
record date for the Meeting, are entitled to receive this Circular
and to vote at the Meeting and at any adjournment or postponement
thereof. On the record date, there were507,417,021issued and outstanding Shares
entitled to notice of and to vote at the Meeting. Shareholders have
one vote per Share on each matter to be acted upon.





A list
of the registered Shareholders entitled to vote will be available
at the Meeting and for 10 days prior to the Meeting, for any
purpose germane to the Meeting, between the hours of 9:00 a.m. and
4:30 p.m. (Toronto Time) at the Company’s principal office at
145 Wellington Street West, Suite 1001, Toronto, Ontario, Canada
M5J 1H8.





Quorum





The
presence in person or by proxy of two persons holding at least ten
percent (10%) of the outstanding Shares of the Company constitutes
a quorum for the Meeting. There are no cumulative voting rights.
The scrutineer who will be appointed for the Meeting will tabulate
votes cast by proxy or in person and will determine whether or not
a quorum is present.





3





Notice and Access





The
Company will be using the notice and access model
(“Notice and
Access”) provided under NI 54-101 for the
delivery of the Circular, the financial statements of the Company
for the fiscal year ended June 30, 2019, and other related
materials of the Meeting (the “Meeting Materials”) to
Shareholders for the Meeting. Under Notice and Access, instead of
receiving printed copies of the Meeting Materials, Shareholders
receive a package (the “Notice and Access Package”) in the
mail containing: (i) information on the Meeting date, location and
purpose; (ii) a form of proxy or voting instruction form so
Shareholders can vote their Shares; and (iii) information on how
they may electronically access the Meeting Materials. However, the
Company will mail paper copies of the Meeting Materials to those
registered and beneficial Shareholders who have previously elected
to receive paper copies of the Meeting Materials.





The
Meeting Materials will be available at
https://docs.tsxtrust.com/2084 on or about November 8, 2019 and
will remain on the website for one full year thereafter. Meeting
Materials are also available upon request, without charge, by
e-mail at TMXEInvestorServices@tmx.com or by calling toll-free
1-866-600-5869, or can be accessed online on SEDAR at www.sedar.comon
or about November 8, 2019.





To
receive the Meeting Materials in advance of the proxy deposit date
and Meeting date, requests for printed copies must be received at
least five business days (i.e. by November 21, 2019) in advance of
the proxy deposit date and time set out in the accompanying form of
proxy or voting instruction form. Shareholders may make this
request by following the instructions on their form of proxy or
voting instruction form.





Voting of Proxies





Registered Shareholders





If your
Shares are registered directly in your name with the
Company’s transfer agent, TSX Trust Company, you are
considered, with respect to those Shares, a registered Shareholder.
The Notice and Access Package has been sent directly to you on the
Company’s behalf at the address on file with TSX Trust
Company. The Company has engaged the TSX Trust Company, to handle
the setup, mailing and tabulation of proxies in relation to the
Meeting.





Non-Registered Shareholders





If your
Shares are held in “street name” through a broker, bank
or other nominee (such as CDS & Co.), you are considered a
non-registered Shareholder. The Notice and Access Package has been
forwarded, if requested, to you by your broker, bank or other
holder of record who is considered, with respect to those Shares,
the registered Shareholder. As a non-registered Shareholder, you
have the right to direct your broker, bank or other holder of
record on how to vote your Shares by using the voting instruction
form included in the Notice and Access Package or as otherwise
provided to you by your broker, bank, or other
nominee.





Appointment and Revocability of Proxies





A Shareholder has the right to appoint a person or company (who
need not be a Shareholder of the Company), other than the persons
designated in the accompanying form of proxy or voting instruction
form, to represent the Shareholder at the Meeting. Such
right may be exercised by inserting the name of such person or
company in the blank space provided in the proxy or by completing
another proper form of proxy or voting instruction
form.





Your
Shares will be voted in accordance with the instructions contained
in the form of proxy or voting instruction form. Your Shares will
be voted or withheld from voting in accordance with your
instructions on any ballot that may be called for and, if you
specify a choice with respect to any matter to be acted upon, your
Shares will be voted accordingly.





IF YOU RETURN A SIGNED FORM OF PROXY OR VOTING INSTRUCTION FORM
WITHOUT INDICATING YOUR VOTE, YOUR SHARES WILL BE VOTED
“FOR” EACH OF THE MATTERS PUT FORTH AT THE
MEETING.





The
grant of a proxy on the enclosed form of proxy or voting
instruction form does not preclude a Shareholder from voting in
person. A Shareholder may revoke a proxy at any time prior to your
proxy being voted: (i) by delivering to the Company’s
President and Chief Executive Officer, prior to the Meeting, a
written notice of revocation bearing a later date or time than the
proxy; (ii) by timely delivery of a valid, later dated proxy; or
(iii) by attending the Meeting and voting in person. Attendance at
the Meeting will not by itself constitute revocation of a proxy. If
an adjournment occurs, it will have no effect on the ability of
registered Shareholders as of the record date to exercise their
voting rights or to revoke any previously delivered proxies. We do
not expect to adjourn the Meeting for a period of time long enough
to require the setting of a new record date.





4





Solicitation Costs





The
Company will pay the cost of solicitation of proxies on behalf of
the Board. In addition to mail, proxy solicitation may be made
through other means, including by telephone, facsimile,
electronically, and personal interview by our officers, directors
and employees.





The Company does not intend to pay for an intermediary to deliver
to Objecting Beneficial Owners, or “OBOs” (within the
meaning of such term under NI 54-101, the proxy-related materials and Form 54-101F7),
and therefore OBOs will not receive the materials unless their
intermediary assumes the costs of delivery. The Company is sending
proxy related material to Non-objecting Beneficial
Owners.


Other Matters





As of
the date of this Circular, the Company does not know of any matters
other than those set forth herein that will be presented for
consideration at the Meeting. If any other matter or matters are
properly brought before the Meeting or any adjournment thereof, the
persons named in the accompanying proxy will have discretionary
authority to vote, or otherwise act, with respect to such matters
in accordance with their judgment.





INTEREST OF CERTAIN PERSON IN MATTERS TO BE ACTED UPON





No
director or officer of the Company, nor any person who has held
such a position since the beginning of the last completed financial
year-end of the Company, nor any proposed nominee for election as a
director of the Company, nor any associate or affiliate of any of
the foregoing persons, has any material interest, direct or
indirect, by way of beneficial ownership of securities or
otherwise, in any matter of business to be acted upon at the
Meeting, other than the election of directors of the Company and as
may otherwise be set out herein.





VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF





The
Company is authorized to issued an unlimited number of
Shares.





As of
October 23, 2019, the Company had 507,417,021Shares issued and outstanding, all
of which are Shares, each of which carries the right to one vote on
all matters that may come before the Meeting.





To the
knowledge of the directors and executive officers of the Company,
as of October 23, 2019, no person or Company beneficially owns, or
controls or directs, directly or indirectly, Shares carrying in
excess of 10% of the voting rights attached to all outstanding
Shares of the Company.





5





CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS





This
Circular contains forward-looking statements within the meaning of
U.S. securities laws and forward-looking information within the
meaning of Canadian securities laws (collectively,
“forward-looking
statements”) and are intended to be covered by the
safe harbors provided by such regulations. Any statements that
express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, identified
by words or phrases such as “expects”, “is
expected”, “anticipates”, “believes”,
“plans”, “projects”,
“estimates”, “assumes”,
“intends”, “strategy”, “goals”,
“objectives”, “potential”,
“possible” or variations thereof or stating that
certain actions, events, conditions or results “may”,
“could”, “would”, “should”,
“might” or “will” be taken, occur or be
achieved, or the negative of any of these terms and similar
expressions) are not statements of historical fact and may be
forward-looking statements.





Forward-looking
statements are not guarantees of future performance. They are based
on current expectations that involve a number of risks,
uncertainties and assumptions that could cause our future results
to differ materially from those expressed in any forward-looking
statements. The assumptions underlying our forward-looking
statements are based on judgments with respect to a number of
factors that are difficult or impossible to predict accurately, and
many of which are beyond our control. Accordingly, although we
believe that the assumptions underlying the forward-looking
statements are reasonable, any such assumption could prove to be
inaccurate and therefore there can be no assurance that the results
contemplated in forward-looking statements will be
realized.





Important
factors that may cause our actual results to differ from our
forward-looking statements include, but are not limited to, the
timing of the completion of any share consolidation
(“Share
Consolidation”) at the sole discretion of the Board
and the risks outlined in the annual information form of the
Company dated September 30, 2019 (the “Annual Information Form”) as well
as risks discussed elsewhere in this Circular.





In
light of the significant uncertainties inherent in our
forward-looking statements, there can be no assurance that the
forward-looking statements contained in this Circular will in fact
occur, and the inclusion of such forward-looking statements in this
Circular should not be construed as a representation by us or any
other person that our predicted or expected outcomes will be
achieved. You should carefully consider the risks disclosed in this
Circular and in the Annual Information Form before deciding how to
vote.





Additionally,
you are cautioned that our Company does not have a policy of
updating or revising forward-looking statements, other in in
compliance with applicable securities laws, and thus, you should
not assume that silence by our management over time means that
actual events are bearing out as estimated in such forward-looking
statements.





6





PARTICULARS OF MATTERS TO BE ACTED UPON AT THE MEETING





ELECTION OF DIRECTORS





General Information





Under
TSX rules, listed issuers must elect directors annually, elect
directors individually and publicly disclose the votes received for
the election of each director by news release. The Company’s
practice is to hold annual elections for directors and at meetings
of Shareholders called for this purpose. Each director is elected
individually. The Company will disclose the votes each nominee for
election receives by way of press release in Canada.





Under
the Company’s existing articles and by-laws, the number of
directors of the Company shall consist of a minimum of one director
and a maximum of ten directors. Directors of the Company will hold
their offices until the next annual meeting of Shareholders or
until their successors have been duly elected and qualified or
until the earlier of resignation, removal of office or death.
Executive officers of the Company are appointed by the Board to
serve until their successors are elected and
qualified.





Advance Notice Provision





The
Company’s existing by-laws include an advance notice
provision for nominations of directors by Shareholders in certain
circumstances. As at the date hereof, the Company had not received
notice of any director nomincations in connection with the Meeting
within the time periods prescribed under the advance notice
provision. A copy of the Company’s advance notice provision
is available on the Company’s website at
www.nextsourcematerials.com under the “Corporate Policies
& Governance” caption.





Majority Voting Policy





The
Company has adopted a majority voting policy stipulating that if
the votes in favour of the election of a director nominee at a
Shareholders’ meeting represent less than a majority of the
Shares voted and withheld at such meeting, the nominee will submit
their resignation promptly after such meeting, for the Nomination
Committee’s consideration. The Nomination Committee will make
a recommendation to the Board after reviewing the matter, and the
Board’s decision to accept or reject the resignation offer
will be disclosed to the public. The nominee will not participate
in any Nomination Committee or Board deliberations relating to the
resignation offer. The policy does not apply in circumstances
involving a proxy battle or contested director
elections.





Nominated Directors





The
following table sets forth the name, province or state and country
of residence, age, Company position and principal occupation of the
seven nominated directors of the Company as at October 23, 2019 as
well as the shareholdings of each director. There are no family
relationships between any director or executive officer of the
Company.





Name
Age
Company Position
Principal Occupation
Director Since
# of Voting Securities Beneficially Owned, or Controlled or
Directed, Directly or Indirectly (3)John
Sanderson(1)
(Vancouver,
BC, Canada)
84
Director,
Chairman
of the Board of Directors
Lawyer
and arbitrator
January
2009
75,000Craig
Scherba(2)
(Oakville,
ON, Canada)
46
Director,
President
& Chief Executive Officer
President
& CEO of the Company
January
2010
600,000Robin
Borley(2)
(Johannesburg,
South Africa)
51
Director,
Senior
Vice President – Mine Development
COO of
the Company
December
2013
2,787,857Dean
Comand (1)
(Ancaster,
ON, Canada)
53
Director
Professional
Engineer. Consultant - mining and energy sectors
October
2014
0Dalton
Larson (1)
(Surrey,
BC, Canada)
79
Director
Lawyer
and arbitrator
October
2014
1,000,000Christopher
Kruba (1)
(Windsor,
ON, Canada)
44
None
Vice-President
and Counsel to Nostrum Capital Corporation
N/A
2,500,000David
McNeely (1)
(Surrey,
BC, Canada)
57
None
Anesthesia
and Critical Care at Surrey Memorial Hospital and member of
advisory boards
N/A
32,100,000





(1)
Messrs. Sanderson, Comand, Larson, Kruba and McNeely are
independent of the Company.


(2)
Messrs. Scherba and Borley are non-independent directors as they
are executive officers of the Company.


(3)
The information as to principal occupation and voting securities
(defined as securities that, by their terms, provide the
securityholders with a presently exercisable right to vote for the
election of directors) beneficially owned or controlled or
directed, directly or not directly, not being within the knowledge
of the Company, has been furnished by the respective
nominees.





7





Recommendation





The Board recommends that Shareholders vote “FOR” the
election of each of the nominated directors.





Biographies of the Nominated Directors of the Company





John Sanderson, Q.C. (Vancouver, Canada)





Mr.
Sanderson has been the Company’s Vice Chairman of the Board
since October 2009 and a director of our Company since January
2009. Mr. Sanderson was Chairman of the Board of the Company from
January 2009 to September 2009. Mr. Sanderson is a chartered
mediator, chartered arbitrator, consultant and lawyer called to the
bar in the Canadian provinces of Ontario and British Columbia. Mr.
Sanderson’s qualifications to serve as a director include his
many years of legal and mediation experience in various industries.
Mr. Sanderson is a Queen’s Counsel (Q.C.). He has acted as
mediator, facilitator and arbitrator across Canada, and
internationally, in numerous commercial transactions, including
insurance claims, corporate contractual disputes, construction
matters and disputes, environmental disputes, inter-governmental
disputes, employment matters, and in relation to aboriginal claims.
He has authored and co-authored books on the use and value of
dispute resolution systems as an alternative to the courts in
managing business and legal issues.





Craig Scherba, P.Geol. (Oakville, Canada)





Mr.
Scherba was appointed as the President and Chief Executive Officer
of the Company in August 2015 and has served as a director since
January 2010. Mr. Scherba served as President and Chief Operating
Officer from September 2012 to August 2015 and Vice President,
Exploration of the Company from January 2010 to September 2012. Mr.
Scherba has been a professional geologist (P. Geol.) since 2000,
and his expertise includes supervising large Canadian and
international exploration. Mr. Scherba also serves as Vice
President, Exploration of MacDonald Mines Exploration Ltd, Red Pine
Exploration Inc. and Honey Badger Exploration Inc. which are
resource exploration companies trading on the TSX Venture Exchange.
In addition, Mr. Scherba was professional geologist with Taiga
Consultants Ltd. (“Taiga”), a mining exploration
consulting company from March 2003 to December 2009. He was a
managing partner of Taiga between January 2006 and December 2009.
Mr. Scherba was an integral member of the exploration team that
developed Nevsun Resources’ high grade gold, copper and zinc
Bisha project in Eritrea. While at Taiga, Mr. Scherba served as the
Company's Country and Exploration Manager in Madagascar during its
initial exploration stage.





Robin Borley (Johannesburg, South Africa)





Mr.
Borley was appointed our Senior Vice President (“SVP”)
of Mine Development in December 2013 and has served as a director
since December 2013. Mr. Borley is a Graduate mining engineering
professional and a certified mine manager with more than 25 years
of international mining experience building and operating mining
ventures. He has held senior management positions both
internationally and within the South African mining industry. Until
October 2014, Mr. Borley served as Mining Director for DRA Mineral
Projects. In addition, Mr. Borley was instrumental as the COO of
Red Island Minerals in a developing a Madagascar coal venture. His
diverse career has spanned resource project management, evaluation,
exploration and mine development. Robin has completed several mine
evaluations including operational and financial evaluations of new
and existing operations across a diverse range of resource sectors.
He has experience in the management of underground and surface
mining operations from both the contractor and owner miner
environments. From 2006 through to 2012, Robin participated in the
BEE management buy-out transaction of the Optimum Colliery mining
property from BHP, through its independent listing and its ultimate
sale to Glencore in December 2012.





Dean Comand P. Eng, CET MMP CDir. (Ancaster, Canada)





Mr.
Comand has served as a director of the Company since October 2014.
He is a Mechanical Engineer and holds his P. Eng designation in the
province of Ontario as well as designation as a Certified
Engineering Technologist. Mr. Comand earned his Maintenance Manager
Professional Designation (MMP) license in 2006 and his Charter
Director designation (CDir) in 2012. Mr. Comand is currently the
President of The Comand Group which provides strategic advice to
numerous clients around the world in the mining and energy sectors.
From 2009 – 2014, Mr. Comand worked for Sherritt
International as Vice President of Operations of Ambatovy, a large
scale nickel project in Madagascar. He successfully led the
construction and commissioning of Ambatovy, and led the operations
to commercial production. He has extensive business and financial
acumen in large-scale energy, power, and mining industries. He has
consistently held senior positions in operations, business, project
development, environmental management, maintenance, and project
construction. He has managed a variety of complex operations,
including one of the world’s largest mining facilities,
industrial facilities, numerous power plants, renewable energy
facilities and privately held municipal water treatment facilities
across Canada and the United States.





8





Dalton Larson (Surrey, Canada)





Mr.
Larson has served as a director of our Company since October 2014.
Mr. Larson is a Canadian attorney with more than 35 years as a
member of the Law Society of British Columbia. He commenced
practice as a member of the Faculty of Law, University of British
Columbia, subsequently becoming a partner of a major Vancouver Law
firm, now McMillan LLP. Currently, he maintains a private practice
along with a vigorous investment business. He is a recognized
expert in alternate dispute resolution and has extensive experience
as a professional arbitrator and mediator. He has three degrees,
including a Master’s degree in law from the University of
London, England. His business activities include more than 25 years
as a director of several investment funds managed by the CW Funds
group of companies, affiliated with Ventures West Management Inc.,
which is one of the largest venture capital firms in Canada. The CW
Funds raised and invested in a wide variety of businesses totaling
more than $130 million, primarily from overseas investors. In that
period, he served as Chairman of the Board of Directors of a
Philippine ethanol company. He was the founding shareholder of the
First Coal Corporation, which started operations in 2014. He served
as the first Chairman of the Board of Directors for two years and
then participated closely in its governance and management
including serving as the Chair of the Compensation Committee.
During his tenure, the Company raised in excess of $65 million in
equity to finance its development activities, all by way of private
placements. First Coal Corporation was sold to Xstrata in excess of
$150 million. He currently serves as the Chairman of the Board of
Directors of Cloud Nine Education Group (CSE:CNI) and on the Board
of Directors of SmartCool Systems Inc. (TSX-V: SSC).





Christopher Kruba (Windsor, Canada)





Christopher
Kruba is Vice-President and Counsel to Nostrum Capital Corporation
and a number of related corporations that are part of the Toldo
Group. The Toldo Group is headquartered in Windsor, Ontario and is
composed of several privately held corporations in Canada and the
United States, some of which manufacture and operate in diversified
sectors and others which are involved in active and passive
investments across capital markets throughout North America, Europe
and Africa. In addition to his responsibilities as counsel to the
Toldo Group Mr. Kruba serves as corporate secretary to all the
companies, is a member of group’s investment committee and he
serves on the board of directors of many of the companies. In his
roles Mr. Kruba is involved in capital market decisions, he has
lead mergers and acquisitions and he has participated in the
management and strategic planning for numerous companies, including
venture capital corporations in which the group has invested. Prior
to joining the Toldo Group in 2000 Mr. Kruba articled with and
practiced at the law firm of Gignac, Sutts LLP in Windsor, Ontario.
Mr. Kruba graduated from the University of Windsor’s Faculty
of Law in 1998 and has been a Member of the Law Society of Ontario
since 1999. Nostrum Capital Corporation and Mr. Kruba personally
have been investors in NextSource Materials Inc. since
2011.





David McNeely (Surrey, Canada)





David
McNeely has a clinical practice in Anesthesia and Critical Care at
Surrey Memorial Hospital and has held numerous executive and
advisory positions over the past 25 years, which include department
leadership, patient safety and advocacy, program implementations
and physician/government contract negotiations. He was Clinical
Co-Lead of the OR Design Team for the Jim Pattison Outpatient Care
and Surgical Centre (2009-2011) and co-authored two reports on
surgical program practice and effectiveness at this facility. He
sits on the Advisory Board of SIM4MIS, a company involved with
Minimally Invasive Surgical Instrument teaching platforms. He has
been a UBC Associate Clinical Instructor since 2008. Dr. McNeely is
also a humanitarian and has worked in causes which have underscored
the critical relationship between health and environment. He is a
member of Canadian Association of Physicians for the Environment
(CAPE) and has participated in medical missions to Inuvik, NWT,
where water levels and weather are now disrupting lifestyles and
food supplies, and Ulaanbaatar, Mongolia, where smog from coal
fired energy plants are having devastating health consequences. He
was a Founding Member of Galliano Greenhouses (1994) which supplied
trees for urban reforestation projects. Mr. McNeely received a
BSc.Hons. from St. Francis Xavier University (1984), medical degree
from McGill (1989) and Anesthesia Fellowship from UBC (1994). Mr.
McNeely has been a major shareholder of the Company since
2014.





9





APPROVAL OF RE-APPOINTMENT OF MNP LLP AS AUDITORS





General Information





At the
Meeting, the Shareholders will vote to ratify the re-appointment of
MNP LLP, as the Company’s auditors for the fiscal year ending
June 30, 2020 and to authorize the Board to fix their remuneration.
MNP LLP served as auditor for the fiscal year ended June 30, 2019.
We do not expect a representative of MNP LLP to be present at the
Meeting.





The
Board has selected MNP LLP as our independent registered public
accounting firm for the fiscal year ending June 30, 2020. If
Shareholders fail to ratify the selection, it will be considered as
a direction to the Board to consider the selection of a different
firm. Even if the selection is ratified, the Board in its
discretion may select a different independent registered public
accounting firm at any time during the year if it determines that
such a change would be in the best interests of the Company and
Shareholders.





Recommendation





The Board recommends that Shareholders vote “FOR” the
ratification of the re-appointment of MNP LLP, as the
Company’s auditors for the fiscal year ending June 30, 2020
and to authorize the Board to fix their remuneration.





10





APPROVAL OF SHARE CONSOLIDATION





General Information About the Share Consolidation





At the
annual and special meeting of our Shareholders held on December 4,
2018, Shareholders approved a Share Consolidation on materially the
same terms as stated herein. The previously passed resolution
granted the Board the discretion to implement the Share
Consolidation for a period of one year.





Over
the course of the previous year, the Board considered the timing
for implementing the Share Consolidation, however, as a result of
market conditions, determined that it was in the Company’s
best interest not to implement the Share Consolidation. The Board
will continue to monitor market conditions to determine the
appropriate time to implement the Share Consolidation, however, the
previously-approved Share Consolidation may not be completed prior
to the one-year anniversary of the date the previous resolution was
passed. Accordingly, you are being asked to approve the Share
Consolidation again at the Meeting.





The
Board has determined that it is advisable and in the
Company’s and the Shareholders’ best interests to
restructure the Company’s capital and has directed the
proposal in respect of the Share Consolidation be submitted to
Shareholders to authorize the Board, in its sole discretion, to
effect a Share Consolidation (or reverse stock split), at an
exchange ratio of not less than 1-for-5 and not greater than
1-for-10 (the “Exchange
Ratio”), as shall be determined in the sole discretion
of the Board, on the terms described in this Circular. A more
detailed discussion of the Share Consolidation is presented
below.





The
Board’s primary objective in seeking authority to effect a
Share Consolidation is to increase the per-Share trading price of
the Shares. The Board believes that the low market price of the
Shares impairs the Company’s marketability and acceptance by
institutional investors and other members of the investing public
and creates a negative impression of the Company. Theoretically,
decreasing the number of Shares outstanding should not, by itself,
affect the marketability of the Shares, the type of investor who
would be interested in acquiring them, or the Company’s
reputation in the financial community. In practice, however, many
investors and market makers consider low-priced shares as unduly
speculative in nature and, as a matter of policy, avoid investment
and trading in such shares. The presence of these negative
perceptions may adversely affect not only the pricing of the Shares
but also the trading liquidity. In addition, these perceptions may
affect the Company’s commercial business and the
Company’s ability to raise additional capital through equity
and debt financings. The Board will determine whether to effect a
Share Consolidation and, if so, pursuant to which Exchange Ratio,
based upon a number of market and business factors deemed relevant
by the Board at that time, including, but not limited
to:





(i)
 historical trading
price and volumes of the Shares;





(ii)
 existing
marketability and liquidity of the Shares and the expected impact
of a Share Consolidation on the trading market, including the
anticipated post-split market price, for the Shares;





(iii)
 potential business
and strategic alternatives, if any, that are available to the
Company at that time; and





(iv)
 stock market and
economic conditions.





If the
Board elects to effect a Share Consolidation, the Company shall
issue a press release announcing the terms, Exchange Ratio and
effective date of the Share Consolidation before the Company files
an amendment to the articles of continuance with the authorities
that administer the CBCA.





11





The
following table contains examples of approximate information, as of
October 23, 2019, relating to the impact of the Share Consolidation
on the Shares based on certain of the Exchange Ratios available for
selection by the Board, without giving effect to any adjustments
for fractional Shares:





Status
Number of Shares Issued
and Outstanding (1)
Number of Shares Reserved
for Future Issuance (2)
Total
Number of Shares Fully DilutedPre-Consolidation
507,417,021
50,172,636
557,589,657Post-Consolidation
1:5 ratio
101,483,404
10,034,527
111,517,931Post-Consolidation
1:6 ratio
84,569,504
8,362,106
92,931,610Post-Consolidation
1:7 ratio
72,488,146
7,167,519
79,655,665Post-Consolidation
1:8 ratio
63,427,128
6,271,580
69,698,707Post-Consolidation
1:9 ratio
56,379,669
5,574,737
61,954,406Post-Consolidation
1:10 ratio
50,741,702
5,017,264
55,758,966





(1)
Number
of Shares Issued and Outstanding does not take into account the
treatment of any fractional Shares. See“Treatment of fractional
shares.”(2)
Shares
reserved for issuance pursuant to outstanding Options and
Warrants.





Upon
implementation of the Share Consolidation, the number of Shares
that are issued and outstanding would immediately and automatically
be reduced, as of the effective date of the Share Consolidation, by
a factor equal to the Exchange Ratio and the number of Shares
subject to outstanding stock options granted by Company
(“Options”) and
common share purchase warrants issued by the Company
(“Warrants”)
would be reduced proportionately and the respective exercise prices
would be increased proportionately.





For
example, on October 23, 2019, there were 507,417,021. Shares issued
and outstanding and 50,172,636 Shares reserved for issuance
pursuant to outstanding Options and Warrants resulting in
557,589,657 Shares on a fully diluted basis. If the Exchange Ratio
selected by the Board is 1-for-5, after the Share Consolidation,
there would be 101,483,404 Shares issued and outstanding and
10,034,527 Shares reserved for issuance pursuant to outstanding
Options and Warrants resulting in 111,517,931 Shares on a fully
diluted basis.





A Share
Consolidation would affect all Shareholders uniformly and would
have no effect on the proportionate holdings of any individual
Shareholder, with the exception of adjustments related to the
treatment of fractional Shares (as described below).








Additional Information About the Share Consolidation





Potential Benefits of the Share Consolidation





In
addition to an increase in the number of authorized and unissued
Shares that would result from implementing a Share Consolidation,
there are other considerations affecting the Board’s decision
to seek approval from Shareholders to effect a Share
Consolidation:





Increased Share Price





If the
Board determines to implement a Share Consolidation, the price per
Share would increase, at least initially, which could return the
Share price to a more favorable level. An increase in the per-Share
cost of the Shares should enhance the acceptability and
marketability of the Shares to the financial community and
investing public. Many institutional investors have policies
prohibiting them from holding lower-priced shares in their
portfolios, which reduces the number of potential buyers for the
Shares. If the Shares traded at a higher price, the Company could
potentially meet investing guidelines of institutional investors
and investment funds who do not currently consider the Shares to be
an eligible investment.





12





Moreover,
advisors and analysts at many broker-dealers are reluctant to
recommend lower-priced shares and do not as a practice follow the
trading activity of lower-priced shares, or if they do follow
lower-priced shares frequently require additional monitoring
activities.





Increasing
the Company’s Share price may make it easier for individual
brokers to recommend the Shares, which could generate increased
interest in the Shares. If the Company were to generate increased
interest in the Shares, the Company anticipates that the Shares
potentially would have greater liquidity. However, there can be no
assurance that a Share Consolidation would result in any increased
interest in the Shares, or that the Shares would achieve a price
level that would meet investing guidelines of institutional
investors who have not considered investing in the
Shares.





Reduced Trading Expense





As
investors tend to pay commissions based on the number of shares
traded, commissions on lower-priced shares generally represent a
higher percentage of the share price than commissions on
higher-priced shares. As a result, investors in lower-priced shares
pay transaction costs which are a higher percentage of their total
value, which may limit interest in the Shares. If the Company were
successful in raising the price per Share, the Company’s
investors could potentially incur lower transaction costs in
trading the Shares, although Shareholders who hold odd-lot
positions (less than 100 Shares) after a Share Consolidation could
experience increased transaction costs in selling their
Shares.





Effects of the Share Consolidation





Effect of a Share Consolidation on the Company’s outstanding
Shares





A Share
Consolidation will be effective immediately and without further
action by Shareholders upon the filing of an amendment to the
Company’s articles of continuance. Individual Shareholders
will own fewer Shares after a Share Consolidation, equal to the
number of Shares owned prior to the Share Consolidation divided by
the Exchange Ratio selected by the Board, subject to the
Company’s treatment of fractional Shares. A Share
Consolidation will not change the number of Shareholders of record,
although it may increase the number of Shareholders holding odd-lot
positions in the Shares. Following a Share Consolidation, all
Shares will remain fully paid and non-assessable.





Following
a Share Consolidation, the value of the Shares as designated on the
Company’s consolidated balance sheet will be decreased
proportionately based on the Exchange Ratio with a corresponding
increase in additional paid-in capital. “Earnings per
share” would increase proportionately as a result of the
Share Consolidation since there would be fewer Shares outstanding.
In future financial statements, “earnings per share”
for periods ending before the Share Consolidation would be recast
to give retroactive effect to the Share Consolidation. The Company
does not anticipate any other material accounting consequence would
arise as a result of the Share Consolidation.





As
Shareholders have no pre-emptive rights to purchase or subscribe
for any Shares, the future issuance of additional Shares will
reduce the Company’s current Shareholders’ percentage
ownership interest in the total outstanding Shares. An increase in
the number of issued and outstanding Shares in the absence of a
proportionate increase in the Company’s future earnings and
book value would dilute the Company’s projected future
earnings per share, if any, and book value per share of all
outstanding Shares. If these factors were reflected in the price
per share of the Shares, the potential realizable value of a
Shareholder’s investment could be adversely
affected.





While
the potential effects of a Share Consolidation are expected to be
similar prior to and after giving effect to the Redomicile,
contemplated changes in the Company’s capital structure in
connection with the Redomicile will lead to certain effects being
realized if a Share Consolidation is completed prior to giving
effect to the Redomicile that will not be present if a Share
Consolidation is completed prior to giving effect to the
Redomicile.





Treatment of fractional Shares





No
fractional Shares will be issued as a result of the Share
Consolidation. Shareholders who otherwise would be entitled to
receive a fractional Share because they hold a number of Shares not
evenly divisible by the Exchange Ratio selected by the Board will
automatically be entitled to receive an additional fraction of a
Share to round up to the next whole Share.





13





Effect of the Share Consolidation on Options and
Warrants





The
number of Shares subject to outstanding Options and Warrants will
automatically be adjusted by a factor equal to the Exchange Ratio
applied for the Share Consolidation and in accordance with their
terms.





No dissenters’ or appraisal rights





Under
CBCA, Shareholders are not entitled to dissenters’ or
appraisal rights in connection with the proposed amendment to the
Company’s articles of continuance to implement the Share
Consolidation. If the Company implements the Share Consolidation,
the Company will not independently make such rights available to
the Company’s Shareholders.





Interests of Directors and Executive Officers in the Share
Consolidation





The
Company’s directors and executive officers, and their
associates, have no substantial interest, directly or indirectly,
in the matters set forth in the Share Consolidation proposal except
to the extent of their ownership of Shares or Options.





Procedures to Implement the Share Consolidation





The
Share Consolidation will occur on the date that the amendment to
the Company’s articles of continuance effecting the Share
Consolidation is filed with the authorities that administer the
CBCA, unless otherwise specified in such amendment, without any
action on the part of the Shareholders and without regard to the
date that any share certificates representing the Shares prior to
the Share Consolidation are physically surrendered for new share
certificates.





Exchange of book-entry Shares





If the
Board implements the Share Consolidation, Shareholders whose Shares
are uncertificated and held in “street name” with a
broker, as non-registered Shareholders, will have their holdings
electronically adjusted by their brokers to give effect to the
Share Consolidation.





Exchange of Shares held in certificate form





SHAREHOLDERS SHOULD NOT DESTROY ANY SHARE CERTIFICATES AND SHOULD
NOT SUBMIT THEIR SHARE CERTIFICATES UNTIL THEY RECEIVE A LETTER OF
TRANSMITTAL FROM THE COMPANY’S TRANSFER
AGENT.





As soon
as practicable after the effective date, the Company’s
transfer agent, acting as exchange agent, will mail to each
registered Shareholder whose Shares are held in certificate form a
letter of transmittal to be used in forwarding their share
certificates for surrender and exchange for the whole number of new
Shares that such Shareholder is entitled to receive as a result of
the Share Consolidation. No new share certificates will be issued
to a Shareholder until the Shareholder has surrendered their
outstanding share certificate(s) together with the properly
completed and executed letter of transmittal.








Certain Risks Related to the Share Consolidation





If a Share Consolidation is effected, there is no assurance that
the Company’s market price will remain above $0.25, and the
total value of the Company’s outstanding shares may
decline.





If the
Board determines that a Share Consolidation is in the best
interests of the Company and Shareholders, the Board will set the
Exchange Ratio with the intent of raising the price per Share above
$0.25. However, there is no assurance that after the Share
Consolidation is completed, the Shares will maintain its Share
Consolidation adjusted price. As a result, the Company’s
Share price could trade below the $0.25 price. Moreover, a decline
in the market price of the Shares after a Share Consolidation may
result in a greater percentage decline than would occur in the
absence of a Share Consolidation.





Similarly,
the total value of the Company’s outstanding Shares (market
capitalization) immediately after a Share Consolidation may be
lower than immediately before a Share Consolidation, and/or the
total market capitalization may decline. If trading activity
following a Share Consolidation has the effect of reducing the
total market capitalization of the Company, the Company may be
unable to fund the Company’s activities, resulting in
reductions in Shareholders’ equity.





14





There
are numerous risks and uncertainties that could affect the value of
the Shares after a Share Consolidation including without limitation
risks and uncertainties related directly to the Company, including,
without limitation, the status of the Company’s development
programs, the Company’s cash position and results of
operations in future periods, and the Company’s ability to
attract and retain key executive management and professional
personnel, as well as other factors such as market conditions as a
whole and the general economic environment. Even though a Share
Consolidation would not directly impact the Company’s
capital, cash position, or the number of Shareholders, there may be
share-consolidation-related trading activity that may have the
effect of depressing the market price of the Shares and the
Company’s market capitalization. For these reasons, if the
Board implements a Share Consolidation, the market price of the
Shares will likely not be sustainable at the arithmetic result
obtained by applying the Exchange Ratio of the Share Consolidation
by the market price of the Shares immediately prior to the
effective date of the Share Consolidation, and the percentage
decline in the Company’s market value may be greater than
would occur in the absence of a Share Consolidation. If the market
price of the Shares declines after the Share Consolidation, the
Company’s total market capitalization (the aggregate value of
all of the Company’s outstanding Shares at the then existing
market price) after the Share Consolidation will be lower than
before the Share Consolidation.





A Share Consolidation may reduce liquidity and increase volatility
of the Shares.





Following
a Share Consolidation, the number of Shares available for trading
in the public market will be reduced by a factor equal to the
Exchange Ratio. This reduction in Shares could result in depressed
trading activity, fewer market makers and less interest in the
Shares. This could result in increased volatility and adversely
affect liquidity of the Shares.





In
addition, investors might consider the increased proportion of
unissued authorized Shares to issued Shares to have an
anti-takeover effect under certain circumstances, since the
proportion allows for dilutive issuances that could prevent certain
Shareholders from changing the composition of the Board or render
tender offers for a combination with another entity more difficult
to successfully complete. The Board does not intend for the Share
Consolidation to have any anti-takeover effects





Recommendation





The Board recommends that Shareholders vote “FOR” the
approval of the Share Consolidation and amending the articles of
continuance of the Company to effect the Share Consolidation at the
discretion of the Board as outlined above.





Share Consolidation Resolution





The
special resolution approving the Share Consolidation (the
“Share Consolidation
Resolution”) must be approved by at least two-thirds
of the votes cast by Shareholders present in person or represented
by proxy at the Meeting or any adjournment or postponement
thereof.





The
text of the Share Consolidation Resolution to be submitted to
Shareholders at the Meeting is set forth below:





“BE
IT RESOLVED THAT:





1.
 the amendment to
the articles of continuance of the Company, to be completed at the
Board’s sole discretion, to effect a share consolidation
(reverse stock split) of the Company’s outstanding common
shares in a ratio of between one-for-five and one-for-ten at any
time prior to the one year anniversary of the date hereof, without
further shareholder approval; provided that all fractional common
shares as a result of the share consolidation shall be
automatically rounded up to the next whole common share, is hereby
authorized and approved; and





2.
 any one director or
officer of the Company be and is hereby authorized and directed to
execute and deliver for and in the name of and on behalf of the
Company, whether under its corporate seal or not, all such
certificates, instruments, agreements, documents and notices and to
do all such other acts and things as in such person’s opinion
as may be necessary or desirable for the purpose of giving effect
to these resolutions.”





Proxies received in favour of management will be voted in favour of
the Share Consolidation Resolution, unless the Shareholder has
specified in the proxy that his, her or its Shares are to be voted
against the Share Consolidation Resolution.





OTHER MATTERS WHICH MAY COME BEFORE THE MEETING





Management
knows of no matters to come before the Meeting other than the
matters referred to in the notice of Meeting. Receipt at the
Meeting of reports to the Directors and auditors and the
Company’s financial statements for its last completed
financial year and the auditors’ report thereon will not
constitute approval or disapproval of any matters referred to
therein. If any matters which are not now known should properly
come before the Meeting, the accompanying form of proxy will be
voted on such matters in accordance with the best judgment of the
person voting it.





15





STATEMENT OF EXECUTIVE COMPENSATION





Under
National Instrument 51-102 – Continuous Disclosure Obligations
(“NI 51-102”)
and in accordance with Form 51-102F6 – Statement of Executive Compensation,
requires the disclosure of certain financial and other information
relating to the compensation of the Chief Executive Officer
(“CEO”), Chief
Financial Officer (“CFO”) and the three most highly
compensated executive officer, other than the CEO and CFO, who was
serving as an executive officer at the end of financial year ended
June 30, 2019 and whose total compensation exceeded CAD$150,000,
for that financial year (collectively, “NEO” or the “Named Executive Officers”) and of
the directors of the Company.





As of
the year-ended June 30, 2019 the Company had four individuals that
qualified as NEOs: Craig Scherba, President and CEO, Marc Johnson,
CFO, Robin Borley, SVP, and Brent Nykoliation, SVP. The remaining
directors of the Company are John Sanderson, Dean Comand and Dalton
Larson.





Compensation Discussion and Analysis





The
objectives of the compensation program is to balance the need to
offer competitive compensation compared to peer companies in the
mining industry and with comparably sized companies at a similar
stage of development in order to attract and retain high-calibre
executives against the need to provide compensation programs that
are fair and reasonable from the perspective of
shareholders.





The
Company compensation program has been designed to achieve the
following key objectives:





1.
 Recruit and Retain
High-Calibre Executive Management





The
Company structures its executive compensation so that it can
continue to attract, retain and motivate key executives in Canada
and South Africa in a highly competitive mining
industry.





2.
 Providing Fair and
Competitive Compensation





The
Company has established executive compensation principles and
formalized a compensation policy for its executive officers. The
executive compensation program is designed to provide fair and
competitive compensation through the following elements of
compensation: (i) a competitive cash compensation consisting of
base salary, milestone-based performance bonuses and certain
perquisites and (ii) providing an opportunity to participate in the
Company’s long-tertm growth through the grant of
Options.





3.
 Balancing the
Interests of Executive Management and Shareholders of the
Company





The
executive compensation program aligns the interests of executive
management with the interests of the shareholders through the
following elements: (i) the opportunity for executives to achieve
contractual bonuses based the achievement of specific project
development milestones and (ii) the grant of Options, which if the
price of the Company’s Shares increase over time, both
executives and Shareholders will benefit.





The
compensation program is designed to reward the advancement of the
Company’s development projects and the long-term appreciation
of the Company’s Share price.





The
basic elements of the compensation progam are base salary, annual
incentive bonuses and long-term Option incentives.





Base Salary





On an
individual basis, base salaries are reviewed for each executive
officer, including the CEO, and where it is deemed necessary,
changes are made. In order to ensure that base salaries paid are
competitive relative to other similar positions within the mining
industry in Canada and South Africa, surveys of such salaries are
examined. Other considerations taken into account when examining
base salaries include years of experience, the potential
contribution which the individual can make to the success of the
Company and the level of responsibility and authority inherent in
the job and the importance of maintaining internal equity within
the organization.





16





Annual Incentives





The
Compensation Committee may recommend bonuses be paid to executive
officers of the Company when their performance warrants additional
consideration. There is currently no annual bonus plan but the
NEO’s are eligible for certain discretionary performance
bonuses linked to achieving Company milestones:





●
 The CEO and SVP
Corporate Development will earn performance bonuses linked to the
closing of a definitive offtake agreement and the commencement of
mining and commissioning of the processing plant (payable 6 months
after commencement).


●
 The CFO will earn
performance bonuses linked to completion of the Share Consolidation
and the commencement of mining and commissioning of the processing
plant (payable 6 months after commencement).


●
 The SVP Mining will
earn performance bonuses linked to the start of plant construction
(initiation of siteworks) and the commencement of mining and
commissioning of the processing plant (payable 6 months after
commencement).





Option-Based Incentives





Options
to purchase the Shares of the Company encourage executive officers
to own and hold the Company’s Shares and are a method of
linking the performance of the Company and the appreciation of
share value to the compensation of the executive officer. When
determining the number of Options granted to an executive officer,
items such as the relative position of the individual officer, the
contribution made by that officer during the review period and the
number of Options granted previously would be taken into
consideration.





The
Compensation Committee recommends Option grants to the Board.
Pursuant to the Stock Option Plan, the Company’s Board grants
Options to directors, executive officers, other employees and
consultants as incentives. The level of Options awarded to a Named
Executive Officer (as hereinafter defined) is determined by his
position and his potential future contributions to the
Company.





Other Compensation – Perquisites





Perquisites
such as health benefits and other usual perquisites may be provided
for executives in accordance with local practices in
order.





Associated Risks





The
Compensation Committee has discussed the implications of the risks
associated with the Company’s compensation policies and
practices. The Compensation Committee works with management of the
Company to determine the risk oversight principles.





The
Company has not adopted a policy that prevents the executive
officers and directors of the Company to purchase financial
instruments, including, prepaid variable forward contracts, equity
swaps, collars or units of exchange funds, that are designed to
hedge or offset a decrease in market value of equity securities
granted as compensation or held, directly or indirectly, by the
executive officer or director





17





Summary Compensation Table





The
following table is a summary of the compensation paid, directly or
indirectly, to the Named Executive Officers and directors of the
Company for the three most recently completed financial years ended
June 30, 2019.





Name and Principal Position
Fiscal Year
Salary and Consulting Fees
($)
Option-Based Awards
($)(1)
Non-Equity Incentive Plan Compensation
($)
Pension Value
($)
All Other Compensation
($)(2)
Total Compensation
($)Craig
Scherba,
2019
179,989
87,992
Nil
Nil
4,998
272,979CEO,
President and
2018
188,586
Nil
Nil
Nil
Nil
188,586Director
(A)
2017
139,870
90,240
Nil
Nil
Nil
230,110Marc
Johnson,
2019
136,989
76,993
Nil
Nil
4,998
218,980CFO
(B)
2018
141,346
Nil
16,000
Nil
1,622
158,9682017
128,860
82,720
Nil
Nil
Nil
211,580Robin
Borley,
2019
196,800
76,993
Nil
Nil
Nil
273,793SVP
Mining and
2018
196,800
Nil
Nil
Nil
Nil
196,800Director
(C)
2017
196,800
82,720
Nil
Nil
Nil
279,520Brent
Nykoliation,
2019
136,989
76,993
Nil
Nil
4,998
218,980SVP
Corporate
2018
141,440
Nil
Nil
Nil
1,705
143,145Development
(D)
2017
132,594
82,720
Nil
Nil
Nil
215,314


(A)
 On July 30, 2015,
Mr. Scherba became the Chief Executive Officer. The Company has an
employment agreement with Mr. Scherba, who receives a salary of
CAD$20,000 per month. He is eligible to receive specific bonuses
linked to achieving company milestones.


(B)
 On October 23,
2015, Mr. Johnson became the Chief Financial Officer. The Company
has a management company agreement with Mr. Johnson, who receives
consulting fees of CAD$15,000 per month. He is eligible to receive
specific bonuses linked to achieving company milestones. His
contract has an 18-month termination notice, which increases to 36
months if within 12 months of a change of control the Company gives
notice of its intention to terminate or a triggering event occurs
and he elects to terminate.


(C)
 The Company has a
management company agreement with Mr. Borley, who receives
consulting fees of USD$16,400 per month. He is eligible to receive
specific bonuses linked to achieving company milestones. His
contract has an 18-month termination notice, which increases to 36
months if within 12 months of a change of control the Company gives
notice of its intention to terminate or a triggering event occurs
and he elects to terminate.


(D)
 The Company has a
management company agreement with Mr. Nykoliation, who receives a
salary of CAD$15,000 per month. He is eligible to receive specific
bonuses linked to achieving company milestones. His contract has an
18-month termination notice, which increases to 36 months if within
12 months of a change of control the Company gives notice of its
intention to terminate or a triggering event occurs and he elects
to terminate.


(1)
 These values
represent the calculated Black-Scholes theoretical value of granted
options. It is important to note that these granted Options may or
may not ever be exercised. Whether granted Options are exercised or
not will be based primarily, but not singularly, on the
Company’s future stock price and whether the granted Options
become “in-the-money”. If these granted Options are
unexercised and expire, the cash value or benefit to the above
noted individuals is $nil.


Other compensation
includes health benefits and other perquisites.





Option-Based Awards Outstanding





As at
June 30, 2019, a total of 19,920,000 Options granted to Named
Executive Officers were outstanding pursuant to the Stock Option
Plan and New Stock Option Plan collectively, as
follows:





Name and Principal Position
Number of Securities Underlying Unexercised Options
Exercisable
(#)
Option Exercise Price
(USD$)
Option Expiration Date
Value of unexercised in-the-money stock Options
(USD$)(1)Craig
Scherba
250,000
0.15
July 3,
2019
0CEO,
President
470,000
0.20
February
26, 2020
0and
Director
950,000
0.056
December
22, 2020
15,1052,400,000
0.066
June 9,
2022
14,4001,600,000
0.076
March
26, 2024
0Marc
Johnson
750,000
0.056
December
22, 2020
11,925CFO
2,200,000
0.066
June 9,
2022
13,2001,400,000
0.076
March
26, 2024
0Robin
Borley
350,000
0.20
February
26, 2020
0SVP
Minig and
750,000
0.056
December
22, 2020
11,925Director
2,200,000
0.066
June 9,
2022
13,2001,400,000
0.076
March
26, 2024
0Brent
Nykoliation
400,000
0.15
July 3,
2019
0SVP
Corporate
450,000
0.20
February
26, 2020
0Development
750,000
0.056
December
22, 2020
11,9252,200,000
0.066
June 9,
2022
13,2001,400,000
0.076
March
26, 2024
0Total
19,920,000


(1)
 Based on a TSX
closing price of USD$ 0.072 (CAD $0.095) on June 30, 2019 and
presuming all Options are exercised.





18





Option-Based Awards – Value Vested or Earned During the
Year





The
value vested for option and share based awards and the value earned
for non-equity incentive plans during the year ending June 30, 2019
are as follows:





Name
and
Principal
Position
Option-based awards
value vested
during the year
($)
Share-based awards
value vested
during the year
($)
Non-equity incentive plan compensation
value earned
during the year
($)Craig
Scherba,CEO, President and Director
$87,992
Nil
NilMarc
Johnson,
CFO
$76,993
Nil
NilRobin
Borley,
SVP
Mining and
Director
$76,993
Nil
NilBrent
Nykoliation,
SVP
Corporate
Development
$76,993
Nil
Nil





Performance Graph





The following table and graph compares the cumulative
total shareholder return for CDN$100 invested in Shares of the
Company on June 30, 2014 against the cumulative total shareholder
return of the S&P/TSX Capped Materials Index and the
S&P/TSX Composite Index to June 30, 2019.





June 30
2014
2015
2016
2017
2018
2019NextSource
Shares
CAD$100.00
CAD$71.43
CAD$57.14
CAD$42.86
CAD$71.43
CAD$67.86S&P/TSX Capped
Materials Index
CAD$100.00
CAD$84.23
CAD$97.58
CAD$88.77
CAD$98.10
CAD$97.12S&P/TSX Composite
Index
CAD$100.00
CAD$98.11
CAD$93.18
CAD$100.58
CAD$107.84
CAD$108.53





The
Company was affected by the mining industry slowdown from 2014 to
2015 but failed to recover in 2016/2017 due to continued weakness
in the price of graphite during this period. The price of the
Shares of the Company has improved significantly since mid-2017 due
to the improvement in the price of graphite and the achievement of
company-specific milestones in 2017, 2018 and 2019, which included
the completion of redomicile of the Company to Canada, the update
of the technical report relating to the Molo Graphite Project and
obtaining the Molo Graphite Project mining permit in early
2019.





19





Concurrent
with the submission of the mining permit for the Molo Graphite
Project to the Government of Madagascar in early 2017, the
Compensation Committee renegotiated the employment and consulting
contracts of the executive officers. As a result, the
Company’s Share price trend shown by the graph above
coincides with the increase in the Company’s compensation to
executive officers reported under this form for the same
period.





Option-Based Awards





The
Compensation Committee reviews on an annual basis the cash
compensation, performance and overall compensation package for each
of the President and Chief Executive Officer, Chief Financial
Officer, and the Senior Vice Presidents. It then submits to the
Board recommendations with respect to the basic salary, bonus and
participation in the New Stock Option Plan for such executive
officers.





Prior
to approving any grants of Options, the Board considers the
unexercised Options already granted to the individual, timing of
the expirations of those Options and the likelihood that those
Options may become exercisable relative to the stock price
performance.





Compensation Governance





The
Company has established a Compensation Committee to determine the
appropriate compensation for the Company’s directors and
officers. The Compensation Committee has a charter, a copy of which
is available on the Company’s website at www.http://nextsourcematerials.com. The
Compensation Committee determines compensation based on industry
standards, the employee or consultant’s level of experience,
and the Company’s financial situation.





The
Compensation Committee consists of Dalton Larson (Chair), John
Sanderson and Dean Comand. All members are independent as per the
standards of National Instrument 58-101. During fiscal 2019, the
Compensation Committee met four(4) times in person or by
telephone.





The
Compensation Committee reviews on an annual basis the cash
compensation, performance and overall compensation package for each
of the President and Chief Executive Officer, Chief Financial
Officer, and the Senior Vice Presidents. It then submits to the
Board recommendations with respect to the basic salary, bonus and
participation in the New Stock Option Plan for such executive
officers.





The
Compensation Committee agrees annually and on an as needed basis
with input from management, on the specific work to be undertaken
by the Compensation Committee.





Relevant Education and Experience





The
skills and experience relevant to the members of the Compensation
Committee is summarized above for each member under the heading
“Biographies of the Nominated Directors of the
Company”.





Termination And Change Of Control Benefits





The
following are the material termination and change of control
benefits payable in respect of services provided to the Company or
any of its subsidiaries that were performed by a director, NEO or
was performed by any other party but are services typically
provided by a director or NEO.





●
 The Company has an
employment agreement with Mr. Scherba, who receives a salary of
CAD$20,000 per month. He is eligible to receive specific bonuses
linked to achieving company milestones. His contract has an
18-month termination notice, which increases to 36 months if within
12 months of a change of control the Company gives notice of its
intention to terminate or a triggering event occurs and he elects
to terminate.


●
 The Company has a
management company agreement with Mr. Johnson, who receives
consulting fees of CAD$15,000 per month. He is eligible to receive
specific bonuses linked to achieving company milestones. His
contract has an 18-month termination notice, which increases to 36
months if within 12 months of a change of control the Company gives
notice of its intention to terminate or a triggering event occurs
and he elects to terminate.


●
 The Company has a
management company agreement with Mr. Borley, who receives
consulting fees of USD$16,400 per month. He is eligible to receive
specific bonuses linked to achieving company milestones. His
contract has an 18-month termination notice, which increases to 36
months if within 12 months of a change of control the Company gives
notice of its intention to terminate or a triggering event occurs
and he elects to terminate.


●
 The Company has a
management company agreement with Mr. Nykoliation, who receives a
salary of CAD$15,000 per month. He is eligible to receive specific
bonuses linked to achieving company milestones. His contract has an
18-month termination notice, which increases to 36 months if within
12 months of a change of control the Company gives notice of its
intention to terminate or a triggering event occurs and he elects
to terminate.





20





Estimated Incremental Payment on Change of Control or
Termination





The
following table provides details regarding the estimated
incremental payments from the Corporation to each of the NEOs upon
termination in connection with a change of control in accordance
with the above provisions, or upon termination without cause,
assuming a triggering event occurs on June 30, 2019.





Name and
Principal
Position
Severance Period
Without / With Change of Control
(# of months)
Base Salary
per Month
(USD$)(1)
Termination Pay Without
Change of Control
(USD$)
Termination Pay
with
Change of Control
(USD$)Craig
Scherba,
18
months
15,000
270,000
540,000CEO,
President and Director
(36
months)Marc
Johnson,
18
months
11,250
202,500
405,000CFO
(36
months)Robin
Borley,
18
months
16,400
295,200
590,400SVP
Mining and Director
(36
months)Brent
Nykoliation,
18
months
11,250
202,500
405,000SVP
Corporate Development
(36
months)


(1)
Conversion from CAD to USD using an exchange rate of $0.75 USD per
CAD





Director Compensation





The
Board, with the recommendation of the Compensation Committee,
determines the compensation payable to the directors of the Company
and reviews such compensation annually.





For the
fiscal year ending June 30, 2019, each director was entitled to (i)
a CAD$2,500monthly fee
(the Chairman is entitled to an additional CAD$1,000 monthly fee
and each Committee Chair is entitled to an additional CAD$667
monthly fee); (ii)$nilper day for each meeting attended
in person; (iii) $nilfor each meeting attended by
telephone upon furnishing an invoice for same; (iv) reimbursement
for travel and other meeting-related expenses and (v) may, from
time to time, be awarded Options under the provisions of the New
Stock Option Plan.





There
are no other arrangements under which the directors of the Company
were compensated by the Company during the most recently completed
financial year end for their services in their capacity as
directors.





Summary Compensation Table





The
following table is a summary of the compensation paid, directly or
indirectly, to the directors of the Company whom were not also NEOs
for the three most recently completed financial years ended June
30, 2019.





Name and Principal Position
Fiscal Year
Fees Earned
($)
Option-Based Awards(1)
($)
Non-Equity Incentive Plan Compensation
($)
Pension Value
($)
All Other Compensation
($)
Total Compensation
($)John
Sanderson,
2019
31,500
$82,493
Nil
Nil
Nil
113,993Chairman
(A)
2018
33,003
Nil
Nil
Nil
Nil
33,0032017
13,475
90,240
Nil
Nil
Nil
103,715Quentin
Yarie,
2019
28,500
$79,743
Nil
Nil
Nil
108,243Director
(B)
2018
29,859
Nil
Nil
Nil
Nil
29,8592017
5,775
82,720
Nil
Nil
Nil
88,495Dean
Comand,
2019
28,500
$79,743
Nil
Nil
Nil
108,243Director
(C)
2018
29,859
Nil
Nil
Nil
Nil
29,8592017
9,625
82,720
Nil
Nil
Nil
92,345Dalton
Larson,
2019
28,500
$79,743
Nil
Nil
Nil
108,243Director
(D)
2018
29,859
Nil
Nil
Nil
Nil
29,8592017
12,191
86,480
Nil
Nil
Nil
98,671


(A)
 Mr. Sanderson
receives chairman fees of CAD$3,500 per month. Mr. Sanderson became
Chairman on March 23, 2016.





21





(B)
 Mr. Yarie received
director fees of CAD$2,500 per month plus committee chair fees of
CAD$667 per month. During 2016, Mr. Yarie received salary and
consulting fees for his services as an employee of the Company and
not for his service as a Director.Mr.
Yarie resigned as a director on September 27, 2019.


(C)
 Mr. Comand receives
director fees of CAD$2,500 per month plus committee chair fees of
CAD$667 per month.


(D)
 Mr. Larson receives
director fees of CAD$2,500 per month plus committee chair fees of
CAD$667 per month.





(1)
 These values
represent the calculated Black-Scholes theoretical value of granted
options. It is important to note that these granted Options may or
may not ever be exercised. Whether granted Options are exercised or
not will be based primarily, but not singularly, on the
Company’s future stock price and whether the granted Options
become “in-the-money”. If these granted Options are
unexercised and expire, the cash value or benefit to the above
noted individuals is $nil.





Option-Based Awards – Outstanding





As at
June 30, 2019, a total of 19,800,000 Options granted to directors
who are not Named Executive Officers were outstanding pursuant to
the Stock Option Plan and New Stock Option Plan collectively, as
follows:





Name and Principal Position
Number of Securities Underlying Unexercised Options
Exercisable
(#)
Option Exercise Price
(USD$)
Option Expiration Date
Value of unexercised in-the- money
stock Options (CDN$)(1)John
Sanderson,
200,000
0.15
July 3,
2019
0Chairman
350,000
0.20
February
26, 2020
0850,000
0.056
December
22, 2020
13,5152,400,000
0.066
June 9,
2022
14,4001,500,000
0.076
March
26, 2024
0Quentin
Yarie,
250,000
0.15
July 3,
2019
0Director(2)
350,000
0.20
February
26, 2020
0750,000
0.056
December
22, 2020
11,9252,200,000
0.066
June 9,
2022
13,2001,450,000
0.076
March
26, 2024
0Dean
Comand,
Director
400,000
0.20
February
26, 2020
0750,000
0.056
December
22, 2020
11,9252,200,000
0.066
June 9,
2022
13,2001,450,000
0.076
March
26, 2024
0Dalton
Larson,
Director
200,000
0.20
February
26, 2020
0750,000
0.056
December
22, 2020
11,9252,300,000
0.066
June 9,
2022
13,8001,450,000
0.076
March
26, 2024
0Total
19,800,000


(1)
 Based on a TSX
closing price of USD$ 0.072 (CAD$0.095) on June 30, 2019 and
presuming all Options are exercised.


(2)
 Mr. Yarie resigned
as a director on September 27, 2019.





Option and Share Based Awards – Value Vested or Earned During
the Year





The
value vested for option and share-based awards and the value earned
for non-equity incentive plans during the year ending June 30, 2019
are as follows:





Name
and Principal Position
Option-based awards value vested during the year
($)
Share-based awards value vested
during the year
($)
Non-equity incentive plan compensation value earnedduring the
year
($)John
Sanderson
82,493
Nil
NilQuentin Yarie(1)
79,743
Nil
NilDean
Comand
79,743
Nil
NilDalton
Larson
79,743
Nil
Nil


(1)
 Mr. Yarie resigned
as a director on September 27, 2019.





22





STATEMENT OF CORPORATE GOVERNANCE PRACTICES


National
Policy 58-201 – Corporate
Governance Guidelines (“NP 58-201”) and National
Instrument 58-101 – Disclosure of Corporate Governance
Practices (“NI
58-101”) set out a series of guidelines for effective
corporate governance. The guidelines address matters such as the
constitution and independence of corporate boards, the function to
be performed by boards and their committees and the effectiveness
and education of board members. NI 58-101 requires the disclosure
by each reporting issuer of its approach to corporate governance
with reference to the guidelines as it is recognized that the
unique characteristics of individual corporations will result in
varying degrees of conformity. The following disclosure is provided
in accordance with the corporate governance disclosure prescribed
by Form 58-101F2 of NI 58-101.





Corporate Governance





The
Board and management consider good corporate governance to be
central to the effective and efficient operation of the Company.
The Board is committed to sound corporate governance practices,
which are both in the interest of its Shareholders and contribute
to effective and efficient decision making.





The
role of the Board is to oversee the conduct of the Company's
business, to set corporate policy and to supervise management,
which is responsible to the Board for the day-to-day conduct of
business. Material transactions are addressed at the Board level.
The Board discharges five specific responsibilities as part of its
stewardship responsibility. These are:





(1)
 Strategic Planning Process:
given the Company's size, the strategic plan is carried out
directly by management, with input from and assistance of the
Board;





(2)
 Managing Risk: the Board
directly oversees most aspects of the business of the Company and
thus, does not require elaborate systems or numerous committees to
effectively monitor and manage the principal risks of all aspects
of the business of the Company;





(3)
 Appointing, Training, and Monitoring
Senior Management: no elaborate system of selection,
training and assessment of Management has been established, given
the operations and size of the Company; however, the Board closely
monitors Management's performance, which is measured against the
overall strategic plan, through reports by and regular meetings
with management;





(4)
 Communication Policy: the
Company has a Disclosure Committee and formal disclosure policy
allowing it to communicate effectively and accurately with its
Shareholders, other stakeholders, and the public generally through
statutory filings and news releases; the Shareholders are also
given an opportunity to make comments or suggestions at Shareholder
meetings; these comments and suggestions are then factored into the
Board's decisions; and





(5)
 Ensuring the integrity of the
Company's Internal Control and Management Information
System: given the involvement of the Board in operations,
the reports from and the meetings with management, the Board can
effectively track and monitor the implementation of approved
strategies.





The
President and Chief Executive Officer of the Company is a member of
the Board, as is usual given the Company’s size. The Board
feels that this is not an impediment to the proper discharge of its
responsibilities. Interaction between members of management and the
Board, inside and outside Board meetings, ensures that the Board is
informed and the Board members' experience utilized by management.
The Board remains cognizant to corporate governance issues and
seeks to set up structures to ensure the effective discharge of its
responsibilities without creating additional costs. The Board is
committed to ensuring the Company’s long-term viability, and
the well-being of its employees and of the communities in which it
operates. The Board has also adopted a policy of permitting
individual directors, under appropriate circumstances, to engage
legal, financial or other advisors at the Company’s expense.
The majority of the Board, when elected, was comprised of
independent directors. See “Election of
Directors”.





The
Board is of the view that the Company’s approach to corporate
governance is appropriate for its current size and resources, but
will monitor its approach as it progresses in its business plans.
The Company will periodically monitor and refine such practices as
the size and scope of its operations increase. The Board regularly
reviews, evaluates and modifies its governance program to ensure it
is of the highest standard. The Board is satisfied that the
Company’s governance plan is consistent with legal and stock
exchange requirements.





23





The
Company does not have a policy requiring members of the Board to
attend annual meetings of Shareholders, although the Company
typically encourages the Board to attend.





Board of Directors





At the
last annual meeting of Shareholders, which was held on December 4,
2018, the following individuals were elected as the Company’s
directors: John Sanderson, Craig Scherba, Quentin Yarie, Robin
Borley, Jr., Dean Comand and Dalton Larson. Mr. Yarie subsequently
resigned as a director on September 27, 2019.





NI
58-101 defines an “independent director” as a director
who has no direct or indirect material relationship with the
Company. A “material relationship” is defined as a
relationship, which could, in the view of the Board, be reasonably
expected to interfere with such member’s independent
judgment. John Sanderson, Dean Comand and Dalton Larson are
considered “independent directors”.





Independent
directors do not hold regularly scheduled meetings at which
non-independent directors and members of management are not in
attendance. Independent directors are encouraged to hold
unscheduled and informal meetings to discuss issues ahead of
regularly scheduled meetings of the Board.





Since
the last annual meeting of Shareholders, the Board has met 10
times. Mr. Sanderson attended 10 meetings, Mr. Scherba attended 10
meetings, Mr. Borley attended 9 meetings, Mr. Comand attended 9
meetings, Mr. Larson attended 10 meetings. No member of the Board
attended fewer than 75% of the total number of board and committee
meetings.





Attendance
Board Meetings
Audit
Committee
Nomination
Committee
Compensation
CommitteeJohn
Sanderson
10
(Chairman)
4
2
2Craig
Scherba
10
N/A
N/A
N/ARobin
Borley
9
N/A
N/A
N/ADean
Comand
9
4
(Committee
Chair)
N/A
2Dalton
Larson
10
4
2
2
(Committee
Chair)





Board Mandate





The
Board of Directors has developed a written Board of Directors
Mandate description. The full text of the Board Mandate is attached
to this Circular as “Appendix A” and is also available
on the Company’s website at www.nextsourcematerials.com under
the “Corporate Policies & Governance”
caption.





Position Descriptions





The
Board of Directors has developed written position descriptions for
the Chair of the Board, the Chair of Board committees. The Board of
Directors has established that these Chairs are required to set the
agenda for respective meetings, assigning meeting secretaries,
calling the meetings to proper order and ensuring the meeting
agendas are respected and that matters are duly discussed. The
Board has developed a written position description for the Chief
Executive Officer, which is reviewed annually. A copy of the
Company’s position descriptions are available on the
Company’s website at www.nextsourcematerials.com under the
“Corporate Policies & Governance”
caption.





Director Orientation and Continuing Education





The
Company does not provide a formal orientation and education program
for its directors. New directors are given an opportunity to
familiarize themselves with the Company by visiting the Company's
corporate offices, meeting with other directors, reviewing the
rules and regulations of the stock exchanges where the Shares are
listed, and reviewing the Company's by-laws and related documents.
Directors are invited to speak with the Company's solicitors,
auditors and other service providers to become familiar with their
legal responsibilities.





24





Ethical Business Conduct





The
Company has instituted certain policies and procedures, including a
Code of Ethics (the “Code of
Ethics”) that applies to its directors, officers, and
employees, including its principal executive officers, principal
financial officer, principal accounting officer, controller or
persons performing similar functions. A copy of the Company’s
Code of Ethics is available on the Company’s website at
www.nextsourcematerials.com under the “Corporate Policies
& Governance” caption. If the Company makes substantive
amendments to the Code of Ethics, the Company will disclose the
nature of such amendments or waiver on the Company’s website
or in a report within four days of such amendment or
waiver.





Board of Director Committees





The
Company’s Board has three committees: Audit Committee,
Nomination Committee, and Compensation Committee.





Audit Committee





The
Audit Committee consists of Dean Comand (Chair), Dalton Larson and
John Sanderson. All members are independent as per the standards of
National Instrument 58-101. During fiscal 2019, the Audit Committee
met four (4)times in
person or by telephone.





The
Audit Committee has a charter, the full text of which is attached
to this Circular as “Appendix B” and is also available
on the Company’s website at www.nextsourcematerials.com under
the “Corporate Policies & Governance”
caption.





Nomination Committee





The
Nomination Committee consists of Dalton Larson and John Sanderson.
All members are independent as per the standards of National
Instrument 58-101. During fiscal 2019, the Nomination Committee met
2 times in person or
by telephone.





The
Company has established a Nomination Committee to appoint and
assesses the performance of directors. The Nomination Committee has
a charter, a copy of which is available on the Company’s
website at www.nextsourcematerials.com under the “Corporate
Policies & Governance” caption. The Nomination Committee
seeks to attract and maintain directors with business expertise,
and in particular, knowledge of mineral development, geology,
investment banking, corporate law and finance. Further, the Company
seeks to have the right mix of these disciplines. Nominations tend
to be the result of recruitment efforts by management and
directors, which are then presented to the Nomination Committee and
then to the Board for consideration. The Nomination Committee has
no specified policy regarding consideration of any director
candidates recommended by securityholders, as it believes the most
effective recruitment efforts are those led by management and
directors.





Compensation Committee





The
Compensation Committee consists of Dalton Larson (Chair), John
Sanderson and Dean Comand. All members are independent as per the
standards of National Instrument 58-101. During fiscal 2019, the
Compensation Committee met 2 times in person or by
telephone.





The
Company has established a Compensation Committee to determine the
appropriate compensation for the Company’s directors and
officers. The Compensation Committee has a charter, a copy of which
is available on the Company’s website at www.http://nextsourcematerials.com under
the “Corporate Policies & Governance” caption. The
Compensation Committee determines compensation based on industry
standards, the employee or consultant’s level of experience,
and the Company’s financial situation.





25





Directorships





The
following directors of the Company are presently directors of the
following other issuers that are reporting issuers, or the
equivalent, in a Canadian or foreign jurisdiction:





Director
Name of Reporting Issuer
Exchange
PositionCraig
Scherba
Honey
Badger Exploration Inc.
TSX-V
DirectorDalton
Larson
Cloud
Nine Education Group
CSE
DirectorSmartCool
Systems Inc.
TSX-V
Director


Note:
“TSX” – Toronto Stock Exchange,
“TSX-V” = TSX Venture Exchange, and “CSE” =
Canadian Securities Exchange





Director Assessments





The
Board uses peer reviews to assess, on an annual basis, the
effectiveness of the Board as a whole and of each of the individual
Directors in order to determine whether the Board is functioning
effectively.





Director Term Limits





The
Company has not instituted director term limits. The Company
believes that in taking into account the nature and size of the
Board and the Company, it is more important to have relevant
experience than to impose set time limits on a director’s
tenure, which may create vacancies at a time when a suitable
candidate cannot be identified and as such would not be in the best
interests of the Company. In lieu of imposing term limits, the
Company regularly monitors director performance through annual
assessments and regularly encourages sharing and new perspectives
through regularly scheduled Board meetings, meetings with only
independent directors in attendance, as well as through continuing
education initiatives. On a regular basis, the Company analyzes the
skills and experience necessary for the Board and evaluates the
need for director changes to ensure that the Company has highly
knowledgeable and motivated Board members, while ensuring that new
perspectives are available to the Board.





Name
Age
Director
Since
Years
of TenureJohn
Sanderson
84
January
2009
10.8
yearsCraig
Scherba
46
January
2010
9.8
yearsRobin
Borley
51
December
2013
5.9
yearsDean
Comand
53
October
2014
5.1
yearsDalton
Larson
79
October
2014
5.1
years





Female Representation in Management and on the Board





The
Company currently hassix Board members and four
executive officers, none of whom are female.





The
Company has not implemented a diversity policy; however, the
Company believes that it currently promotes the benefits of, and
need for, extending opportunities to all candidates, without
distinction as to gender, race, colour, religion, sexual
orientation, family or marital status, political belief, age,
national or ethnic origin, citizenship, disability, or any other
basis and will strive for diversity of experience, perspective and
education. The Company believes that it currently focuses on hiring
the best quality individuals for the position and also encourages
representation of women on the Board and in executive officer
positions.





While
the Nomination Committee does not have a formal diversity policy
for Board membership, the Nomination Committee seeks directors who
represent a mix of backgrounds and experiences that will enhance
the quality of the Board’s deliberations and decisions. The
Nomination Committee considers, among other factors, diversity with
respect to viewpoint, skills, experience, character and behavior
qualities in its evaluation of candidates for Board
membership.





The
Company has not adopted a written policy relating to the
identification and nomination of women directors and executive
officers. The Nomination Committee has been tasked with identifying
and nominating a woman as an eventual seventh director. The Company
has not considered the level of representation of women in its
executive officer positions or on its Board in previous nominations
or appointments (including a targeted number or
percentage).





26





The
Company’s focus has always been, and will continue to be, to
attract the highest quality executive officers and Board candidates
with special focus on the skills, experience, character and
behavioral qualities of each candidate. The Company will continue
to monitor developments in the area of diversity.





Board’s Relations with Management





The
interaction between Management and Board members, both inside and
outside of meetings of the Board, ensures that the Board is
properly informed and that the Board members’ experience is
brought to bear when needed by management.





The
Board remains sensitive to corporate governance issues and seeks to
set up the necessary structures to ensure the effective discharge
of its responsibilities without creating additional overhead costs
or reducing the return on shareholders’ equity. The Board is
committed to ensuring the long-term viability of the Company, as
well as the well-being of its consultants and of the communities in
which it operates. The Board has also adopted a policy of
permitting individual Directors under appropriate circumstances to
engage legal, financial or other expert advisors at the
Company’s expense.





AUDIT COMMITTEE INFORMATION AND OVERSIGHT





National
Instrument 52-110 – Audit
Committees (“NI
52-110”) requires that certain information regarding
the Audit Committee be included in the management Circular sent to
shareholders in connection with the issuer’s annual
meeting.





The
Audit Committee is responsible for the oversight and for
recommending the appointment, compensation, retention, termination
of an independent external auditor engaged for the purpose of
preparing or issuing an audit report or performing other audit,
review or attest services for the Company. The Company has not yet
adopted any specific policies or procedures regarding the
engagement of non-audit services, but does review such matters as
they arise in light of factors such as the Company’s current
needs and the availability of services.





The
Audit Committee consists of Dean Comand (Chair), Dalton Larson and
John Sanderson. All members are independent and “financially
literate” as per the standards of National Instrument 52-110.
During fiscal 2019, the Audit Committee met four (4)times in person or by telephone.
All Audit Committee members attended all four
meetings.





The
Audit Committee has a charter, the full text of which is attached
to this Circular as “Appendix B” and is also available
on the Company’s website at www.nextsourcematerials.com under
the “Corporate Policies & Governance”
caption.





Relevant Education and Experience





Dean Comand P. Eng, CET MMP CDir. (Ancaster, Canada)





Mr.
Comand has served as a director of the Company since October 2014.
He is a Mechanical Engineer and holds his P. Eng designation in the
province of Ontario as well as designation as a Certified
Engineering Technologist. Mr. Comand earned his Maintenance Manager
Professional Designation (MMP) license in 2006 and his Charter
Director designation (CDir) in 2012. Mr. Comand is currently the
President of The Comand Group which provides strategic advice to
numerous clients around the world in the mining and energy sectors.
From 2009 – 2014, Mr. Comand worked for Sherritt
International as Vice President of Operations of Ambatovy, a large
scale nickel project in Madagascar. He successfully led the
construction and commissioning of Ambatovy, and led the operations
to commercial production. He has extensive business and financial
acumen in large-scale energy, power, and mining industries. He has
consistently held senior positions in operations, business, project
development, environmental management, maintenance, and project
construction. He has managed a variety of complex operations,
including one of the world’s largest mining facilities,
industrial facilities, numerous power plants, renewable energy
facilities and privately held municipal water treatment facilities
across Canada and the United States.





27





Dalton Larson (Surrey, Canada)





Mr.
Larson has served as a director of our Company since October 2014.
Mr. Larson is a Canadian attorney with more than 35 years as a
member of the Law Society of British Columbia. He commenced
practice as a member of the Faculty of Law, University of British
Columbia, subsequently becoming a partner of a major Vancouver Law
firm, now McMillan LLP. Currently, he maintains a private practice
along with a vigorous investment business. He is a recognized
expert in alternate dispute resolution and has extensive experience
as a professional arbitrator and mediator. He has three degrees,
including a Master’s degree in law from the University of
London, England. His business activities include more than 25 years
as a director of several investment funds managed by the CW Funds
group of companies, affiliated with Ventures West Management Inc.,
which is one of the largest venture capital firms in Canada. The CW
Funds raised and invested in a wide variety of businesses totaling
more than $130 million, primarily from overseas investors. In that
period, he served as Chairman of the Board of Directors of a
Philippine ethanol company. He was the founding shareholder of the
First Coal Corporation, which started operations in 2014. He served
as the first Chairman of the Board of Directors for two years and
then participated closely in its governance and management
including serving as the Chair of the Compensation Committee.
During his tenure, the Company raised in excess of $65 million in
equity to finance its development activities, all by way of private
placements. First Coal Corporation was sold to Xstrata in excess of
$150 million. He currently serves as the Chairman of the Board of
Directors of Cloud Nine Education Group (CSE:CNI) and on the Board
of Directors of SmartCool Systems Inc. (TSX-V: SSC).





John Sanderson, Q.C. (Vancouver, Canada)





Mr.
Sanderson has been the Company’s Vice Chairman of the Board
since October 2009 and a director of our Company since January
2009. Mr. Sanderson was Chairman of the Board of the Company from
January 2009 to September 2009. Mr. Sanderson is a chartered
mediator, chartered arbitrator, consultant and lawyer called to the
bar in the Canadian provinces of Ontario and British Columbia. Mr.
Sanderson’s qualifications to serve as a director include his
many years of legal and mediation experience in various industries.
Mr. Sanderson is a Queen’s Counsel (Q.C.). He has acted as
mediator, facilitator and arbitrator across Canada, and
internationally, in numerous commercial transactions, including
insurance claims, corporate contractual disputes, construction
matters and disputes, environmental disputes, inter-governmental
disputes, employment matters, and in relation to aboriginal claims.
He has authored and co-authored books on the use and value of
dispute resolution systems as an alternative to the courts in
managing business and legal issues.





Audit Committee Oversight





Since
the commencement of the most recently completed financial year, the
Board adopted all the recommendations of the Audit Committee to
nominate or compensate an external auditor.





Pre-Approval Policies and Procedures





The
Audit Committee has not adopted any specific policies and
procedures regarding the engagement of non-audit services, but does
review such matters as they arise in light of factors such as the
Company’s current needs, the availability of services from
other sources and the other services provided by the
Company’s auditor.





External Auditor Services Fees





The
Board considers that the work done in the year ended June 30, 2019
by the Company’s external auditors, MNP LLP is compatible
with maintaining MNP LLP. All of the work expended by MNP LLP on
our June 30, 2019 audit was attributed to work performed by MNP
LLP’s full-time, permanent employees. The Audit Committee
reviews and must approve all engagement agreements with external
auditors.





During
the year ended June 30, 2019, the Audit Committee pre-approved all
of the fees invoiced by MNP LLP.





Audit Fees:


The
aggregate fees, including expenses, billed by the Company’s
auditor in connection with the audit of our financial statements
for the most recent fiscal year and for the review of our financial
information included in our Annual Report and our quarterly reports
during the fiscal year ending June 30, 2019 was CAD$49,542 (June
30, 2018: CAD$32,100).





28





Non-Audit Assurance Fees:


The
aggregate fees, including expenses, billed by the Company’s
auditor for assurance services unrelated to the audit for the year
ended June 30, 2019 were CAD$Nil (June 30, 2018:
CAD$23,647).





Non-Audit Taxation Fees:


The
aggregate fees, including expenses, billed by the Company’s
auditor for tax compliance services during the year ended June 30,
2019 were CAD$72,549 (June 30, 2018: CAD$6,527).





SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS





The
Company has two (2) equity compensation plans outstanding, being a
fixed stock option plan (the “Stock Option Plan”) and a 10%
rolling stock option plan that was more recently approved by
Shareholders at the last annual and special meeting of the Company
on December 4, 2018 (the “New
Stock Option Plan” and together with the Stock Option
Plan, the “Option
Plans”).





In
respect of the Option Plans: (i) since December 4, 2018, no further
awards have been or shall be granted under the Stock Option Plan;
(ii) all Options issued under the Stock Option Plan that remain
outstanding shall continue to be governed by the terms and
conditions of the Stock Option Plan; (ii) Stock Option Plan shall
terminate in November 2026; and (iii) on December 4, 2018, the New
Stock Option Plan replaced the Stock Option Plan as the
Company’s primary incentive plan.





Set
forth below is a summary of securities issued and issuable under
all equity compensation plans of the Company (being Option Plans,
collectively) as at June 30, 2019.





Name and Position
Number of securities to be issued upon exercise of outstanding
Options, Warrants and rights
(#)
Weighted-average exercise price of outstanding Options, Warrants
and rights
($)
Number of securities remaining available for future issuance under
equity compensation plans (excluding security reflected in column
(a))
(#)Equity
Compensation Plans Approved by Shareholders (Option
Plans)
40,670,000(1)
$0.08
10,071,702(2)Equity
Compensation Plans Not Approved by Shareholders
N/A
N/A
N/A


(1)
 Representing
approximately 8.0% of the 507,417, 021 Shares issued and
outstanding as at June 30, 2019.


(2)
 Representing
approximately 2.0% of the 507,417,021 Shares issued and outstanding
as at June 30, 2019.





Set
forth below is a summary of securities issued and issuable under
all equity compensation plans of the Company (being the Option
Plans, collectively) as at October 23, 2019.





Name and Position
Number of securities to be issued upon exercise of outstanding
Options, Warrants and rights
(#)
Weighted-average exercise price of outstanding Options, Warrants
and rights
($)
Number of securities remaining available for future issuance under
equity compensation plans (excluding security reflected in column
(a))
(#)Equity
Compensation Plans Approved by Shareholders (Option
Plans)
39,520,000
$0.08
11,221,702Equity
Compensation Plans Not Approved by Shareholders
N/A
N/A
N/A





29





As at
October 23, 2019, there were 39,520,000 Options issued under the
Option Plans collectively, representing approximately 8.0% of the
507,417,021Shares
issued and outstanding. Of such Options, 38,620,000 Options are
issued to existing insiders (which represents approximately 7.8% of
the currently issued and outstanding Shares of the Company) and
700,000 to current employees or consultants (which represents
approximately 0.2% of the currently issued and outstanding Shares
of the Company). The number of Options remaining for further
issuance under the Option Plans is 11,221,702, representing
approximately 2.0% of the 507,417,021 Shares issued and
outstanding.





The
following table provides details of the burn rate under the Option
Plans for the three financial years ended June 30, 2019, June 30,
2018, and the year ended June 30, 2017.





Fiscal Year Ended
Burn Rate(1)
Number of Options Granted
Weighted Average Number of Shares OutstandingYear
Ended June 30, 2019
2.4%
11,850,000
493,586,450Year
Ended June 30, 2018
0.0%
Nil
468,252,639Year
Ended June 30, 2017
4.7%
21,140,000
448,187,140


(1)
Calculated by dividing the number of Options granted under the
Option Plans during the applicable period by the weighted average
number of Shares outstanding for the applicable
period.





Summary of the Option Plans





Stock Option Plan





The
purpose of the Stock Option Plan is to advance the interests of the
Company, by providing an additional incentive to attract, retain
and motivate highly qualified and competent persons who are key to
the Company and upon whose efforts and judgment the success of the
Company and its subsidiaries is largely dependent. Eligibility of
the Stock Option Plan includes Employees, Consultants, Officers and
Directors of the Company or any subsidiary.





Subject
to adjustment in certain circumstances, the Company can issue up to
46,000,000 Optionsunder the Stock Option
Plan.





The
Board (or a committee appointed by the Board) administers the Stock
Option Plan. The Board, may designate an exercise price for Options
as the prior day closing price on a stock exchange to which the
Shares trade.





Subject
to the policies of the TSX, the Board may determine the granting of
the Options, the exercise price of the Options, and vesting
schedule and any terms and conditions attaching to such Options.
Options may be issued for a period of up to 10 years and are
non-transferrable in the ordinary course. If and for so long as the
Shares are listed on the TSX:





(i)
 the aggregate
number of Shares issued to insiders of the Company within any
12-month period, or issuable to insiders of the Company at any
time, under the Stock Option Plan and any other security-based
compensation arrangement of the Company, may not exceed 10% of the
total number of issued and outstanding Shares of the Company at
such time;





(ii)
 the maximum
aggregate number of Shares that may be reserved under the Stock
Option Plan for issuance to any one individual in any 12-month
period shall not exceed 5% of the issued and outstanding Shares at
the time of grant, unless the Company has obtained disinterested
shareholder approval for such an issuance;





(iii)
 the maximum
aggregate number of Shares that may be reserved under the Stock
Option Plan or other share compensation arrangements of the Company
for issuance to any one consultant during any 12-month period shall
not exceed 2% of the issued and outstanding Shares at the time of
grant;





(iv)
 the maximum
aggregate number of Shares that may be reserved under the Stock
Option Plan or other share compensation arrangement of the Company
for issuance to persons who are employed in investor relations
activities during any 12-month period shall not exceed 2% of the
issued and outstanding Shares at the time of grant;
and





30





(v)
 the Board shall,
through the establishment of the appropriate procedures, monitor
the trading in the securities of the Company by all optionees
performing investor relations activities.





Unless
otherwise expressly provided in any option agreement, and subject
to any applicable limitations contained in the Stock Option Plan,
the unexercised portion of any Option shall automatically and
without notice immediately terminate and become forfeited, null and
void at the time of the earliest to occur of the
following:





(i)
 the expiration of a
period not to exceed one year (such period to be determined by the
Board in its sole discretion) after the date on which the
optionee’s employment is terminated for any reason other than
by reason of (a) cause, (b) the termination of the optionee’s
employment with the Company by such optionee following less than 60
days’ prior written notice to the Company of such
termination, (c) a mental or physical disability, or (d)
death;





(ii)
 immediately upon
(a) the termination by the Company of the optionee’s
employment for cause, or (b) an improper termination;





(iii)
 the later of (a)
the expiration of a period not to exceed one year (such period to
be determined by the Board in its sole discretion) after the date
on which the optionee’s employment is terminated by reason of
a mental or physical disability, or (b) one year after the date on
which the optionee shall die if such death shall occur during such
period;





(iv)
 one year after the
date of termination of the optionee’s employment by reason of
death of the employee; or





(v)
 the expiration date
of the Option established on the date of grant and set forth in the
option agreement. Upon termination of optionee’s employment
any Option (or portion thereof) not previously vested or not yet
exercisable pursuant to the terms of the Stock Option Plan shall be
immediately cancelled.





Under
the terms of the Stock Option Plan, the Board is permitted to make
certain adjustments or modifications to the Stock Option Plan and
any Option that may have been issued under the Stock Option Plan.
Notwithstanding the amendment provisions included in the Stock
Option Plan, the following may not be amended without approval of
security holders:





(i)
 reduction in the
exercise price or purchase price benefiting an insider of the
Company;





(ii)
 any amendment to
remove or to exceed the insider participation limit;





(iii)
 an increase to the
maximum number of securities issuable, either as a fixed number or
a fixed percentage of the listed issuer's outstanding capital
represented by such securities; and





(iv)
 amendments to an
amending provision within a security based compensation
arrangement.





The
Board may grant stock appreciation rights in tandem with Options
that have been or are granted under the Stock Option Plan. A stock
appreciation right shall entitle the holder to receive in cash,
with respect to each Share as to which the right is exercised,
payment in an amount equal to the excess of the share’s fair
market value on the date the right is exercised over its fair
market value on the date the right was granted. To date no stock
appreciation rights have been granted.





The
Stock Option Plan shall terminate in November 2026.





New Stock Option Plan





The
principal purposes of the New Stock Option Plan is to secure for
the Company and its Shareholders the benefits of incentive inherent
in the share ownership by issuing Options to the employees
(including part-time employees), directors or officers of the
Company or any of its subsidiaries or affiliates, management
company employees, consultants, and service providers
(“Optionees”)
who, in the judgment of the Board, will be largely responsible for
its future growth and success. It is generally recognized that a
stock option plan of the nature provided for in the New Stock
Option Plan aids in retaining and encouraging persons of
exceptional ability because of the opportunity offered them to
acquire a proprietary interest in the Company.





31





The
maximum number of Shares available at all times for issuance under
the New Stock Option Plan or any other security based compensation
arrangements (pre-existing or otherwise) shall not exceed 10% of
the issued and outstanding Shares at the time of grant. Any
increase in the number of issued and outstanding Shares will result
in an increase in the number of Shares issuable under the New Stock
Option Plan. The New Stock Option Plan is an
“evergreen” plan and accordingly, any issuance of
Shares from treasury, including issuances of Shares in respect of
which Options are exercised, and any expired or cancelled Options,
shall automatically replenish the number of Options issuable under
the New Stock Option Plan.





The
exercise price per Share under an Option shall be determined by the
Board, but, in any event, shall not be lower than the market price
of the Shares on the date of grant of the Options, being the
closing price of the Shares on the TSX (or if the Shares are not
then listed on the TSX, on the principal stock exchange on which
such Shares are traded, on the trading day of the Option grant)(the
“Market Price”).
In the event that the Shares are not then listed and posted for
trading on a stock exchange, the Market Price shall be the fair
market value of such Shares as determined by the Board in its sole
discretion.





The
exercise price per Share under an Option shall be determined by the
Board, but, in any event, shall not be lower than the market price
of the Shares on the date of grant of the Options.





The
period within which Options may be exercised and the number of
Options which may be exercised in any such period are determined by
the Board at the time of granting the Options provided, however,
that the maximum term of any Options awarded under the New Stock
Option Plan is ten (10) years from the date of the Option
grant.





In the
event that the expiry of an Option falls within, or within two (2)
days of, a trading blackout period imposed by Company, the expiry
date of the Option shall be automatically extended to the tenth
business day following the end of the blackout period.





An
Optionee will have, in all cases subject to the original Option
expiry date and any determination otherwise by the
Board:





●
 In the event of
retirement or resignation, a 12-month period to exercise his or her
Options, which will automatically vest;


●
 In the event of the
death or disability of an Optionee, a 12-month period to exercise
his or her Options, which will automatically vest;


●
 In the event of
termination without cause of an Optionee, the Optionee will have 12
months to exercise his or her Options which have vested, but any
unvested Options will become void; and


●
 In the event of
termination with cause, Options shall become void, except as may be
set out in the Optionee’s Option commitment or as otherwise
determined by the Board in its sole discretion.





In the
event of a change of control, the vesting of all Options and the
time for the fulfilment of any conditions or restrictions on such
vesting shall be accelerated to a date or time immediately prior to
the effective time of the change of control, and the Board, in its
sole discretion, may authorize and implement any one or more of the
following additional courses of action:





●
 Terminating without
any payment or other consideration, any Options not exercised or
surrendered by the effective time of the change of
control;


●
 Causing the Company
to offer to acquire from each Optionee his or her Options for a
cash payment equal to the in-the-money amount, and any Options not
so surrendered or exercised by the effective time of the change of
control will be deemed to have expired; and


●
 An Option granted
under the New Stock Option Plan be exchanged for an option to
acquire, for the same exercise price, that number and type of
securities as would be distributed to the Optionee in respect of
the Shares issued to the Optionee had he or she exercised the
Option prior to the effective time of the change of control,
provided that any such replacement option must provide that it
survives for a period of not less than one (1) year from the
effective time of the change of control, regardless of the
continuing directorship, officership or employment of the
Optionee.





For
great certainty, and notwithstanding anything else to the contrary
contained in the New Stock Option Plan, the Board may, in its sole
discretion, in any change of control which may or has occurred,
make such arrangements as it deems appropriate for the exercise of
issued and outstanding Options including, without limitation, the
power to modify the terms of the New Stock Option Plan and/or the
Options as contemplated above. If the Board exercises such power,
the Options shall be deemed to have been amended to permit the
exercise thereof in whole or in part by the Optionee at any time or
from time to time as determined by the Board prior to or in
conjunction with completion of the change of control.





32





The
grant of Options under the New Stock Option Plan is subject to a
restriction such that the number of Shares: (i) issued to insiders
of Company, within any one-year period, and (ii) issuable to
insiders of Company, at any time, under the New Stock Option Plan,
or when combined with all of Company’s other security based
compensation arrangements, shall not exceed 10% of Company’s
total issued and outstanding Shares, respectively.





The
Board may delegate, to the extent permitted by applicable law and
by resolution of the Board, its powers under the New Stock Option
Plan to the Compensation
Committee, or such other committee as the Board may
determine from time to time, such committee consisting of no less
than two (2) members.





Options
are not assignable or transferable other than by will or by the
applicable laws of descent. During the lifetime of an Optionee, all
Options may only be exercised by the Optionee.





The
amendment provisions of the New Stock Option Plan provide the Board
with the power, subject to the requisite regulatory approval, to
make the following amendments to the provisions of the New Stock
Option Plan and any Option commitment without Shareholder approval
(without limitation):





●
 Amendments of a
housekeeping nature,


●
 Additions or
changes to any vesting provisions of an Option,


●
 Changes to the
termination provisions of an Option or the New Stock Option Plan
which do not entail an extensions beyond the original expiry
date,


●
 Addition of a
cashless exercise feature, payable in cash or securities, whether
or not providing for a full deduction of the number of underlying
Shares from the New Stock Option Plan reserves, and


●
 Amendments to
reflect changes to applicable securities or tax laws.


However,
any of the following amendments require Shareholder
approval:





●
 Reducing the
exercise price of an Option, cancelling and reissuing an Option, or
cancelling an Option in order to issue an alternative
entitlement,


●
 Amending the term
of an Option to extend the term beyond its original expiry
date,


●
 Materially
increasing the benefits to the holder of Options who is an insider
to the material detriment of Company and the
Shareholders,


●
 Increasing the
number of Shares or maximum percentage of Shares which may be
issued pursuant to the New Stock Option Plan (other than by virtue
of adjustments permitted under the New Stock Option
Plan),


●
 Permitting Options
to be transferred other than for normal estate settlement
purposes,


●
 Removing or
exceeding of the insider participation limits,


●
 Materially
modifying the eligibility requirements for participation in the New
Stock Option Plan, or


●
 Modifying the
amending provisions of the New Stock Option Plan.





INDEBTEDNESS OF DIRECTORS AND OFFICERS





No
person who is now, or was at any time since the beginning of the
most recently completed financial year of the Company has been, a
director, executive officer or senior officer of the Company, or
associate thereof, been indebted to the Company, or had
indebtedness during that period which was the subject of a
guarantee, support agreement, letter of credit or other similar
arrangement or understanding provided by the Company.


INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS





None of
the directors or senior officers of the Company, nor any proposed
director of the Company, nor any person who beneficially owns,
directly or indirectly, shares carrying more than 10% of the voting
rights attached to all outstanding shares of the Company, nor any
associate or affiliate of the foregoing persons has any material
interest, direct or indirect, in any transaction since the
commencement of the Company’s last completed fiscal year or
in any proposed transaction which, in either case, has or will
materially affect the Company.





ADDITIONAL INFORMATION


Additional
information related to the Company, including the Annual
Information Form, financial statements and management discussion
and analysis (MD&A) for the most recently completed financial
year, is available on SEDAR at www.sedar.com or on the Company
website at www.nextsourcematerials.com.





Shareholders may request copies of such financial statements and
MD&A by mailing a request to: NextSource Materials Inc.,
1001-145 Wellington Street West, Toronto, Ontario, M5J
1H8.





33








APPENDIX “A”





BOARD MANDATE





BOARD OF DIRECTORS MANDATE





The
Board of Directors (the "Board") of NextSource Materials Inc. (the
"Corporation") has the responsibilities and duties as outlined
below:





1.
 Responsible for the
stewardship of the Corporation.





2.
 To oversee the
management of the business and affairs of the
Corporation.





3.
 To perform such
duties and approve certain matters as may be required by applicable
legislation and regulations, including those of the Ontario
Securities Commission, the United States Securities and Exchange
Commission, the Toronto Stock Exchange and the New York Stock
Exchange.





4.
 To oversee the
Corporation’s strategic direction, organizational structure
and succession planning of the Chief Executive
Officer.





5.
 To adopt a
strategic planning process and review, on an annual basis, a
strategic plan for the Corporation, which takes into account, among
other things, the opportunities and risks of the
business.





6.
 To identify the
principal business risks and review and approve key policies and
practices, particularly in the areas of mine development and
safety, property acquisitions, mineral reserve and mineral resource
calculations, internal control, corporate governance and risk
management and ensure the implementation of appropriate systems to
manage those risks.





7.
 To ensure that the
Board receives from senior management the information and input
required to enable the Board to effectively perform its
duties.





8.
 To ensure the
integrity of the Corporation’s internal controls and
management information systems.





9.
 To review and
approve all material transactions.





10.
 To review the
performance of the Corporation on a consolidated basis and approve
all annual and quarterly financial statements and the declaration
of dividends.





11.
 To the extent
feasible, satisfy itself as to the integrity of the Chief Executive
Officer and other executive officers and that the Chief Executive
Officer and other executive officers create a culture of integrity
throughout the organization.





12.
 To approve the
appointment and compensation of executive management and training
and monitoring of executive management.





13.
 To develop the
Corporation’s approach to corporate governance and its
corporate governance principles and guidelines.





14.
 To provide advice
and counsel the Chief Executive Officer.





15.
 To establish
committees of the Board, delegate the appropriate responsibilities
to those said committees, and appoint the Chairs for committees of
the Board.





16.
 On the
recommendation of the Corporate Governance Committee, to appoint
directors or recommend nominees for election to the Board at the
Annual Meeting of shareholders.





17.
 From its
membership, to appoint a non-executive Chairman of the Board or
Lead Director.





18.
 To conduct and act
upon annual assessments and evaluations of the Board, committees of
the Board and individual directors.





19.
 To oversee the
establishment of processes for accurate, timely and full public
disclosure, including the Corporation’s disclosure
policy.





20.
 To ensure that
there is an ongoing, appropriate and effective process in place for
ensuring adherence to the Corporation’s Code of
Ethics.





34





APPENDIX “B”





AUDIT COMMITTEE CHARTER





GENERAL AND AUTHORITY





The
Board of Directors of NextSource Materials Inc. (the
“Company) appoints the Audit Committee (the
“Committee). The Committee is a key component of the
Company’s commitment to maintaining a higher standard of
corporate responsibility. The Committee shall review the
Company’s financial reports, internal control systems, the
management of financial risks and the external audit process. It
has the authority to conduct any investigation appropriate to its
responsibilities. The Committee has the authority to: engage
independent counsel and other advisors as it necessary to carry out
its duties; set and pay the compensation for advisors employed by
the Committee; and communicate directly with the internal and
external auditors.





RESPONSIBILITIES





Overseeing the External Audit Process - The Committee shall
recommend to the Board the external auditor to be nominated, shall
set the compensation for the external auditor and shall ensure that
the external auditor reports directly to the Committee. (b) The
Committee shall be directly responsible for overseeing the work of
the external auditor, including the resolution of disagreements
between management and the external auditor regarding financial
reporting. (c) The Committee shall review the external
auditor’s audit plan, including scope, procedures and timing
of the audit. (d) The Committee shall pre-approve all non-audit
services to be provided by the external auditor. (e) The Committee
shall review and approve the Company’s hiring policies
regarding partners, employees and former partners and employers of
the present and former external auditor. (f) The Committee shall
review fees paid by the Company to the external auditor and other
professionals in respect of audit and non-audit services on an
annual basis.





Financial Reporting and Internal Controls - (a) The
Committee shall review the annual audited financial statements to
satisfy itself that they are presented in accordance with generally
accepted accounting principles, that the information contained
therein is not erroneous, misleading or incomplete and that the
audit function has been effectively carried out. (b) The Committee
shall report to the Board with respect to its review of the annual
audited financial statements and recommend to the Board whether or
not same should be approved prior to their being publicly
disclosed. (c) The Committee shall review the Company’s
annual and interim financial statements, management’s
discussion and analysis relating to annual and interim financial
statements, and earnings press releases prior to any of the
foregoing being publicly disclosed by the Company. (d) The
Committee shall satisfy itself that adequate procedures are in
place for the review of the Company’s public disclosure of
financial information extracted or derived from the Company’s
financial statements other than the disclosure referred to in
Section 3.2(c) of this Charter, and periodically assess the
adequacy of these procedures. (e) The Committee shall oversee any
investigations of alleged fraud and illegality relating to the
Company’s finances. (f) The Committee shall establish
procedures for: (1) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters; and (2) the confidential,
anonymous submission by employees of the Company or concerns
regarding questionable accounting or auditing matters. (g) The
Committee shall meet no less frequently than annually with the
external auditor and the Chief Financial Officer or, in the absence
of a Chief Financial Officer, with the officer of the Company in
charge of financial matters, to review accounting practices,
internal controls, auditing matters and such other matters as the
Committee deems appropriate.





Risk Management - The Committee shall inquire of management
and the external auditor regarding significant risks or exposures
to which the Company may be subject, and shall assess the adequacy
of the steps management has taken to minimize such
risks.





Other Responsibilities - The Committee shall perform any
other responsibilities consistent with this Charter and any
applicable laws as the Committee or Board deems
appropriate.





35





COMPOSITION AND MEETINGS





Composition - (a) The Committee shall be composed of three
or more directors, all of whom are independent as per the
independence standards of the NYSE MKT in the United States of
America and as per the standards of NI 58-101 in Canada (each are
independent directors as they do not have involvement in the
day-to-day operations of the Company). (b) If at any time, the
Company ceases to be exempt from Part 3 of National Instrument
52-110 - Audit Committees, every audit committee member shall be
Independent, as such term is defined in said Instrument. (c)
Notwithstanding Sections 4.1(a) and 4.1(b) of this Charter, the
Committee and its membership shall at all times be so constituted
as to meet all current, applicable legal, regulatory and listing
requirements, including, without limitation, securities laws and
the requirements of the TSX and of all applicable securities
regulatory authorities. (d) Committee members will be appointed by
the Board. One member shall be designated by the Board to serve as
Chair.





Meetings - (a) The Committee shall meet at least quarterly,
at the discretion of the Chair or a majority of its members, as
circumstances dictate or are required. A minimum of two and at
least 50% of the members present in person or by telephone shall
constitute a quorum. For quorum to exist, the majority of
members’ present must not be Company’ employees,
Control Persons or officers or any of its Associates or Affiliates,
(capitalized terms as defined by the TSX). (b) If a vacancy in the
Committee exists, the remaining members may exercise all of its
powers and responsibilities provided that a quorum (as herein
defined) remains in office. (c) The time and place at which
meetings of the Committee shall be held, and the procedures at such
meetings, shall be determined by the Committee. A meeting of the
Committee may be called by letter, telephone, facsimile or
electronic means, by giving 48 hours’ notice, or such greater
notice as may be required under the Company’s By-Laws,
provided that no notice shall be necessary if all the members are
present either in person or by telephone or if those absent have
waived notice. (d) The Committee shall keep minutes of its meetings
which shall be submitted to the Board. The Committee may, from time
to time, appoint any person, who need not be a member, to act as a
secretary at any meeting. (e) The Committee may invite such
officers, directors and employees of the Company as it deems
appropriate, from time to time, to attend meetings of the
Committee. Any matters to be determined by the Committee shall be
decided by a majority of the votes cast at a meeting of the
Committee called for such purpose. Actions of the Committee may be
taken by an instrument or instruments in writing signed by all
members of the Committee, and such actions shall be effective as
though they had been decided by a majority of the votes cast at a
meeting of the Committee called for such purpose.





REPORTING TO THE BOARD





The
Committee shall report regularly to the Board on Committee
activities, findings and recommendations. The Committee is
responsible for ensuring that the Board is aware of any matter that
may have a significant impact on the financial condition or affairs
of the Company.





CONTINUED REVIEW OF CHARTER





The
Committee shall review and assess the continued adequacy of this
Charter annually and submit such proposed amendments as the
Committee sees fit to the Board for its consideration.








36