Exhibit
99.4














NEXTSOURCE MATERIALS INC.


NOTICE OF THE 2020 ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS





I am
pleased to give you notice that the 2020 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
Company’s offices at 130 King Street West, Exchange Tower
Suite 1940, Toronto, Ontario on December 29, 2020 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, 2020 and the
Auditors’ Report thereon.





2.
 To elect five (5)
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.





3.
 To approve the
re-appointment of MNP LLP, Chartered Accountants, as the
Company’s auditors for the fiscal year ending June 30, 2021
and to authorize the Board of Directors to fix their
remuneration.





4.
 To ratify, confirm
and approve, in accordance with the policies of the Toronto Stock
Exchange, the Company’s new long-term incentive plan and
certain outstanding awards issued and unallocated awards issuable
thereunder.





5.
 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.





6.
 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 November 20,
2020 (the “Circular”).





The
Board of Directors has fixed the close of business on November 19,
2020 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.





The
Meeting Materials will be available at
https://docs.tsxtrust.com/2084 on or about December 7, 2020 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 December 7, 2020.





DUE TO COVID PHYSICAL DISTANCING RESTRICTIONS, ALL SHAREHOLDERS ARE
ENCOURAGED TO VOTE IN ADVANCE USING THE ENCLOSED FORM OF PROXY
SINCE SHAREHOLDERS WILL NOT BE PERMITTED TO ATTEND THE MEETING IN
PERSON.





Any
shareholder that would like to attend the Meeting can join
ELECTRONICALLY through Zoom
using https://zoom.us/j/8234938921
or by dialing (647) 374-4685 and using Zoom meeting code
8234938921. Prior to attending, all attendees MUST obtain the Zoom meeting
PASSCODE in order to login.
The passcode can be obtained by advising the Company of your
intention to attend electronically at least three (3) business days
prior to the Meeting date by sending an email that includes your
full name (as it appears on your proxy/voting instruction form) and
contact information to info@nextsourcematerials.com.





All Shareholders are encouraged to submit your proxy votes online
before the Meeting through voteproxyonline.com
using the control number that has
been provided on your proxy/voting instruction form.
Shareholders that attend electronically and that have not already
voted by proxy will be permitted to vote their Shares during the
Meeting by requesting a ballot from the scrutineer at the start of
the Meeting.





If you
hold your Shares directly (that is, as a registered Shareholder),
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 December 23,
2020.








i





If you
hold your Shares in "street name", 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.





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





ii








NEXTSOURCE MATERIALS INC.


MANAGEMENT INFORMATION CIRCULAR


FOR THE 2020 ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS





INTRODUCTION





Unless
otherwise stated, the information contained in this Circular is as
of November 20, 2020.





No
person is authorized to give any information or to make any
representation other than those contained in this Circular and, if
given or made, such information or representation should not be
relied upon as having been authorized by the Corporation. The
delivery of this Circular shall not, under any circumstances,
create an implication that there has not been any change in the
information set forth herein since the date hereof.





All
references to shareholders in this Circular and the accompanying
Form of Proxy and Notice of Meeting are to be shareholders of
record unless specifically stated otherwise.





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





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 130
King Street West, Exchange Tower Suite 1940, Toronto, Ontario,
Canada M5X 2A2.





SOLICITATION OF PROXIES





This
Circular is being sent 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
2020 annual and special meeting of Shareholders (the
“Meeting”) to be
held 130 King Street West, Exchange Tower Suite 1940, Toronto,
Ontario, M5X 2A2 on December 29, 2020 at 10:00 a.m. (Toronto time),
or at any adjournment or postponement thereof.





Proxies
will be solicited primarily by mail but may also be solicited
personally, by telephone or electronically by the regular employees
of the Company at nominal costs. The proxy cut-off date for Shares
to be voted in advance of the Meeting will be on December 23, 2020
at 10:00 a.m. (Toronto time).





Record Date





Registered
Shareholders at the close of business on November 19, 2020, 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. 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 130 King Street West, Exchange Tower Suite
1940, Toronto, Ontario, Canada M5X 2A2.





The
Meeting Materials will be available at
https://docs.tsxtrust.com/2084 on or about December 7, 2020 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 December 7, 2020.





COVID Restrictions





DUE TO COVID PHYSICAL DISTANCING RESTRICTIONS, ALL SHAREHOLDERS ARE
ENCOURAGED TO VOTE IN ADVANCE USING THE ENCLOSED FORM OF PROXY
SINCE SHAREHOLDERS WILL NOT BE PERMITTED TO ATTEND THE MEETING IN
PERSON.





Any
shareholder that would like to attend the Meeting can join
ELECTRONICALLY through Zoom
using https://zoom.us/j/8234938921
or by dialing (647) 374-4685 and using Zoom meeting code
8234938921. Prior to attending, all attendees MUST obtain the Zoom meeting
PASSCODE in order to login.
The passcode can be obtained by advising the Company of your
intention to attend electronically at least three (3) business days
prior to the Meeting date by sending an email that includes your
full name (as it appears on your proxy/voting instruction form) and
contact information to info@nextsourcematerials.com.





All Shareholders are encouraged to submit your proxy votes online
before the Meeting through voteproxyonline.com
using the control number that has
been provided on your proxy/voting instruction form.
Shareholders that attend electronically and that have not already
voted by proxy will be permitted to vote their Shares during the
Meeting by requesting a ballot from the scrutineer at the start of
the Meeting.








3





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 meeting materials have 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. In accordance with National Instrument
54-101 – 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 meeting materials have 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 meeting materials or as otherwise provided to
you by your broker, bank, or other nominee.





Appointment and Submission of Proxies





The
persons named in the enclosed form of proxy are directors and/or
officers of the Company. 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. In all cases, the
completed proxy is to be delivered to the TSX Trust Company, 100
Adelaide Street West, Suite 301, Toronto, Ontario, Canada, M5H 4H1,
Attention: Proxy Department, by December 23, 2020 at 10:00 a.m.
(Toronto time). You can also submit
your proxy votes online through voteproxyonline.com
and using the control number that
will be provided on the Proxy/VIF.





Manner of Voting and Exercise of Discretion by Proxies





Your
Shares will be voted at the Meeting in accordance with the
instructions contained in the form of proxy or voting instruction
form. Your Shares will be voted for, against 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. Shareholders that attend electronically will be permitted
to vote their Shares during the Meeting by requesting a ballot from
the scrutineer at the start of the Meeting.





Revocability of Proxies





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; or (ii) by
timely delivery of a valid, later dated proxy; or (iii) by
electronically 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.





Quorum and Approval





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.





Unless
otherwise noted, approval of matters to be placed before the
Meeting are by “ordinary resolution”, which is a
resolution passed by a simple majority (50% plus 1) of the votes
cast by Shareholders of the Company entitled to vote and present in
person or represented by proxy.








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, 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.





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, the
LTIP Plan Resolution, 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
the date hereof, the Company has 598,073,572Shares 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 the date hereof, 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.





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 22, 2020 (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.





PARTICULARS OF MATTERS TO BE ACTED UPON AT THE MEETING





1.
 FINANCIAL STATEMENTS





The
audited financial statements of the Company for the year ended June
30, 2020, together with the auditor’s report thereon, will be
presented to the Shareholders at the Meeting. The Company’s
financial statements and management discussion and analysis are on
available on SEDAR at www.sedar.com.





5





2.
 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
five (5) nominated directors of the Company 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
(1)
Director
Since
# and % of
Common Shares Beneficially Owned, Controlled or Directed, Directly
or Indirectly (2)Brett
Whalen (3)
(Markham,
ON, Canada)
45
Non-Executive
Chairman of the Board of Directors
Investor
July
2020
6,500,000
(1.1%)Craig
Scherba
(Oakville,
ON, Canada)
48
Director,
and
President
& Chief Executive Officer

January
2010
600,000
(0.1%)Robin
Borley
(Johannesburg,
South Africa)
52
Director,
and
Senior
Vice President – Mine Development,

December
2013
5,743,413
(1.0%)Christopher
Kruba (3)(4)(5)(6)
(Windsor,
ON, Canada)
45
Director
Vice-President
and Senior Counsel of Nostrum Capital Corporation
December
2020
2,900,000
(0.5%)David
McNeely (3)(4)(5)(6)
(Surrey,
BC, Canada)
58
Director
Physician
December
2020
31,600,000
(5.3%)





(1)
Other than Company Position as described by the respective
individual.


(2)
The number of securities beneficially owned or controlled or
directed, directly or not directly, is not within the knowledge of
the Company and has been furnished by the respective
individual.


(3)
Brett Whalen, Christopher Kruba and David McNeely are independent
directors of the Company.





6





(4)
Members of the Audit Committee are Christopher Kruba (Chair), David
McNeely and Dean Comand.


(5)
Members of the Nomination Committee are Dean Comand (Chair),
Christopher Kruba, and David McNeely.


(6)
Members of the Compensation Committee are Dean Comand (Chair),
Christopher Kruba, and David McNeely.


(7)
Mr. Dean Comand has declined to be renominated to the Board of
Directors and will resign on December 29, 2020.





Biographies of the Nominated Directors of the Company





Brett Whalen (Markham, Canada)





Mr.
Whalen has been a director since July 2020 and was appointed as
Non-Executive Chairman in July 2020. Mr. Whalen has over 20 years
of investment banking and M&A expertise, spending over 16 of
those years at Dundee Corporation (Dundee Corp.). During his tenure
at Dundee Corp., Mr. Whalen was directly involved in completing
approximately $2 billion in M&A deals and helped raise over $10
billion dollars in capital to the resource sector. Mr. Whalen
became Vice President and Portfolio Manager of Goodman and Company
(a division of Dundee), and was President and CEO of the CMP Group
of Companies. Mr. Whalen has held Board seats of several TSX-listed
and privately held companies and holds a BA (Honours) degree in
Economics and Finance from Wilfrid Laurier University.





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 been 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 been 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.





Christopher Kruba (Windsor, Canada)





Christopher R.
Kruba has been a director since December 2019. Mr. Kruba is
Vice-President and Senior Counsel to Nostrum Capital Corporation.
Nostrum Capital Corporation is part of the Toldo Group, which is a
group of privately held related corporations based in Windsor,
Ontario, Canada. The Toldo Group corporations are involved in
various manufacturing industries and they have invested in a global
diversified list of asset-based corporations. In addition to his
responsibilities as counsel, Mr. Kruba serves on the Toldo Group
investment committee and assists in overseeing a diversified
portfolio of assets and investments. Prior to joining the Toldo
Group in 2000 Mr. Kruba practiced law at the law firm of Gignac,
Sutts LLP in Windsor, Ontario. Mr. Kruba is a graduate of the
University of Windsor’s Faculty of Law and he is a Member of
the Law Society of Ontario.





David McNeely (Surrey, Canada)





Dr.
McNeely has been a director since December 2019. He has over 25
years of experience as a Physician and also brings significant
experience resulting from work in Departmental Administration,
Program Development and Review, Patient Safety and Advocacy,
Contract Negotiations, Regulatory and Professional Practice
Oversight, and University Student Education. He has volunteered
with medical missions to Inuvik, NWT and Ulaanbaatar, Mongolia and
understands the important relationship between health and
responsible environmental/social stewardship. Dr. McNeely has been
an active front-line worker through the COVID-19 Pandemic, having
worked on the Airway Team at Surrey Memorial Hospital, a COVID
referral center, and in policy development and implementation for
this crisis. He is a major shareholder of NextSource
Materials.





7





Recommendation





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





3.
 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, 2021 and to authorize the Board to fix their remuneration.
MNP LLP served as auditor for the fiscal year ended June 30, 2020.
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, 2021. 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, 2021
and to authorize the Board to fix their remuneration.





4.
 SHAREHOLDER APPROVAL OF LONG TERM INCENTIVE PLAN





At the
Meeting, Shareholders will be asked to consider and, if deemed
appropriate, to pass, with or without variation, the following
resolution to approve the Long Term Incentive Plan and the
unallocated Awards issuable thereunder (the “LTIP Plan
Resolution”):





“WHEREAS
the Board of Directors of the Company approved on November 18, 2020
the adoption of an long-term incentive plan (the
“LTIP Plan”) of
the Corporation, as set out in the management information circular
of the Company dated November 20, 2020 (the “Circular”), for the benefit of
directors, officers, senior executives and other employees of the
Company or a subsidiary, consultants and service providers
providing ongoing services to the Company and its
affiliates;





AND WHEREAS under the LTIP Plan, the total number of Shares
reserved and available for grant and issuance pursuant to Awards
(as defined under the LTIP Plan) under the LTIP Plan, shall not
exceed a number of Shares equal to ten percent (10%) of the total
issued and outstanding Shares of the Company at the time of
granting of Awards (on a non-diluted basis);





AND WHEREAS since the LTIP Plan was adopted by the Board, on
November 18, 2020, the Board of Directors of the Company granted
5,174,440 RSUs to the officers of the Corporation under the LTIP
Plan (the “Granted
RSUs”) which are subject to shareholder ratification.
The Granted RSUs have an exercise price of $Nil, will vest upon
achieving a project financing milestone and 33.33% of the RSUs will
expire on each of Feb 16, 2021, August 16, 2021 and Feb 16,
2022;





NOW THEREFORE BE IT HEREBY RESOLVED THAT:





1.
 the LTIP Plan as
set out in the Circular be and is hereby approved;





2.
 the Granted RSUs as
set out in the Circular be and are hereby ratified;





3.
 the Company be and
is hereby authorized to grant Awards to acquire up to 10% of the
issued and outstanding common shares in the capital of the Company
from time to time in accordance with the terms of the LTIP Plan;
and





4.
 any one director or
officer of the Company be and is hereby authorized, for and on
behalf of the Company, to execute and deliver all documents and do
all things as such person may determine to be necessary or
advisable to give effect to this resolution, the execution of any
such document or the doing of any such other act or thing being
conclusive evidence of such determination.”





Recommendation





The Board recommends that Shareholders vote “FOR” the
LTIP Plan Resolution.





General Information About the LTIP Plan





On
November 18, 2020, the Board adopted a new long-term incentive plan
for the Company (the “LTIP
Plan”). Prior to the adoption of the LTIP Plan by the
Board, the security-based compensation plans which the Company had
available in order to attract, retain and motivate directors,
officers, senior executives and other employees of the Company and
consultants and service providers providing ongoing services to the
Company, were its existing stock option plans (the
“Existing Option
Plans”), pursuant to which the Board was able to grant
stock options to such individuals. With the growth of the
Company’s business subsequent to adoption of the Existing
Option Plans, the Board determined it was in the best interests of
the Company to adopt a new security-based compensation plan which
would provide the Board with the ability and flexibility to make
broader and different forms of equity rewards as part of its need
to retain a competitive compensation structure for its directors,
officers, executives, employees, consultants and service
providers.








8





Consequently,
the Board adopted the LTIP Plan as a means to grant options
(“Options”),
restricted share units (“RSUs”), deferred share units
(“DSUs”), share
appreciation rights (“SARs”) and retention awards
(“Retention
Awards”, and together with the Options, the RSUs, the
DSUs and the SARs, the “Awards”) to directors, officers,
senior executives and other employees of the Company or a
subsidiary, consultants and service providers providing ongoing
services to the Company and its affiliates (“Eligible Participants”, and when
such Eligible Participants are granted Awards (as defined below),
the “Participants”) in order to
attract, retain and motivate such persons as individuals whose
skills, performance and loyalty to the objectives and interests of
the Company are necessary to the Company’s success, to
incentivize them to continue their services for the Company, and to
align their interests with those of the Company.





A
complete copy of the LTIP Plan is set out in Appendix
“C” of this Circular, and a summary of the material
provisions of the LTIP Plan is set out below.





The
adoption of the LTIP Plan by the Board was subject to approval of
the LTIP Plan by the Shareholders in accordance with the rules of
the TSX. Under TSX rules, security-based compensation arrangements
that are “evergreen plans”, like the LTIP Plan, which
contain provisions which provide for the replenishment of the
number of securities reserved when Awards are exercised, must be
approved by shareholders upon adoption and every three years
thereafter. Accordingly, at the Meeting, Shareholders will be asked
to approve the LTIP Plan and the unallocated Awards issuable
pursuant to the LTIP Plan, as set out below. If approval of the
LTIP Plan is obtained at the Meeting, the Company will not be
required to seek further approval of the grant of unallocated
Awards under the LTIP Plan until the Company’s 2023 annual
Shareholders’ meeting (provided that such meeting is held on
or prior to December 29, 2023).





Since
the LTIP Plan was adopted by the Board, 5,174,424 RSUs have been
granted to the officers of the Corporation under the LTIP Plan (the
“Granted RSUs”).
The Granted RSUs have an exercise price of $nil, will vest upon
achieving a project financing milestone and 33.33% of the RSUs will
expire on each six (6) month anniversary of the grant.





The
Granted RSUs cannot be exercised until such time that the
Shareholders have approved and ratified the LTIP Plan and the grant
of the Granted RSUs. Should Shareholders fail to approve the LTIP
Plan, the Granted RSUs will be cancelled forthwith (but could then
be replaced by stock options under the Existing Option Plan as an
alternative to the LTIP Plan).





Summary of the LTIP Plan





The
following is a summary of the material provisions of the LTIP
Plan:





Administration
The
LTIP Plan is administered and interpreted by the Board. The Board
may decide by resolution to appoint a committee of at least three
members to administer and interpret the LTIP Plan. The Board and
the committee may also delegate to one or more officers of the
Company, or to a committee of such officers, the authority, subject
to such terms and limitations as the Board or the committee may
determine, to grant, cancel, modify, waive rights with respect to,
alter, discontinue, suspend or terminate Awards.Eligibility
The
persons eligible to receive Awards are the Eligible
Participants.Reserve Maximum
Subject
to adjustment, the total number of Shares reserved and available
for grant and issuance pursuant to Awards under the LTIP Plan shall
not exceed a number of Shares equal to ten percent (10%) of the
total issued and outstanding Shares of the Company at the time of
granting of Awards (on a non-diluted basis) or such other number as
may be approved by the Shareholders of the Company from time to
time.

The
LTIP Plan is a “rolling plan” and “evergreen
plan”. This means any increase in the issued and outstanding
Shares (whether as a result of exercise of Awards or otherwise)
will result in an increase in the number of Shares that may be
issued on Awards outstanding at any time and any increase in the
number of Awards granted will, upon exercise, make new grants
available under the LTIP Plan.





9








Current Reserve
As of
the date of this Circular, the Company had 598,073,572 Shares
issued and outstanding. Consequently, 59,807,357 Shares are
available to be reserved for issuance under the Company’s
security-based compensation plans. This represents 10% of the
issued and outstanding Shares.

The
Company does not currently have any other security-based
compensation plan other than the Existing Option Plans, under which
stock options to acquire 36,250,000 Shares have been granted as of
the date of this Circular. This represents 6.1% of the issued and
outstanding Shares. No additional stock options will be granted
under the Existing Option Plans. The stock options granted under
the Existing Option Plans are in addition to any Awards which may
be made under the LTIP Plan. The exercise, cancellation or
expiration of the stock options granted under the Existing Option
Plans will make new grants available under the LTIP
Plan.

Accordingly,
as of the date of this Circular, there is a current reserve of
23,557,357 Shares available to be reserved for issuance under the
LTIP Plan. This is equivalent to 3.9% of the issued and outstanding
Shares.Participation Limits
The
LTIP Plan does not include insider participation
limits.Market Value as of Grant
Options

The
option price for Shares that are the subject of any Option shall be
determined by the Board at the time the Option is granted, but may
not be less than Market at the time of grant. The terms of the LTIP
Plan allow for the exercise of an Option on a cashless basis subjet
to approval by the Board o Directors. The number of Shares received
on the cashless exercise of an Option is determined by taking (i)
the difference between (A) the Market Value and (B) the exercise
price of such Option, (ii) multiplying that difference by the
number of Shares to which such Option relates, and then (iii)
dividing that product by the Market Value.

DSUs

Each
Eligible Participant may elect, once each calendar year, to be paid
a percentage of his or her annual retainer in the form of DSUs. The
number of DSUs an Eligible Participant is entitled to receive is
calculated by taking (i) the percentage elected by the Eligible
Participant, (ii) multiplying that percentage by the Eligible
Participant’s annual retainer, and then (iii) dividing that
product by the Market Value.

RSUs

The
purchase price of an RSU is determined by the Board and may be
zero.

SARs

The
exercise price of a SAR shall be fixed by the Board, but may not be
less than the Market Value at the time of grant. Upon exercise, the
holder is entitled to receive the number of Shares equal to the
excess of the Market Value on the effective date of such exercise
over the exercise price of the SAR.

Retention Awards

A
retention award entitles an Eligible Participant to receive the
number of Shares that is equal to the retention payment divided by
the Market Value on the vesting date of the retention award,
disregarding fractions and less any amounts withheld for
taxes.

“Market
Value” means at any date when the Market Value of
Shares of the Company is to be determined, and (i) if the Shares of
the Company are listed on the TSX, the “market price”
as defined in Part I of the TSX Company Manual, as same may be
amended, supplemented or replaced from time to time; or (ii) if the
Shares of the Company are not listed on any stock exchange, the
value as is determined solely by the Board, acting reasonably and
in good faith.





10








Market Appreciation/Dividend Payment
The
LTIP Plan contemplates the award of SARs.

In
addition, a holder of DSUs and RSUs is entitled to receive
additional DSUs or RSUs (or fractions thereof) when dividends are
declared and paid on Shares. The additional DSUs and RSUs are based
on (i) the actual amount of dividends that would have been paid if
the Participant had held Shares under the LTIP Plan on the
applicable record date divided by (ii) the Market Value on the date
on which the dividends on Shares are payable.Vesting
Options

The
Board shall, from time to time by resolution, determine the vesting
provisions of the Options.

DSUs

The
Board may, at the time of grant, make DSUs subject to restrictions
and conditions (i.e. continuing employment or achievement of
pre-established performance goals). DSUs are exercisable
immediately following the date a Participant resigns or is
terminated.

RSUs

The
relevant conditions and vesting provisions of a RSU are determined
by the Board (including the performance period and criteria, if
any). In making its determination regarding the vesting
requirements applicable to any RSUs, the Board shall ensure that
such requirements are not considered a “salary deferral
arrangement” for purposes of applicable legislation. The
Board also sets a date upon which it is determined whether the
vesting conditions with respect to RSUs have been met (the
“RSU Vesting Determination Date”). This then
establishes the number of RSUs that become vested. The RSU Vesting
Determination Date cannot fall outside the period (the
“Restricted Period”) that ends on December 31 of the
year that is three (3) years after the calendar year in which the
grant of RSUs was made. Any RSU that remains unvested on the RSU
Vesting Determination or at the end of the Restricted Period,
whichever is earlier, is cancelled.

SARs

The
relevant conditions and vesting provisions of a SAR are determined
by the Board (including the performance period and criteria, if
any).

Retention Awards

The
relevant conditions and vesting provisions of a Retention Award are
determined by the Board (including the performance period and
criteria, if any).Term
Options

The
Board shall determine the period in which an Option is exercisable.
An Option cannot expire later than ten (10) years from the date it
is granted.

DSUs

A
Participant may redeem his or her DSUs up to the 120th day after
the date of his or her termination.

RSUs

The
Board shall determine the Restricted Period, provided such
Restricted Period cannot expire later than December 31 of the year
that is three (3) years after the calendar year in which the grant
of RSUs was made.

SARs

The
Board shall determine the period during which a SAR is exercisable,
provided such period cannot expire more than ten (10) years from
the date the SAR was granted.

Retention Awards

The
relevant conditions and vesting provisions of a Retention Award are
determined by the Board (including the performance period and
criteria, if any).





11








Cessation
Options, SARs and Retention Awards

Termination
for Cause.

Any
Option, SAR or Retention Award, or any unexercised or unvested
portion thereof, shall terminate when a Participant ceases to be an
Eligible Participant for “cause”.“Cause”
shall include, among other things, gross misconduct, theft, fraud,
breach of confidentiality or breach of the any code of conduct of
the Company (or equivalent policy) and any reason determined by the
Company to be cause for termination.

Death.

Any
vested Option, SAR or Retention Award or the unexercised portion
thereof (“Vested
Award”), may be exercised by the estate of a
Participant if such Participant dies while he or she is an Eligible
Participant. However, a Vested Award must be exercised (i) within
one (1) year of the Participant’s death or (ii) prior to the
expiration of the original term of such Vested Award, whichever is
earlier.

Disability.

Any
Option, SAR or Retention Award, or any unexercised portion thereof,
may be exercised by the Participant or his/her representative as
the rights to exercise accrue. However, the Award must be exercised
(i) within three (3) years of the disability, (ii) until the
Participant becomes eligible for long-term disability benefits, or
(iii) prior to the expiration of the original term of the Award,
whichever is earlier.

Other.

If a
Participant ceases to be an Eligible Participant for any reason
other than for “cause”, death, or disability, the right
to exercise an Option, SAR or Retention Award shall be limited to
and expire on the earlier of (i) one (1) year after the date the
Participant ceases to be an Eligible Participant or (ii) the expiry
date of the Award set forth in the agreement pursuant to which the
Award was granted.

RSUs

Termination
for Cause.

Any
unvested RSUs credit to a Participant’s account shall be
forfeited and cancelled immediately upon such Participant ceasing
to be an Eligible Participant for “cause” or by
resignation.

Cessation
of Employment.

When a
Participant retires, becomes eligible to receive long-term
disability benefits, or has his or her employment terminated for
reasons other than “cause” or by reason of injury or
disability, such Participant’s participation in the LTIP Plan
shall be terminated immediately. Unvested RSUs shall remain in
effect until the applicable RSU Vesting Determination
Date.

Retirement.

If a
Participant retires and becomes involved in another business or
activity in the cannabis industry prior to the applicable RSU
Determination Date, then (i) if the Board determines the vesting
conditions have not been met on the RSU Vesting Determination Date,
the unvested RSUs of such Participant shall be forfeited and
cancelled, or (ii) if the Board determines the vesting conditions
have been met on the RSU Vesting Determination Date, such
Participant is entitled to receive the number of Shares he or she
is entitled to in respect of such RSUs adjusted for the length of
service provided by the Participant to the Company.

Death.

If a
Participant dies, his or her participation in the LTIP Plan
terminates immediately. All unvested RSUs remain in effect until
the RSU Vesting Determination Date. If the Board determines the
vesting conditions have not been met on the RSU Vesting
Determination Date, the unvested RSUs of such deceased Participant
shall be forfeited and cancelled. If the Board determines the
vesting conditions have been met on the RSU Vesting Determination
Date, such deceased Participant is entitled to receive the number
of Shares he or she is entitled to in respect of such RSUs adjusted
for the length of service provided by the Participant to the
Company.

Leave
of Absence.

If a
Participant voluntarily takes a leave of absence, his or her
participation in the LTIP Plan terminates immediately. All unvested
RSUs remain in effect until the RSU Vesting Determination Date. If
the Board determines the vesting conditions have not been met on
the RSU Vesting Determination Date, the unvested RSUs of such
Participant shall be forfeited and cancelled. If the Board
determines the vesting conditions have been met on the RSU Vesting
Determination Date, such Participant is entitled to receive the
number of Shares he or she is entitled to in respect of such RSUs
adjusted for the length of service provided by the Participant to
the Company.





12








Assignability
Awards
granted under the LTIP Plan are transferrable or assignable only to
a “permitted assign”. A permitted assign means the
spouse of a Participant or a trustee, holding entity, or RRSP/RRIF
of the Participant or his or her spouse.Amendments
The
Board may amend the LTIP Plan or any Award without consent of the
Participants provided that the amendment shall:

●not
adversely alter or impair any Award previously
granted;

●be
subject to any regulatory approvals;

●be
subject to Shareholder approval, where required, provided that
Shareholder approval is not required for following amendments and
the Board may make any changes which may include but are not
limited to: (i) amendments of a “housekeeping” nature;
(ii) a change to the vesting provisions of any Award; (iii) the
introduction or amendment of a cashless exercise feature payable in
securities, whether or not such feature provides for a full
deduction of the number of underlying securities from the LTIP Plan
reserve; and (iv) the addition of or amendment to any form of
financial assistance.

The
Board needs Shareholder approval to make the following
amendments:

●any
change to the maximum number of Shares issuable under the LTIP
Plan, except any increase due to an adjustment or due to the
evergreen nature of the plan;

●any
amendment that reduces the exercise price of an Award;

●any
amendment that extends the expiry date of an Award;

●any
amendment that changes the Eligible Participants;

●any
amendment that would permit an Award to be transferable or
assignable other than as currently permitted; and

●any
amendment to the amendment provisions of the LTIP
Plan.

Shares
held directly or indirectly by insiders that may benefit from
certain amendments shall be excluded from voting when obtaining
Shareholder approval.Financial Assistance
The
LTIP Plan does not contain any form of financial
assistance.Ratification
The
Granted RSUs are subject to ratification.Black-out Period
If the
expiration date of an Option or SAR falls within a black-out period
or within the ten (10) business days following the end of the
black-out period, then the expiration of the Option or SAR is
extended to the tenth (10th) business day following the end of the
black-out period.





13








Change of Control
In the
event of a “Change in Control”, a reorganization of the
Company, an amalgamation of the Company, an arrangement involving
the Company, a take-over bid (as that term is defined in the
Securities Act (Ontario)) for all of the Shares or the sale or
disposition of all or substantially all of the property and assets
of the Company, the Board may make such provision for the
protection of the rights of the Participants as the Board in its
discretion considers appropriate in the circumstances.

“Change
in Control” means an event whereby (i) any person becomes the
beneficial owner, directly or indirectly, of 50% or more of either
the issued and outstanding Shares or the combined voting power of
the Company’s then outstanding voting securities entitled to
vote generally; (ii) any person acquires, directly or indirectly,
securities of the Company to which is attached the right to elect
the majority of the directors of the Company; (iii) the Company
undergoes a liquidation or dissolution or sells all or
substantially all of its assets; or (iv) the Board adopts a
resolution to the effect that a Change in Control as defined herein
has occurred or is imminent.Adjustments
The
LTIP Plan may be adjusted if certain changes are made to the
Company’s capitalization (e.g. subdivision, consolidation or
reclassification of or a distribution of assets on (other than an
ordinary course dividend) the Shares) in order to preclude a
dilution or enlargement of the benefits due to Participants under
the LTIP Plan.





5.
 APPROVAL OF SHARE CONSOLIDATION





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.





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.





General Information About the Share Consolidation





At the
annual and special meeting of our Shareholders held on December 2,
2019, 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
following 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.








14





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.





The
following table contains examples of approximate information, as of
the date hereof, 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
598,073,572
86,752,702
684,826,274Post-Consolidation 1:5 ratio
119,614,714
17,350,540
136,965,255Post-Consolidation 1:6 ratio
99,678,929
14,458,784
114,137,712Post-Consolidation 1:7 ratio
85,439,082
12,393,243
97,832,325Post-Consolidation 1:8 ratio
74,759,197
10,844,088
85,603,284Post-Consolidation 1:9 ratio
66,452,619
9,639,189
76,091,808Post-Consolidation 1:10 ratio
59,807,357
8,675,270
68,482,627





(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, as of the date hereof, there are 598,073,572 Shares issued
and outstanding and 86,752,702 Shares reserved for issuance
pursuant to outstanding Options, RSUs (if the LTIP Plan Resolution
is approved by Shareholders) and Warrants, resulting in 684,826,274
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
119,614,714 Shares issued and outstanding and 17,350,540 Shares
reserved for issuance pursuant to outstanding Options, RSUs and
Warrants, resulting in 136,965,255 Shares on a fully diluted
basis.








15





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).





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.





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.








16





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.





Effect of the Share Consolidation on Options, RSUs and
Warrants





The
number of Shares subject to outstanding Options, RSUs (if the LTIP
Plan Resolution is approved by Shareholders) 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, Options or RSUs (if the
LTIP Plan Resolution is approved by Shareholders).





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.








17





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





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.





18





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, 2020 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, 2020 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
independent directors of the Company are Brett Whalen, Chris Kruba,
Dave McNeely and Dean Comand.





Executive 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. If the LTIP Plan
Resolution is approved by Shareholders at the Meeting, the
compensation program will also include other long-term
security-based Awards.





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.





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).





19





●
 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).





Security-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 2018 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.





If the
LTIP Plan Resolution is approved by Shareholders at the Meeting,
Named Executive Officers may be issued other long-term
security-based Awards for the financial year ended June 30,
2021.





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





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, 2020.





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,CEO, President and Director (A)
2020
179,603
Nil
Nil
Nil
3,746
183,3492019
179,989
87,992
Nil
Nil
4,998
272,9792018
188,586
Nil
Nil
Nil
Nil
188,586Marc
Johnson,
CFO
(B)
2020
134,882
Nil
Nil
Nil
3,746
138,6282019
136,989
76,993
Nil
Nil
4,998
218,9802018
141,346
Nil
16,000
Nil
1,622
158,968Robin
Borley,
SVP
Mining and Director (C)
2020
196,800
Nil
Nil
Nil
Nil
196,8002019
196,800
76,993
Nil
Nil
Nil
273,7932018
196,800
Nil
Nil
Nil
Nil
196,800Brent
Nykoliation, SVP Corporate Development (D)
2020
134,882
Nil
Nil
Nil
3,746
138,6282019
136,989
76,993
Nil
Nil
4,998
218,9802018
141,440
Nil
Nil
Nil
1,705
143,145


(A)
 Mr. Scherba became
the Chief Executive Officer on July 30, 2015. 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.





20





(B)
 Mr. Johnson became
the Chief Financial Officer on October 23, 2015. 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.


(2)
 Other compensation
includes health benefits and other perquisites.





Option-Based Awards Outstanding





As at
June 30, 2020, a total of 18,000,000 Options granted to Named
Executive Officers were outstanding pursuant to the Existing Option
Plans, 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
950,000
0.056
December
22, 2020
NilCEO,
President
2,400,000
0.066
June 9,
2022
Niland
Director
1,600,000
0.076
March
26, 2024
NilMarc
Johnson
750,000
0.056
December
22, 2020
NilCFO
2,200,000
0.066
June 9,
2022
Nil1,400,000
0.076
March
26, 2024
NilRobin
Borley
750,000
0.056
December
22, 2020
NilSVP
Mining and
2,200,000
0.066
June 9,
2022
NilDirector
1,400,000
0.076
March
26, 2024
NilBrent
Nykoliation
750,000
0.056
December
22, 2020
NilSVP
Corporate
2,200,000
0.066
June 9,
2022
NilDevelopment
1,400,000
0.076
March
26, 2024
NilTotal
18,000,000


(1)
 Based on a TSX
closing price of USD$ 0.029 (CAD $0.04) on June 30, 2020 and
presuming all Options are exercised.





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, 2020
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
Nil
Nil
NilMarc
Johnson,
CFO
Nil
Nil
NilRobin
Borley,
SVP
Mining and
Director
Nil
Nil
NilBrent
Nykoliation,
SVP
Corporate
Development
Nil
Nil
Nil





21





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,
2015 against the cumulative total shareholder return of the
S&P/TSX Capped Materials Index and the S&P/TSX Composite
Index to June 30, 2020.











June
30
2015
2016
2017
2018
2019
2020NextSource
Shares
CAD
$100.00
CAD
$80.00
CAD
$60.00
CAD
$100.00
CAD
$95.00
CAD
$40.00S&P/TSX Capped
Materials Index
CAD
$100.00
CAD
$115.85
CAD
$105.39
CAD
$116.47
CAD
$115.31
CAD
$141.80S&P/TSX Composite
Index
CAD
$100.00
CAD
$94.98
CAD
$102.53
CAD
$109.92
CAD
$110.63
CAD
$104.77





The
Company stock price was affected by the mining industry slowdown
prior to 2015 but the stock price weakened throughout 2016 and 2017
due to weakness in the price of graphite during this period. The
price of the Shares of the Company improved significantly in 2018
and 2019 due to the strengthening of price of graphite and the
achievement of company-specific milestones, 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.
The stock price has declined in 2020 due to delays in obtaining the
necessary capital to begin construction of the Molo Graphite
Project and uncertainty due to COVID.





The
Compensation Committee renegotiated the employment and consulting
contracts of the executive officers in 2017, which was concurrent
with the submission of the mining permit for the Molo Graphite
Project to the Government of Madagascar.





Security-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 2018 Stock Option Plan (and, if approved, the
LTIP 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 Dean Comand, Chris Kruba and
David McNeely. All members are independent as per the standards of
National Instrument 58-101. During fiscal 2020, the Compensation
Committee met four(4)
times in person or by telephone.





22





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 2018 Stock Option Plan (and, if approved, the
LTIP 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.





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, 2020.





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,
CEO,
President and Director
18
months
(36
months)
15,000
270,000
540,000Marc
Johnson,
CFO
18
months
(36
months)
11,250
202,500
405,000Robin
Borley,
SVP
Mining and Director
18
months
(36
months)
16,400
295,200
590,400Brent
Nykoliation,
SVP
Corporate Development
18
months
(36
months)
11,250
202,500
405,000


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





23





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.





From
July 1, 2019 to December 31, 2019, each director was entitled to
(i) a CAD$2,500monthly
fee (the Non-Executive Chairman was entitled to an additional
CAD$1,000 monthly fee and each Committee Chair was 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 2018
Stock Option Plan.





From
December 1, 2020 to June 30, 2020, each director was entitled to
(i) a CAD$1,250monthly
fee (the Non- Executive Chairman was entitled to an additional
CAD$500 monthly fee); (ii)$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 2018
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. If the LTIP Plan Resolution is approved by Shareholders
at the Meeting, directors may be issued other long-term
security-based Awards for the financial year ended June 30,
2021.





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, 2020.





Name
and
Principal
Position
Fiscal
Year
Fees
Earned
($)
Option-Based
Awards(1)
($)
Non-Equity
Incentive Plan Compensation
($)
Pension
Value
($)
All Other
Compensation
($)
Total
Compensation
($)Brett
Whalen,
Non-Executive
Chairman (A)
2020
Nil
Nil
Nil
Nil
Nil
Nil2019
Nil
Nil
Nil
Nil
Nil
Nil2018
Nil
Nil
Nil
Nil
Nil
NilChris
Kruba,
Director
(B)
2020
6,563
Nil
Nil
Nil
Nil
6,5632019
Nil
Nil
Nil
Nil
Nil
Nil2018
Nil
Nil
Nil
Nil
Nil
NilDavid
McNeely, Director (B)
2020
6,563
Nil
Nil
Nil
Nil
6,5632019
Nil
Nil
Nil
Nil
Nil
Nil2018
Nil
Nil
Nil
Nil
Nil
NilDean
Comand,
Director
(C)
2020
29,752
Nil
Nil
Nil
Nil
29,7522019
28,500
79,743
Nil
Nil
Nil
108,2432018
29,859
Nil
Nil
Nil
Nil
29,859John
Sanderson (D)
2020
13,125
Nil
Nil
Nil
Nil
13,1252019
31,500
82,493
Nil
Nil
Nil
113,9932018
33,003
Nil
Nil
Nil
Nil
33,003Dalton
Larson (E)
2020
11,877
Nil
Nil
Nil
Nil
11,8772019
28,500
79,743
Nil
Nil
Nil
108,2432018
29,859
Nil
Nil
Nil
Nil
29,859Quentin
Yarie (F)
2020
7,126
Nil
Nil
Nil
Nil
7,1262019
28,500
79,743
Nil
Nil
Nil
108,2432018
29,859
Nil
Nil
Nil
Nil
29,859


(A)
 Mr. Whalen receives
chairman fees of CAD$1,750 per month and became a director on July
17, 2020. He was appointed as Non-Executive Chairman on August 19,
2019.


(B)
 Mr. Kruba and Mr.
McNeely receive director fees of $1,250 per month and became
directors on December 2, 2019.


(C)
 Mr. Comand receives
director fees of CAD$1,250 per month. From January 2020 to August
2020, he received Chairman fees of $1,750 per month. Prior to
December 31, 2019, he received director fees of CAD$2,500 per month
plus committee chair fees of CAD$667 per month. Mr. Comand has
declined to be renominated to the Board of Directors and will
resign on December 29, 2020.


(D)
 Mr. Sanderson
resigned as director on January 24, 2020. Prior to December 31,
2019, he received Chairman fees of CAD$3,500 per
month.


(E)
 Mr. Larson resigned
as director on January 24, 2020. Prior to December 31, 2019, he
received director fees of CAD$2,500 per month plus committee chair
fees of CAD$667 per month.


(F)
 Mr. Yarie resigned
as a director on September 27, 2019. Prior to resigning, he
received 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.





24





Option-Based Awards – Outstanding





As at
June 30, 2020, a total of 36,250,000 Options granted to directors
who are not Named Executive Officers were outstanding pursuant to
the Existing Option Plans, 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)Dean
Comand,
Director
750,000
0.056
December
22, 2020
Nil2,200,000
0.066
June 9,
2022
Nil1,450,000
0.076
March
26, 2024
NilTotal
4,400,000


(1)
 Based on a TSX
closing price of USD$ 0.029 (CAD $0.04) on June 30, 2020 and
presuming all Options are exercised.





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, 2020
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
($)Chris
Kruba
Nil
Nil
NilDavid
McNeely
Nil
Nil
NilDean
Comand
Nil
Nil
NilJohn
Sanderson (1)
Nil
Nil
NilDalton Larson (1)
Nil
Nil
NilQuentin Yarie (2)
Nil
Nil
Nil


(1)
 Mr. Sanderson and
Mr. Larson resigned as directors on January 24, 2020.


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





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;








25





(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.





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 2,
2019, the following individuals were elected as the Company’s
directors: Craig Scherba, Robin Borley, Jr., Dean Comand, Chris
Kruba and David McNeely. John Sanderson and Dalton Larson did not
receive a plurality of votes for and subsequently resigned as
directors. Brett Whalen was appointed as a director on July 17,
2020.





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. Brett Whalen, Chris Kruba, Dean Comand and David McNeely
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 21
times. Director attendance is set out in the following table with
the meetings attended out of the total meetings held while they
were directors. No director attended fewer than 75% of the total
number of board and committee meetings.





26








Attendance
Board
Meetings
Audit
Committee
Nomination
Committee
Compensation
CommitteeBrett
Whalen
3 /
3
(Non-Executive
Chairman)
N/A
N/A
N/ACraig
Scherba
21 /
21
N/A
N/A
N/ARobin
Borley
19 /
21
N/A
N/A
N/AChris
Kruba
21 /
21
6
(Committee
Chair)
2
4Dean
Comand
21 /
21
6
2
(Committee
Chair)
4
(Committee
Chair)David
McNeely
20 /
21
6
2
4





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.





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.





Cease Trade Orders, Bankruptcies, Penalties and
Sanctions





No
directors or executive officers of the Company: (i) is, as at the
date hereof, or has been, within 10 years before the date hereof, a
director, chief executive officer or chief financial officer of any
company (including the Company) that (a) was subject to a cease
trade order; an order similar to a cease trade order; or an order
that denied the relevant company access to any exemption under
securities legislation, that was in effect for a period of more
than 30 consecutive days (collectively, an “Order”)
that was issued while the proposed director was acting in the
capacity as director, chief executive officer or chief financial
officer, or (b) was subject to an Order that was issued after the
proposed director ceased to be a director, chief executive officer
or chief financial officer and which resulted from an event that
occurred while that person was acting in the capacity as director,
chief executive officer or chief financial officer; (ii) is, as at
the date hereof, or has been within 10 years before the date
hereof, a director or executive officer of any company (including
the Company) that, while that person was acting in that capacity,
or within a year of that person ceasing to act in that capacity,
became bankrupt, made a proposal under any legislation relating to
bankruptcy or insolvency or was subject to or instituted any
proceedings, arrangement or compromise with creditors or had a
receiver, receiver manager or trustee appointed to hold its assets;
or (iii) has, within the 10 years before the date hereof, become
bankrupt, made a proposal under any legislation relating to
bankruptcy or insolvency, or become subject to or instituted any
proceedings, arrangements or compromise with creditors, or had a
receiver, receiver manager or trustee appointed to hold the assets
of the proposed director.





27





As at
the date hereof, no directors or executive officers of the Company
have been subject to: (i) any penalties or sanctions imposed by a
court relating to securities legislation or by a securities
regulatory authority or has entered into a settlement agreement
with a securities regulatory authority; or (ii) any other penalties
or sanctions imposed by a court or regulatory body that would
likely be considered important to a reasonable Shareholder in
deciding whether to vote for a proposed director.





Conflicts of Interest





To the
best of our knowledge, and other than as disclosed in this
Circular, there are no known existing or potential conflicts of
interest between the Company and any of the directors or
officers.





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 Chris Kruba (Chair), Dean Comand and
David McNeely. All members are independent as per the standards of
National Instrument 58-101. During fiscal 2020, the Audit Committee
met six (6)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 Dean Comand (Chair), Chris Kruba
and David McNeely. All members are independent as per the standards
of National Instrument 58-101. During fiscal 2020, the Nomination
Committee met two (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 Dean Comand (Chair), Chris Kruba
and David McNeely. All members are independent as per the standards
of National Instrument 58-101. During fiscal 2020, the Compensation
Committee met four (4) 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.





Directorships





None of
the directors of the Company are presently directors of other
issuers that are reporting issuers, or the equivalent, in a
Canadian or foreign jurisdiction.





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.





28








Name
Age
Director
Since
Years of
TenureBrett
Whalen
45
July
2020
0.3
yearsCraig
Scherba
48
January
2010
10.8
yearsRobin
Borley
52
December
2013
6.9
yearsDean
Comand
54
October
2014
6.1
yearsChris
Kruba
45
December
2019
0.8
yearsDavid
McNeely
58
December
2019
0.8
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. 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
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 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).





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 Chris Kruba (Chair), Dean Comand and
David McNeely. All members are independent and “financially
literate” as per the standards of National Instrument 52-110.
During fiscal 2020, the Audit Committee met four (6)times in person or by telephone.
All Audit Committee members attended all six meetings.








29





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





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.





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





Mr.
Comand 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 and Chief Executive Officer of Hamilton Utilities
Corporation and continues to provide 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.





David McNeely (Surrey, Canada)





Dr.
McNeely has over 25 years of experience as a Physician and also
brings significant experience resulting from work in Departmental
Administration, Program Development and Review, Patient Safety and
Advocacy, Contract Negotiations, Regulatory and Professional
Practice Oversight, and University Student Education. He has
volunteered with medical missions to Inuvik, NWT and Ulaanbaatar,
Mongolia and understands the important relationship between health
and responsible environmental/social stewardship. Dr. McNeely has
been an active front-line worker through the COVID-19 Pandemic,
having worked on the Airway Team at Surrey Memorial Hospital, a
COVID referral center, and in policy development and implementation
for this crisis. He is a major shareholder of NextSource
Materials.





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, 2020
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, 2020 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.








30





During
the year ended June 30, 2020, 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 MD&A during the fiscal year ending
June 30, 2020 was CAD$43,870 (June 30, 2019:
CAD$49,542).





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,
2020 were CAD$20,169 (June 30, 2019: CAD$72,549).





Non-Audit Assurance Fees:





The
aggregate fees, including expenses, billed by the Company’s
auditor for assurance services unrelated to the audit and non-audit
tax compliance during the year ended June 30, 2020 were CAD$Nil
(June 30, 2019: CAD$Nil).





SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS





The
Company has two (2) equity compensation plans approved by
shareholders, being a fixed stock option plan (the
“2016 Stock Option Plan”) and a 10%
rolling stock option plan that was approved by Shareholders at the
2018 annual and special meeting of the Company on December 4, 2018
(the “2018 Stock Option
Plan” and together with the Stock Option Plan, the
“Existing Option
Plans”). In respect of
the Existing Option Plans: (i) since December 4, 2018, no further
awards have been or shall be granted under the 2016 Stock Option
Plan; (ii) all Options issued under the 2016 Stock Option Plan that
remain outstanding shall continue to be governed by the terms and
conditions of the 2018 Stock Option Plan; (iii) 2016 Stock Option
Plan shall terminate in November 2026; and (iv) on December 4,
2018, the 2018 Stock Option Plan replaced the 2016 Stock Option
Plan as the Company’s primary incentive plan.





The
Company has adopted a security-based compensation plan that has not
yet been approved by Shareholders, being the LTIP Plan. In respect
of the LTIP Plan: (i) since August 19, 2020, no further awards have
been or shall be granted under the Existing Option Plans; (ii) all
Options issued under the Existing Option Plans that remain
outstanding shall continue to be governed by the terms and
conditions of the respective Existing Option Plans; (iii) on August
19, 2020, the LTIP Plan replaced the 2018 Stock Option Plan as the
Company’s primary incentive plan; and (iv) if the LTIP Plan
Resolution is approved by Shareholders at the Meeting, no further
awards shall be granted under the 2018 Stock Option Plan and it
shall terminate in accordance with its terms.





Set
forth below is a summary of securities issued and issuable under
all security-based compensation plans of the Company, being the
Existing Option Plans, as at June 30, 2020.





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 securities reflected in column
(a))
(#)Equity
Compensation Plans Approved by Shareholders (Existing Option
Plans)36,250,000(1)(3)
$0.067
17,399,479(2)


(1)
 Representing
approximately 6.8% of the 536,494,789 Shares issued and outstanding
as at June 30, 2020.


(2)
 Representing
approximately 3.2% of the 536,494,789 Shares issued and outstanding
as at June 30, 2020.


(3)
 Of such Options,
22,400,000 Options are issued to existing insiders (which
represents approximately 3.75% of the currently issued and
outstanding Shares of the Company) and Nil to current employees or
consultants (which represents approximately Nil% of the currently
issued and outstanding Shares of the Company).








31





Set
forth below is a summary of securities issued and issuable under
all security-based compensation plans of the Company, being the
Existing Option Plans and LTIP Plan, as at November 20,
2020.





Name and
Position
Number of
securities to be issued upon exercise of outstanding Options,
Warrants, Awards, and rights(4)
(#)
Weighted-average
exercise price of outstanding Options, Warrants, Awards and
rights
($)
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(#)Equity
Compensation Plans Approved by Shareholders (Existing Option
Plans)36,250,000(1)
$0.067
NilEquity
Compensation Plans Not Approved by Shareholders
(LTIP
Plan)5,174,424(2)
Nil
22,782,230(3)


(1)
 Representing
approximately 6.1% of the 598,073,572 Shares issued and outstanding
as at November 20, 2020.


(2)
 Representing
approximately 0.9% of the 598,073,572 Shares issued and outstanding
as at November 20, 2020.


(3)
 Representing
approximately 3.8% of the 598,073,572 Shares issued and outstanding
as at November 20, 2020.


(4)
 Of such securities,
22,400,000 Options and 5,174,424 Granted RSUs are issued to
existing insiders (which represents approximately 4.6% of the
currently issued and outstanding Shares of the Company) and Nil
Options to current employees or consultants (which represents
approximately Nil% of the currently issued and outstanding Shares
of the Company).The
remainder of the outstanding Options are held by former insiders
and consultants, which will be cancelled on the anniversaries of
their resignations.





The
following table provides details of the burn rate under the
Existing Option Plans for the three financial years ended June 30,
2020, June 30, 2019, and the year ended June 30, 2018.





Fiscal Year
Ended
Burn Rate(1)
Number
of
Options
Granted
Weighted Average
Number of Shares OutstandingYear
Ended June 30, 2020
0.0%
Nil
527,206,058Year
Ended June 30, 2019
2.4%
11,850,000
493,586,450Year
Ended June 30, 2018
0.0%
Nil
468,252,639


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





Summary of the Existing Option Plans





The
following are summaries of the Existing Option Plans, each of which
has been approved by Shareholders.





2016 Stock Option Plan





The
purpose of the 2016 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 2016 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 2016 Stock Option
Plan.





The
Board (or a committee appointed by the Board) administers the 2016
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 2016 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 2016
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;








32





(iii)
 the maximum
aggregate number of Shares that may be reserved under the 2016
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 2016
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





(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 2016 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 2016 Stock Option Plan
shall be immediately cancelled.





Under
the terms of the 2016 Stock Option Plan, the Board is permitted to
make certain adjustments or modifications to the 2016 Stock Option
Plan and any Option that may have been issued under the 2016 Stock
Option Plan. Notwithstanding the amendment provisions included in
the 2016 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 2016 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
2016 Stock Option Plan shall terminate in November
2026.





2018 Stock Option Plan





The
principal purposes of the 2018 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 2018 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.





The
maximum number of Shares available at all times for issuance under
the 2018 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 2018
Stock Option Plan. The 2018 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 2018 Stock Option Plan.








33





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 2018 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 2018 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 2018 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 2018 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.





The
grant of Options under the 2018 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 2018 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 2018 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 2018 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 2018
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 2018 Stock Option Plan
which do not entail an extensions beyond the original expiry
date,





34





●
 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 2018 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 2018 Stock Option Plan (other than by virtue
of adjustments permitted under the 2018 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
2018 Stock Option Plan, or


●
 Modifying the
amending provisions of the 2018 Stock Option Plan.





If the
LTIP Plan Resolution is approved by Shareholders at the Meeting, no
further awards shall be granted under the 2018 Stock Option Plan
and it shall terminate in accordance with its terms.





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., 130
King Street West, Exchange Tower Suite 1940, Toronto, Ontario, M5X
2A2.





35


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.








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.





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.











APPENDIX “C”





LONG-TERM INCENTIVE PLAN