Exhibit
99.1






































NextSource Materials Inc.





Annual Information Form (AIF)





For the
year ended June 30, 2020























NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020








Table of Contents





1
Introduction
32
General Description of the Business
43
Corporate Highlights
84
Molo Graphite Property, Southern Madagascar Region,
Madagascar
95
Green Giant Vanadium Project, Southern Madagascar Region,
Madagascar
326
Sagar Property, Labrador Trough Region, Quebec, Canada
327
Risk Factors
338
Market for Securities
409
Directors and Officers
4110
Legal Proceedings and Regulatory Actions
4611
Interest of Management and Others in Material
Transactions
4712
Interest of Experts
4713
Material Contracts
4714
Transfer Agent and Registrar
4715
Auditors
4716
Additional Information
48SCHEDULE A
49














2
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





1.
 Introduction





This
Annual Information Form (AIF) is intended to help the reader
understand NextSource Materials Inc.’s operations, financial
performance, financial condition and business plans. All amounts
are in US dollars unless otherwise noted.





This
AIF, which has been prepared as of September 22, 2020, should be
read in conjunction with NextSource’s consolidated financial
statements for the years ended June 30, 2019 and 2018.





All
amounts are in US dollars, unless otherwise indicated. The term
“NSR” stands for net smelter royalty. The term
“tpa” stands for tonnes per annum. References to
“NextSource”, “Company”, “we”,
“us”, “our”, refer to NextSource Materials
Inc. and its consolidated subsidiaries unless the context indicates
otherwise.





CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION





Certain
statements contained in this MD&A constitute forward-looking
information within the meaning of applicable Canadian securities
legislation. Generally, forward-looking information can be
identified by the use of forward-looking terminology such as
“plans,” “expects,” or “does not
expect,” “is expected,” “budget,”
“scheduled,” “goal,”
“estimates,” “forecasts,”
“intends,” “anticipates,” or “does
not anticipate,” or “believes” or variations of
such words and phrases or statements that certain actions, events
or results “may,” “could,”
“would,” “might,” or “will be
taken,” “occur,” or “be
achieved”.





Forward-looking
information includes, but is not limited to, information with
respect to certain expectations regarding obtaining necessary
permits; construction timelines and costs; anticipated production
volumes; anticipated operating costs and capital spending; supply,
demand and pricing outlook in the graphite market; sources of
funding for the Molo Graphite Project and the Green Giant Vanadium
Project; exploration drill results; metallurgical drill results;
environmental assessment and rehabilitation costs and amounts of
certain other commitments; the expected use of proceeds; and the
Corporation’s business objectives and targeted milestones
(and timing thereof).





Forward-looking
information is subject to known and unknown risks, uncertainties
and other factors that may cause the actual results, level of
activity, performance or achievements of the Corporation to be
materially different from those expressed or implied by such
forward-looking information. Such factors include, among others:
there is no market for the Securities; negative operating cash
flow; the Corporation’s ability to continue as a going
concern; development projects are uncertain, and it is possible
that actual capital and operating costs and economic returns will
differ significantly from those estimated for a project prior to
production; the Corporation’s development and exploration
projects are in the African country of Madagascar and are subject
to country political and regulatory risks; dependence on the Molo
Graphite Project; additional permits and licenses are necessary to
complete the development of the Molo Graphite Project; mining
companies are increasingly required to consider and provide
benefits to the communities and countries in which they operate,
and are subject to extensive environmental, health and safety laws
and regulations; fluctuations in the market price of graphite and
other metals may adversely affect the value of the
Corporation’s securities and the ability of the Corporation
to develop the Molo Graphite Project; the Corporation may not have
access to sufficient capital to develop the Molo Graphite Project;
the Corporation has a limited operating history and expects to
incur operating losses for the foreseeable future; due to the
speculative nature of mineral property exploration, there is
substantial risk that the Corporation’s assets will not go
into commercial production and the business will fail; estimates of
mineral resources and mineral reserves may not be realized; because
of the inherent dangers involved in mineral exploration, there is a
risk that the Corporation may incur liability or damages as the
Corporation conducts business; the Corporation has no insurance for
environmental problems; should the Corporation lose the services of
key executives, the Corporation’s financial condition and
proposed expansion may be negatively impacted; because access to
the Corporation’s properties may be restricted by inclement
weather or proper infrastructure, its exploration programs are
likely to experience delays; climate change and related regulatory
responses may impact the Corporation’s business; compliance
with changing regulation of corporate governance and public
disclosure will result in additional expenses and pose challenges
for management; tax risks; the Corporation’s business is
subject to anti-corruption and anti-bribery laws, a breach or
violation of which could lead to civil and criminal fines and
penalties, loss of licenses or permits and reputational harm; the
Corporation does not intend to pay dividends; because from time to
time the Corporation holds a significant portion of cash reserves
in Canadian dollars, the Corporation may experience losses due to
foreign exchange translations; the Corporation is exposed to
general economic conditions, which could have a material adverse
impact on its business, operating results and financial condition;
the current financial environment may impact the
Corporation’s business and financial condition that cannot
predict; the market price for the Common Shares is particularly
volatile given the Corporation’s status as a relatively
unknown company with a small and thinly traded public float,
limited operating history and lack of profits which could lead to
wide fluctuations in the market price for the Common Shares; and
the Corporation’s ability to meet other factors listed from
time to time in the Corporation’s continuous disclosure
documents, including but not limited to, the AIF.





3
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





Forward-looking
information is based on the reasonable assumptions, estimates,
analysis and opinions of management and/or “qualified
persons” (as such term is defined under National Instrument
43-101 – Standards of Disclosure for Mineral Projects
(“”NI 43-101”) made in light of their experience
and their perception of trends, current conditions and expected
developments, as well as other factors that management and/or
qualified persons believe to be relevant and reasonable in the
circumstances at the date that such statements are made, but which
may prove to be incorrect. Although the Corporation believes that
the assumptions and expectations reflected in such forward-looking
information are reasonable, undue reliance should not be placed on
forward-looking information because the Corporation can give no
assurance that such expectations will prove to be correct. In
addition to the assumptions discussed herein and in the Technical
Report (as defined herein), the material assumptions upon which
such forward-looking statements are based include, among others,
that: the Corporation will be successful in its financing
activities; the demand for graphite will develop as anticipated;
graphite prices will remain at or attain levels that would render
the Molo Graphite Project potentially economic; that any proposed
operating and capital plans will not be disrupted by operational
issues, title issues, loss of permits, environmental concerns,
power supply, labour disturbances, financing requirements or
adverse weather conditions; the Corporation will continue to have
the ability to attract and retain skilled staff; and there are no
material unanticipated variations in the cost of energy or
supplies. Readers are cautioned that the foregoing list is not
exhaustive of all factors and assumptions which may have been used.
Although the Corporation has attempted to identify important
factors that could cause actual results to differ materially from
those contained in forward-looking information, there may be other
factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such information will
prove to be accurate, as actual results and future events could
differ materially from those anticipated in such information.
Accordingly, readers should not place undue reliance on
forward-looking information. The forward-looking information
contained herein is presented for the purposes of assisting
investors in understanding the Corporation’s expected
financial and operating performance and the Corporation’s
plans and objectives and may not be appropriate for other
purposes.





The
Corporation does not undertake to update any forward-looking
information, except in accordance with applicable securities
laws.





2.
 General Description of the
Business





NextSource
Materials Inc. (the "Company" or “NextSource”) was
continued under the Canada Business Corporations Act and has a
fiscal year end of June 30. The Company's registered head office
and primary location of records is 145 Wellington Street West,
Suite 1001, Toronto, Ontario, M5J 1H8.





The
Company's principal business is the acquisition, exploration and
development of mineral resources. The Company does not operate any
mines and has not initiated construction on any mines. The Company
has yet to generate any revenue from mining operations. The Company
has yet to pay dividends and is unlikely to do so in the immediate
or foreseeable future. The Company accepts the risks which are
inherent to mineral exploration programs and the exposure to the
cyclical nature of mineral prices. These risks are discussed in the
Risk Factors section of
this report.





Principal Products





The
Company is currently focused on developing a graphite
mine.





The
Company, through a wholly owned foreign subsidiary, obtained a
mining permit and environmental certificate for its Molo Graphite
Project in Madagascar. The Molo Graphite Project is one of the
largest-known and highest quality flake graphite deposits in the
world. Although the Company released a NI 43-101 Technical Report
Feasibility Study dated September 27, 2019 that concluded that
Phase 1 and Phase 2 of the Molo Graphite Project contains
mineralization that is economically recoverable, the Company does
not have the necessary capital to begin construction at this
time.





In
addition to the Molo Graphite Project, NextSource has 100%
ownership of its NI 43-101 compliant Green Giant Vanadium Project,
located just 11 kilometres from the Molo Graphite Project. The
Green Giant Project is a rarely occurring, sedimentary-hosted
deposit that also ranks as one of the largest-known and highest
in-situ grade vanadium resources in the world.





4
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





Competitive Conditions





The
mineral exploration and mining business are highly competitive. We
compete with numerous other companies and individuals in the search
for and the acquisition of financially attractive mineral
properties. Our ability to acquire precious metal mineral
properties in the future will depend not only on our ability to
develop our present properties, but also on our ability to select
and acquire suitable producing properties or prospects for precious
metal development or mineral exploration.





In
addition, we also compete with other companies over retaining
skilled experienced workers and sourcing raw materials and supplies
used in connection with eventual development and mining
operations.





Foreign Operations





Our
foreign operations are exposed to various levels of political,
economic and social risks and uncertainties. These risks and
uncertainties vary from country to country and include, but are not
limited to: terrorism; hostage taking; military repression;
expropriation; political corruption, extreme fluctuations in
currency exchange rates; high rates of inflation; labour unrest;
war or civil unrest; renegotiation or termination of existing
concessions, licenses, permits and contracts; ability of
governments to unilaterally alter agreements; surface land access
issues; illegal mining; changes in taxation policies, laws and
regulations; restrictions on foreign exchange and repatriation; and
changing political conditions, currency controls and governmental
regulations that favor or require the awarding of contracts to
local contractors or require foreign contractors to employ citizens
of, or purchase supplies from, a particular jurisdiction. Any
changes in regulations or shifts in political attitudes in such
foreign countries are beyond our control and may adversely affect
our business. Future development and operations may be affected in
varying degrees by such factors as government regulations (or
changes thereto) with respect to restrictions on production, export
controls, import restrictions, such as restrictions applicable to,
among other things, equipment, services and supplies, taxes,
expropriation of property, repatriation of profits, environmental
legislation, land use, water use, surface land access, land claims
of local people and mine safety.





Corporate Redomicile





The
Company completed a corporate redomicile from the State of
Minnesota to Canada on December 27, 2017.





Corporate Structure





NextSource
owns 100% of NextSource Materials (Mauritius) Ltd.
(“MATMAU”), a Mauritius subsidiary, and 2391938 Ontario
Inc., an Ontario Company.





MATMAU
owns 100% of NextSource Minerals (Mauritius) Ltd.
(“MINMAU”), a Mauritius subsidiary, NextSource Graphite
(Mauritius) Ltd (“GRAMAU”), a Mauritius subsidiary, and
NextSource Materials (Madagascar) SARL (“MATMAD”), a
Madagascar subsidiary.





MINMAU
owns 100% of NextSource Minerals (Madagascar) SARL
(“MINMAD”), a Madagascar subsidiary. MINMAD holds the
Green Giant Vanadium Project exploration permits.





5
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





GRAMAU
owns 100% of ERG Madagascar SARL (“GRAMAD”), a
Madagascar subsidiary. GRAMAD holds the Molo Graphite Project
exploration permits.











Capital Structure





The Company’s common shares have no par value and the
authorized share capital is composed of an unlimited number of
common shares. The Company’s common shares trade on the
Toronto Stock Exchange (the “TSX”) under the symbol
“NEXT” and the OTCQB under the symbol
“NSRCF”.





As of June 30, 2020, the Company had 536,494,789 common shares
issued and outstanding (June 30, 2019: 507,417,021).





6
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





As of June 30, 2020, the Company had 36,250,000 stock options
issued and outstanding (June 30, 2019: 40,670,000) with a weighted
average expiration of 2.28 years (June 30, 2019: 3.0 years), which
are exercisable into 36,250,000 common shares (June 30, 2019:
40,670,000) at a weighted average exercise price of $0.067 (June
30, 2019: $0.08). All stock options that are currently outstanding
vested on the grant date.





As of June 30, 2020, the Company had 25,191,522 common share
purchase warrants issued and outstanding (June 30, 2019:
10,652,636) with a weighted average expiration of 0.82 years (June
30, 2019: 1.1 years), which are exercisable into 25,191,522 (June
30, 2019: 10,652,636) common shares at a weighted average exercise
price of $0.07 (June 30, 2019: $0.08). All warrants that are
currently outstanding vested on the issue date.





On July
2, 2020, the Company completed a non-brokered private placement of
61,578,783 units at a price of $0.024 (CAD$0.0325) for gross
proceeds of $1,476,572 (CAD$2,001,310). Each Unit consists of one
common share of the Company and one-half of one common share
purchase warrant (a “Warrant”), with each full Warrant
entitling the holder to acquire one additional common share of the
Company at a price of $0.048 (CAD$0.065) per share for a period of
24 months. No finder fees or commissions were paid in association
with the private placement. In connection with the private
placement, the Company incurred $9,292 (CAD$12,619) in share
issuance costs. As at June 30, 2020, the Company had received share
subscriptions received in advance totaling $68,411.





On
August 17, 2020, the 10,652,636 common share purchase warrants
exercisable at a price of CAD$0.10 expired.





As of
the date of this AIF, the Company had 598,073,72 common shares,
36,250,000 stock options and 45,328,278 common share purchase
warrants issued and outstanding.





Dividends and Distributions





The
Company has yet to generate any revenue from mining operations or
pay dividends since inception and is unlikely to do so in the
immediate or foreseeable future. Our continued operations are
dependent upon the ability of the Company to obtain financing
through the proceeds of equity and/or debt offerings for the
continued exploration and development of its mineral
properties.





The
value of a mineral project is highly dependent upon the discovery
of economically recoverable mineralization, the long-term
preservation of the Company’s ownership interest in the
underlying mineral property, the ability of the Company to obtain
the necessary funding to complete sufficient exploration activities
on the property, and the prospects of any future profitable
production therefrom, or alternatively upon the Company’s
ability to dispose of its property interests on an advantageous
basis.





Indebtedness





As of
June 30, 2020, the Company had $22,115 outstanding in its Canada
Emergency Business Account, which is not subject to an interest
rate. As of June 30, 2019, the Company did not have any outstanding
long-term debt, loans or credit facilities.





Employees and Contractors





The
Company relies on the geological and industry expertise of its
Toronto-based management team and engages contractors to complete
certain aspects of its exploration programs.





As of
June 30, 2020, we had one employee and several contractors in
addition to the Board of Directors, President & Chief Executive
Officer and Chief Financial Officer. Certain professional,
administrative and geological services are provided to the Company
by independent contractors, including corporations and/or
individuals who may be officers or directors of NextSource. No
assurance can be given that qualified employees can be retained by
NextSource when necessary.





Sustainability





The
Company is committed to the health and safety of our workers and
communities, the protection of the environment, and to the rights,
culture and development of local communities.





7
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





3.
 Corporate
Highlights





Three-Year History





On June
1, 2017, we released the results of a positive updated Molo
Feasibility Study for Phase 1 of the mine development plan
utilizing a fully modular build-out approach which was based on the
FEED Study and subsequent detailed engineering studies. Phase 1
would consist of a fully operational and sustainable graphite mine
with a permanent processing plant capable of producing, in our
estimation, approximately 17,000 tpa of high-quality
SuperFlakeTM graphite concentrate per year with a mine life of
30 years.





On
December 27, 2017, the Company completed a corporate redomicile
from Minnesota to Canada. This was completed to reduce our legal
and regulatory compliance costs and improve our financing
opportunities. The presentation and functional currency of the
Company continued to be the US dollar. Upon completing the
redomicile, the Company adopted International Financial Reporting
Standards (“IFRS”).





On
April 13, 2018, the Company issued 1,000,000 common shares upon the
exercise of 1,000,000 common share purchase warrants for gross
proceeds of $110,000.





On August 17, 2018, the Company closed a non-brokered private
placement offering of 21,059,270 units at a price of $0.053
(CAD$0.07) per unit for aggregate gross proceeds of $1,120,385
(CAD$1,474,149). Each unit consisted of one common share and
one-half common share purchase warrant, with each warrant
exercisable into one common share at an exercise price of $0.076
(CAD$0.10) for a period of two years.





On October 16, 2018, the Company announced the signing of an
Offtake Agreement with the primary graphite supplier to a major
Japanese electric vehicle anode producer. The Offtake Agreement is
for a period of ten (10) years and activates on the commencement of
commercial production at the Molo project, with an automatic
renewal for an additional five (5) years. The Japanese Partner will
have the exclusive right to import and sell SuperFlake®
graphite concentrate in Japan. Provided that commercial production
commences within 3 years, following the ramp up period, the
Japanese Partner will purchase 20,000 tonnes of SuperFlake®
graphite per annum Product prices will be negotiated on a per order
basis between the parties and will be based on the floating market
prices (FOB basis) prevailing in the region.





On
February 15, 2019, the Company announced the Madagascar Government
granted a 40-year mining license for the Molo Graphite Project and
that the mining license does not limit mining to any specific
volume.





On March 7, 2019, the Company closed a non-brokered private
placement offering of 16,086,426 common shares at a price of $0.08
(CAD$0.11) per common share for aggregate gross proceeds of
$1,323,630 (CAD$1,769,507).





On
April 11, 2019, the Company announced it had received the Global
Environmental Permit for the Molo Graphite Project from the
Madagascar Ministry of Environment’s Office National pour
l'Environnement (the National Office for the Environment; or
“ONE”). This follows the completion of the
Environmental & Social Impact Assessment (“ESIA”)
and Relocation Action Plan (“RAP”) to International
Finance Corporation (IFC) performance standards and World Bank
standards, the completion of local and regional stakeholder and
community engagement, and the completion of negotiations and signed
agreements with all potentially affected land occupants to accept
compensation for any affected crops and grazing land and relocation
if needed.





On
September 27, 2019, the Company reported the results of a new
Feasibility Study (“FS”) for its 100%-owned Molo
Graphite Project in southern Madagascar. The FS outlines a phased
development approach with Phase 1 producing 17,000 tonnes per annum
(“tpa”) over the first two years of production and
Phase 2 producing a total of 45,000 tpa by year 3. Over the
modelled life of mine (30 years), the production plants will have a
pre-tax internal rate of return (“IRR”) of 43.1%, and a
post-tax IRR of 36.2%. The pre-tax Net Present Value
(“NPV”) at 8% discount rate will be US$237.1M, and the
post-tax NPV will be US$184.3M. The FS results are summarized in
further detail in the Molo Graphite Property section.





On
October 24, 2019, the Company announced the successful registration
of Molo SuperFlake® as a trademark in Canada. The successful
registration of this trademark means that NextSource has the
exclusive right to brand all of its natural flake graphite sold in
Canada as Molo SuperFlake® from its fully permitted and
feasibility-stage Molo Graphite Project in Madagascar when it
enters production and begins exploring high-quality flake
graphite.





8
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





On October 25, 2019, the Company closed a non-brokered private
placement offering of 29,077,768 units at a price of $0.035
(CAD$0.045) per unit for aggregate gross proceeds of $987,917
(CAD$1,308,500). Each unit consisted of one common share and
one-half common share purchase warrant, with each warrant
exercisable into one common share at an exercise price of $0.07
(CAD$0.09) for a period of two years. There were no finder’s
fees in relation to the private placement.





On
September 27, 2019, Quentin Yarie resigned as a director of the
Company.





On
December 2, 2019, Christopher Kruba and David McNeely became
directors of the Company.





On
January 23, 2020, John Sanderson and Dalton Larson resigned as
directors of the Company and Dean Comand was appointed as Chair of
the Board of Directors.





On April 9, 2020, the Company announced that it has executed a
Letter of Agreement (“LOI”) with its Japanese offtake
partner and a leading Chinese processor of graphite anode material
to collaborate on the construction of a value-add, battery anode
plant in a jurisdiction that is proximal to the Company’s
Molo graphite project in Madagascar.





On July 2, 2020, the Company completed a non-brokered private
placement of 61,578,783 units at a price of $0.024 (CAD$0.0325) for
gross proceeds of $1,476,572 (CAD$2,001,310). Each Unit consists of
one common share of the Company and one-half of one common share
purchase warrant (a “Warrant”), with each full Warrant
entitling the holder to acquire one additional common share of the
Company at a price of $0.048 (CAD$0.065) per share for a period of
24 months. No finder fees or commissions were paid in association
with the private placement. In connection with the non-brokered
private placement, the Company incurred $9,292 (CAD$12,619) in
share issuance costs.





On July 20, 2020, Brett Whalen became a director of the
Company.





On August 24, 2020, the Company announced the appointment of Brett
Whalen as Chair of the Board of Directors. The Company also
announced that management agreed to a plan to defer their monthly
compensation payments by up to 30 percent and until total project
financing has been secured. The Company announced its intention to
implement a Performance Share Units (“PSU”) plan for
management.





4.
 Molo Graphite Property,
Southern Madagascar Region, Madagascar





Overview





The
Company has received a 40-year mining license for the Molo Graphite
Project from the Madagascar Government which does not limit mining
to any specific volume. The Company has also received the Global
Environmental Permit for the Molo Graphite Project from the
Madagascar Ministry of Environment’s Office National pour
l'Environnement (the National Office for the Environment; or
“ONE”). Application for all other necessary permits to
construct and operate the mine, including water use, facilities
construction, mineral processing, transportation, export, and
labour have been initiated but the Company cannot provide any
assurance as to the timing of the receipt of sufficient capital and
of any of the permits and licenses necessary to initiate
construction of the mine.





The
Company is currently working to obtain construction financing for
Phase 1 of the Molo Graphite Project. Once constructed, the mine is
expected to produce 17,000 tpa of high-quality SuperFlakeTM
graphite concentrate.





Exploration Timeline





The
Molo Graphite Project is one of seven surficial graphite trends
discovered and drill tested by NextSource in late 2011 and
announced to the market in early January 2012. The Molo deposit
itself occurs in a flat, sparsely populated and dry savannah
grassland region that has easy access via a network of seasonal
secondary roads.





9
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





The
Molo Graphite Project graphitic zone consists of multi-folded
graphitic strata at surface with an exposed strike length of over
two kilometres. Outcrop mapping and trenching on the Molo Graphite
Project has shown the surface geology to be dominated by resistant
ridges of graphitic schist and graphitic gneiss, as well as
abundant graphitic schist float. Geological modeling has shown that
the Molo Graphite Project deposit consists of various zones of
mineralized graphitic gneiss, with a barren footwall composed of
garnetiferous gneiss. The host rock of the mineralized zones on the
Molo Graphite Project is graphitic gneiss.





Resource
delineation, drilling and trenching on the Molo Graphite Project
took place between May and November of 2012, which resulted in a
maiden mineral resource estimate to be released in early December
of the same year. This maiden mineral resource estimate formed the
basis for the Company’s Preliminary Economic Assessment (the
“PEA”), which was undertaken by DRA Mineral Projects
and released in 2013.





The
positive outcome of the PEA led NextSource to undertake another
phase of exploratory drilling and sampling in 2014 to upgrade the
deposit and its contained mineral resources to mineral reserves.
The process included an additional 32 diamond drill holes (totaling
2,063 metres) and 9 trenches (totaling 1,876 metres). The entire
database upon which the upgraded resource estimate was based
contained 80 drill holes (totaling 11,660 metres) and 35 trenches
(totaling 8,492 metres). This new mineral resource formed the basis
of the first Molo Feasibility Study, which was released in February
2015.





History





On
December 14, 2011, the Company entered into a Definitive Joint
Venture Agreement ("JVA") with Malagasy Minerals Limited
("Malagasy"), a public company listed on the Australian Stock
Exchange, to acquire a 75% interest in a property package for the
exploration and development of industrial minerals, including
graphite, vanadium and 25 other minerals. The land position
consisted of 2,119 permits covering 827.7 square kilometers and is
mostly adjacent towards the south and east with the Company's 100%
owned Green Giant Vanadium Project. Pursuant to the JVA, the
Company paid $2,261,690 and issued 7,500,000 common shares that
were valued at $1,350,000.





On
April 16, 2014, the Company signed a Sale and Purchase Agreement
and a Mineral Rights Agreement (together “the
Agreements”) with Malagasy to acquire the remaining 25%
interest. Pursuant to the Agreements, the Company paid $364,480
(CAD$400,000), issued 2,500,000 common shares subject to a 12-month
voluntary vesting period that were valued at $325,000 and issued
3,500,000 common share purchase warrants, which were valued at
$320,950 using Black-Scholes, with an exercise price of $0.14 and
an expiry date of April 15, 2019. On May 20, 2015 and upon
completion of a bankable feasibility study (“BFS”) for
the Molo Graphite Property, the Company paid $546,000 (CAD$700,000)
and issued 1,000,000 common shares, which were valued at $100,000.
Malagasy retains a 1.5% net smelter return royalty ("NSR") on the
property. A further cash payment of approximately $771,510
(CAD$1,000,000) will be due within five days of the commencement of
commercial production. The Company also acquired a 100% interest in
the industrial mineral rights on approximately 11⁄2 additional
claim blocks covering 10,811 hectares adjoining the east side of
the Molo Graphite Property.





On June
1, 2017, we released the results of a positive updated Molo
Feasibility Study for Phase 1 of the mine development plan
utilizing a fully modular build-out approach which was based on the
FEED Study and subsequent detailed engineering studies. Phase 1
would consist of a fully operational and sustainable graphite mine
with a permanent processing plant capable of producing, in our
estimation, approximately 17,000 tpa of high-quality
SuperFlakeTM graphite concentrate per year with a mine life of
30 years.





During
fiscal 2017, the Company applied to the BCMM to have the
exploration permit for the Molo Graphite Project converted into a
mining permit.





On
February 15, 2019, the Company announced the Madagascar Government
granted a 40-year mining license for the Molo Graphite Project and
that the mining license does not limit mining to any specific
volume.





On
April 11, 2019, the Company announced it had received the Global
Environmental Permit for the Molo Graphite Project from the
Madagascar Ministry of Environment’s Office National pour
l'Environnement (the National Office for the Environment; or
“ONE”). This follows the completion of the
Environmental & Social Impact Assessment (“ESIA”)
and Relocation Action Plan (“RAP”) to International
Finance Corporation (IFC) performance standards and World Bank
standards, the completion of local and regional stakeholder and
community engagement, and the completion of negotiations and signed
agreements with all potentially affected land occupants to accept
compensation for any affected crops and grazing land and relocation
if needed.





On
September 27, 2019, the Company reported the results of an updated
Feasibility Study (“FS”) consisting of two phases. The
FS took into account updated mine capital equipment and mining
costs, as well as current 12-month rolling flake graphite pricing
on a Freight-on-Board (“FOB”) China basis, supplied by
UK-based battery mineral commodities research firm, Benchmark
Minerals Intelligence. The FS incorporates the procurement of all
mining equipment, off-site modular fabrication and assembly,
factory acceptance testing, module disassembly, shipping, plant
infrastructure construction, onsite module re-assembly,
commissioning, project contingencies and working capital. All
capital and operating costs expressed for Phase 1 are considered to
be accurate to +/- 10%, and accurate to +/- 12.5% for Phase 2. The
project phases are outlined below:





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PHASE 1: Production of 17,000 tpa





The
first phase of production will consist of a fully operational and
sustainable graphite mine with a permanent processing plant capable
of processing 240,000 tpa of ore and producing approximately 17,000
tpa of high-quality SuperFlakeTM graphite concentrate. The
updated build cost of the fully modular process plant marginally
increased from the US$18.4 million reported in the 2017 FS to
US$21.0M due to equipment cost inflation.





PHASE 2: Production Expansion to 45,000 tpa in Year 3





Phase 2
incorporates the processing of 240,000 tpa of ore (producing 17,000
tpa of SuperFlake® concentrate) for the first two years of
operation and then ramping up to 720,000 tpa of processed ore in
the third year to accommodate additional sales, resulting in a
total of 45,000 tpa of SuperFlake® concentrate being produced
for a mine life of 30 years. The costing for Phase 2 is based on
the addition of two modules of the beneficiation plant with a
proportional increase in mining and infrastructure costs. The
capital mine cost for Phase 2 (with contingency) will be US$39.1M,
for a total project cost (Phase 1 and Phase 2 with contingency) of
US$60.1M.





Feasibility Study Extract (Released September 27,
2019)





The
following information is extracted from the Molo Feasibility Study
dated May 31, 2019 and prepared by J.K. de Bruin Pr.Eng of Erudite
Strategies (Pty) Ltd., J. Hancox of Caracle Creek International
Consulting (Pty) Ltd., D. Subrumani of Caracle Creek International
Consulting (Pty) Ltd., O. Peters of Metpro Management Inc., O.
Mogoera of Erudite Strategies (Pty) Ltd., H. Smit of Erudite
Projects (Pty) Ltd., E.V. Heerden of EVH Consulting (Pty) Ltd.,.
and A. Marais of GCS Consulting (Pty) Ltd., each of whom is a
“qualified person” and “independent”, as
such terms are defined in NI 43-101.





The
extract below is subject to all the assumptions, qualifications and
procedures set out in the Molo Feasibility Study and is qualified
in its entirety with reference to the full text of the Molo
Feasibility Study. It is advised that this extract should be read
in conjunction with the entire Molo Feasibility Study.





1
 Summary





1.1
 Introduction





The
Company is a mineral exploration and development company based in
Toronto, Canada. The Company is currently focused on the
exploration and development of its 100% owned, flagship Molo
Project.





The
Molo deposit is situated 160 km southeast of the city of
Toliara, in the Tulear region of south-western Madagascar. The
deposit occurs in a sparsely populated, dry savannah grassland
region, which has easy access via a network of seasonal secondary
roads radiating outward from the village of Fotadrevo. Fotadrevo in
turn has an all-weather airstrip and access to a road system that
leads to the regional capital (and port city) of Toliara and the
Port of Ehoala at Fort Dauphin via the RN10, or RN13.





Geologically, Molo
is situated in the Bekily block (Tolagnaro-Ampanihy high grade
metamorphic province) of southern Madagascar. The Molo deposit is
underlain predominantly by moderately to highly metamorphosed and
sheared graphitic (biotite, chlorite and garnet-rich)
quartzo-feldspathic schists and gneisses, which are variably
mineralized. Near surface rocks are oxidized, and saprolitic to a
depth, usually of less than 5m.





Molo
was one of several surficial graphite trends discovered by the
Company (then Energizer) in late 2011 and announced in early
January 2012. The deposit was originally drill tested in 2012, with
an initial seven holes being completed. Resource delineation,
drilling and trenching on Molo took place between May and November
of 2012, and allowed for a maiden Indicated and Inferred Resource
to be stated in early December of the same year. This maiden
mineral resource estimate formed the basis for a PEA, which was
undertaken by DRA Projects in 2013.





The
positive outcome of this PEA led the Company to undertake another
phase of exploratory drilling and sampling in 2014, which was done
under the supervision of CCIC. This phase of exploration was aimed
at improving the geological confidence of the deposit and
it’s contained mineral resources and included an additional
32 diamond drill holes (totaling 2,063 metres) and 9 trenches
(totaling 1,876 metres).





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CCIC
were subsequently engaged to update the geological model and
resource estimate. The entire database on which this new model and
resource estimate is based contains 80 drill holes (totaling 11,660
metres) and 35 trenches (totaling 8,492 metres). This new resource
formed the basis of the Molo 2015 FS which targeted 860ktpa of ore
processing capacity.





This
Report utilizes the knowledge base of both the Molo 2015 FS and
Molo 2017 240ktpa FS technical reports.





Anticipating the
future demand for industrial minerals such as those held by the
Company (Graphite, Vanadium and Cobalt) is complex. The demand for
these minerals is, to a large extent, driven by the development of
the battery market which remains uncertain. Significant research
has been completed by various analysts and the consensus view is
that an explosive increase in demand can be expected. The
uncertainty, however, is the timing of such increase in
demand.





In
order to ensure that the Company remains ahead of the competition
and to appropriately plan for future market demand, the Company has
opted for a flexible development approach which comprises a modular
solution yielding optimal cashflow and return metrics with suitable
flexibility to enable them to rapidly respond to market
changes.





The
Company has an off-take agreement in place with a Japanese Trader
and is in the process of formalizing an additional sales agreement
with a European Trader. As such, the Company requested
feasibility-level analysis of a phased development approach: Phase
1 – 240,000 Tonnes per annum (240ktpa), and Phase 2 –
after 240ktpa for the first 2 years of production, ramping up to
720ktpa in the third year to accommodate additional
sales.





The
Feasibility Study (hereinafter referred to as the “Molo 2019
720ktpa (Ph 2) FS”) as detailed in this Report considers in
some detail the development of a greenfields graphite mine with
modular beneficiation plant and supporting infrastructure.
Engineering, costing and Project planning for Phase 1 of the
proposed mine development has been completed to a level as required
for this Report to comply to the requirements as defined by the TSX
in terms of the NI 43-101. The numbers confirmed during the Molo
2017 240ktpa FS for Phase 1 of the Project are updated as part of
this Report to incorporate the effects of escalation and market
realities, as currently relevant.


Although detailed
engineering has not been completed in order to define an optimal
solution for a larger throughput mine facility, costing for Phase 2
(which adds an additional two modules of the beneficiation plant
and increases the mining and infrastructure in proportion), is
costed as part of this Report. Phase 2 costing is merely factored
and therefore deemed accurate to FS level but will be optimized
through certain economies of scale which are not considered in this
Report. The increased capital expenditure is included in the
financial model to provide comprehensive financial analysis of the
Project. The increased throughput requires increased water sourcing
which has been considered in the engineered solution for water
supply. Some of the infrastructure has been increased to support
the increased workforce.





The
Company has every intent to develop Phase 2 in close succession to
Phase 1 and has the mineral resources to support further increases
of its mining and beneficiation capacity as the inevitable increase
in demand is realized.





1.2
 Project Location





The
Molo deposit is located some 160 km southeast of Madagascar’s
administrative capital (and port city) of Toliara, in the Tulear
region and about 220 km NW of Fort Dauphin and is approximately 13
km NE of the local village of Fotadrevo.





1.3
 Project Description





The
proposed development of the Project includes the construction of a
green fields open pit mine, a Phase1 processing plant with a
capacity of 240,000 tonnes of ore per annum and all supporting
infrastructure including water, fuel, power, tailings
(co-disposed), buildings and permanent accommodation. This Project
will be augmented with expansion to Phase 2 processing plant with a
capacity of 720,000 tonnes of ore per annum based on market
conditions.





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1.4
 Summary of financial results





Table 1
below summarizes the financial results of Phase 1 (240ktpa for the
first two years of production and Phase 2 (ramp-up to 720ktpa
production in year three). These are based on a discounted flow
analysis of the Project using real cash flows, which do not include
the effect of inflation.





Table 1: Summary of Financial
Results





Description
Phase
1 and 2Pre-Tax
Post-TaxPost-tax:
NPV (8% Discount Cash Flow)(1)(2)
$237.1m
$184.3mPost-tax:
IRR (1)(2)
43.1%
36.2%Payback
(2)
3.4
years
3.8
yearsCapital
cost ("CAPEX")
$60,082,340Owners
Contingency
$6,670,430On-site
Operating Costs ("OPEX") per tonne
of concentrate, (year
3 onward)
Mining
$82.69On-site
Operating Costs ("OPEX") per tonne
of concentrate, (year 3 onward)
Processing
$270.27Transportation
per tonne of concentrate (from mine site to Madagascar Port year 3
onward)
$133.01Average
annual production of concentrate
45,136
tonneLife
of Mine ("LOM")
30
yearsGraphite
concentrate sale price (US$/tonne at Start Up - 2017)
$1,208Average
Head Grade
7.1%Average
ore mined per annum over Life of Mine
720,000
tonneAverage
stripping ratio
0.53:1Average
carbon recovery
88.30%





Notes


●
 Note 1: Assumes
Project is financed with 100% equity





●
 Note 2: Values
shown are based on real graphite sales pricing Table 2 below
summarizes key mine and process data.





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Table 2: Mine & Process
Data





Phase
1
Phase
2Proven
reserves (t)
14,048,733Probable
reserves (t)
8,207,458Grade
(% graphitic carbon)
8.05%
7.10%Waste
to ore ratio
0.53:1Processing
rate (tpa)
240,000
720,000Mine
life (years)
30Recovery
(%)
88.30%Average
annual product tonnes
17,000
45,000





1.5
 Property Description and Ownership





1.5.1
 Property Description





The
Project includes 790 claims and an area totaling 308.6
km2.





The
Project is centered on UTM coordinates 495,289 Easting 7,345,473
Northing (UTM 38S, WGS 84 datum), and is located 11.5 km
east-northeast of the town of Fotadrevo.





The
property is within Exploitation/Mining Permit PE #39807 which
covers an area of 175 km2 or 17,500 hectares
(“ha”), and Exploration Permits PR #39806 and PR #39810
which cover areas of 96.1 km2 (9609 ha) and 37.5
km2 (3750
ha), respectively.





1.5.2
 Ownership





On
December 14, 2011, the Company entered into a Definitive JVA with
Malagasy Minerals Limited (hereinafter referred to as "Malagasy"),
a public company on the Australian Stock Exchange, to acquire a 75%
interest to explore and develop a group of industrial minerals,
including graphite, vanadium and approximately 25 other minerals.
On October 24, 2013, the Company signed a MOU with Malagasy to
acquire the remaining 25% interest in the land
position.





On
April 16, 2014, Energizer signed a Sale and Purchase Agreement and
a Mineral Rights Agreement with Malagasy to acquire the remaining
25% interest. Malagasy retains a 1.5% net smelter return royalty
("NSR").





CCIC
reviewed a copy of the Contrat d’amodiation pertaining to
this right and are satisfied that the rights to explore this permit
have been ceded to the Company or one of its Madagascar
subsidiaries.





The
Project was located within Exploration Permit PR #3432 as issued by
the Bureau de Cadastre Minier de Madagascar (“BCMM”)
pursuant to the Mining Code 1999 (as amended) and its implementing
decrees. On January 18, 2019, Permit PR #3432 was transformed into
two Exploration Permits (PR #39806 and PR #39810) and an
Exploitation Permit (PE #39807) by the Ministry of Mines, with the
official permit being granted to the Company by the BCMM on
February 14, 2019.





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Mineral
Resources and Reserves delineated in Sections 14 and 15 of this
Report are entirely within the bounds of Exploitation Permit PE
#39807. The Company holds the exclusive right to exploit/mine and
explore for graphite within this license area for a period of 40
years and can renew the license several times for a further period
of 20 years upon each renewal.





The
Company holds the exclusive right to explore for a defined group of
industrial minerals within Exploration Permits PR #39806 and PR
#39810. These industrial minerals include the following: Vanadium,
Lithium, Aggregates, Alunite, Barite, Bentonite, Vermiculite,
Carbonatites, Corundum, Dimensional stone (excluding labradorite),
Feldspar (excluding labradorite), Fluorspar, Granite, Graphite,
Gypsum, Kaolin, Kyanite, Limestone / Dolomite, Marble, Mica,
Olivine, Perlite, Phosphate, Potash–Potassium minerals,
Pumice Quartz, Staurolite, Zeolites.





Companies in
Madagascar first apply for an exploration mining permit with the
BCMM, a government agency falling under the authority of the
Minister of Mines. Permits under usual circumstances are generally
issued within a month. The number of squares varies widely by claim
number.





The
updated Decret requires the payment of annual administration fees
of Permits Research of ~15,000 Ariary (MGA) for exploitation
permits in years’ one and two. Annual fees increase by
multiplying by a factor equivalent to the number of years (plus 1)
that the company has held the permit. Exploration permits have an
updated duration of five years, with the possibility of two
renewals of an additional three years each. Payments of the
administration fees are due each year on 31March, along with the
submission of an activity report. Each year, the Company is
required to pay a similar, although increasing, amount in order to
maintain the claims in good standing.





Reporting
requirements of exploration activities carried out by the
titleholder on an Exploration Permit are minimal. A titleholder
must maintain a diary of events and record the names and dates
present of persons active on the Project. In addition, a site plan
with a scale between 1/100 and 1/10,000 showing “a map of the
work completed” must be presented. CCIC is of the opinion
that the Company is compliant in terms of its commitments under
these reporting requirements.





The
Project has not been legally surveyed; however, since all claim
boundaries conform to the predetermined rectilinear LaBorde
Projection grid, these can be readily located on the ground by use
of Global Positioning System (“GPS”) instruments. Most
current GPS units and software packages do not however offer
LaBorde among their available options, and therefore defined shifts
have to be employed to display LaBorde data in the WGS 84
system. For convenience, all the Company’s positional data is
collected in WGS 84, and if necessary, converted back to
LaBorde.





1.5.3
 The Company’s Royalties





Malagasy retains a
1.5% net smelter return royalty on the Project.





1.5.4
 Permits





Exploitation Permit
PE #39807 (175 km2) and Exploration
Permits PR #39806 and PR #39810 are held under the name of a
subsidiary of the Company called ERG (Madagascar) Ltd. S.A.R.L.U.
and were granted to the Company by the BCMM on February 14,
2019.


The
Madagascar Ministry of Environment’s Office National pour
l'Environnement (the National Office for the Environment) or
“ONE”, granted the Company its Environmental License
for the 240ktpa (Phase 1) Project on April 8, 2019 after reviewing
the following:





●
 Exploitation Permit
PE #39807





●
 Environmental &
Social Impact Assessment (“ESIA”) and Relocation Action
Plan (“RAP”) to International Finance Corporation (IFC)
Performance and World Bank Standards





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●
 Completion of local
and regional stakeholder and community engagement, with
overwhelming support from both the local community and local
government, as well as regional government





●
 Signed agreements
with all potentially affected land occupants to accept compensation
for any affected crops and grazing land and relocation if
needed





●
 Approved capital
investment certification from the BCMM





●
 Receipt of Cahier
des Charges Miniér (mining specification) from the BCMM as
pre-requisite to submitting the ESIA & RAP to ONE for
review





●
 Successful
completion of the ONE’s technical evaluation process which
consisted of a site visit and four separate community
consultations





●
 Joint agreement and
signature of the Cahier des Charges Environnementales
(environmental specification) with the ONE








1.6
 Geologic Setting and Mineralization





The
Molo deposit occurs within the regional Ampanihy Shear Zone. The
most conspicuous feature of rocks found within this shear zone is
their well-developed north-south foliation and vertical to
sub-vertical nature. Martelat et al. (2000) state that this
observed bulk strain pattern is clearly related to a
transpressional regime during bulk horizontal shortening of heated
crust, which resulted in the exhumation of lower crustal
material.





The
Project area is underlain by supracrustal and plutonic rocks of
late Neoproterozoic age that were metamorphosed under upper
amphibolite facies and deformed with upright
north-northeast-trending structures. The supracrustal rocks involve
migmatitic (± biotite, garnet) quartzo-feldspathic gneiss,
marble, chert, quartzite, and amphibolite gneiss. The metaplutonic
rocks include migmatitic (± hornblende / diopside, biotite,
garnet) feldspathic gneiss of monzodioritic to syenitic
composition, biotite granodiorite, and leucogranite.





1.7
 Mineral Resource Estimate





The
Project hosts the following resources:





●
 Measured mineral
resource of 23.62 Mt grading 6.32% Carbon ("C")





●
 Indicated mineral
resource of 76.75 Mt grading 6.25% C





●
 Inferred mineral
resource of 40.91 Mt at 5.78% C





●
 The effective date
of the Mineral Resource tabulation is 14 August 2014. The Mineral
Resources are classified according to the Canadian Institute of
Mining, Metallurgy and Petroleum definitions. A cut-off grade of 4%
C was used for the “higher grade” zones and 2% C for
the “lower grade” zones. It is important to note that
while the ‘high’ grade resource occurs within the
‘low’ grade resource, each was estimated and reported
separately.





●
 A relative density
of 2.36 tonnes per cubic meter was assigned to the mineralized
zones for the resource estimation. The resource remains open along
strike and to depth. The Mineral Resources are inclusive of the
Mineral Reserves below. The Mineral Resources reported herein
include Mineral Reserves. Mineral Resources that are not Mineral
Reserves do not have demonstrated economic viability.





●
 The current mineral
resource estimate for Molo is summarized in Table 3 below. The
mineral resources are classified in the Measured, Indicated and
Inferred categories as defined by the Canadian Institute of Mining,
Metallurgy and Petroleum definition standards.





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Table
3: Mineral Resource Statement for the Molo Graphite Deposit -
September 2014


Classification
Material Type
Tonnes
Grade - C%
Graphite
- TMeasured
"Low
Grade"
13 048
373
4.64
605
082Measured
"High
Grade"
10 573 137
8.4
887
835Total Measured
23 621 510
6.32
1 492
916Indicated
"Low
Grade"
39 539 403
4.73
1 871
075Indicated
"High
Grade"
37 206 550
7.86
2 925
266Total Indicated
76 745 953
6.25
4 796
341Measured
+ Indicated
"Low
Grade"
52 587 776
4.71
2 476
157Measured
+ Indicated
"High
Grade"
47 779 687
7.98
3 813
101Total Measured + Indicated
100 367 464
6.27
6 289
257Inferred
"Low
Grade"
24 233 267
4.46
1 080
677Inferred
"High
Grade"
16 681 453
7.70
1 285
039Total Inferred

40 914 721
5.78
2 365
716


C% =
carbon percentage; Graphite – T = Tonnes of
graphite





Notes:


●
 Mineral Resources
are classified according to the Canadian Institute of Mining
definitions.





●
 Mineral Resources
are reported Inclusive of Mineral Reserves.





●
 “Low
Grade” Resources are stated at a cut-off grade of 2%
C.





●
 “High
grade” Resources are stated at a cut-off grade of 4%
C.





●
 Eastern and Western
high-grade assays are capped at 15% C.





●
 A relative density
of 2.36 tonnes per cubic metre (t/m3) was assigned to the
mineralized zones for the resource tonnage estimation.





The
total Measured and Indicated Resource is estimated at 100.37
million tonnes, grading at 6.27% carbon. Additionally, an Inferred
Resource of 40.91 million tonnes, grading at 5.78% carbon is
stated. When compared to the November 2012 resource statement,
(Hancox and Subramani, 2013), this shows a 13.7% increase in
tonnage, a 3.4% decrease in grade and a 9.8% increase in graphite
content.





The
reason for the increase in tonnage is due to the 2014 drilling on
the previously untested north eastern limb of the deposit, which
added additional new resources. Additionally, 23.62 million
tonnes, grading at 6.32% carbon, have been upgraded by infill
drilling from the Indicated to Measured Resource
category.





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1.8
 Exploration





No
further exploration is currently planned.





1.9
 Mineral Reserve Estimate





The
mineral reserves declared in this Molo 2019 (720ktpa) FS are
declared as per Table 4 below.





Table 4: Mineral
Reserves


Category
Tonnage
C Grade (%)Proven
14 169
741
7.00Probable
8 266
944
7.04Proven
and Probable
22 436
685
7.02





Proven
reserves are reported as the Measured Resources inside the designed
open pit and above the grade cut-off of 4.5% C. Similarly, the
Probable Reserves are reported as the Indicated Resources inside
the designed open pit and above the grade cut-off of 4.5%
C.





1.10
 Metallurgical Test Work





The FS
analyses are based on a full suite of metallurgical test work
performed by SGS Canada Metallurgical Services Inc. in Lakefield,
Ontario, Canada. These tests included laboratory scale
metallurgical work and a 200-tonne bulk sample / pilot plant
program. The laboratory scale work included comminution tests,
process development and optimization tests, variability flotation,
and concentrate upgrading tests. Comminution test results place the
Molo ore into the very soft to soft category with low abrasivity. A
simple reagent regime consists of fuel oil number 2 and methyl
isobutyl carbinol at dosages of approximately 120 g/t and 195 g/t,
respectively. A total of approximately 150 open circuit and locked
cycle flotation tests were completed on almost 70 composites as
part of the process development, optimization, and variability
flotation program. The metallurgical programs culminated in a
process flowsheet that is capable of treating the Molo ore using
proven mineral processing techniques and its robustness has been
successfully demonstrated in the laboratory and pilot plant
campaigns.





The
metallurgical programs indicated that variability exists with
regards to the metallurgical response of the ore across the
deposit, which resulted in a range of concentrate grades between
88.8% total carbon and 97.8% total carbon. Optical mineralogy on
representative concentrate samples identified interlayered graphite
and non-sulphide gangue minerals as the primary source of
impurities. The process risk that was created by the ore
variability was mitigated with the design of an upgrading circuit,
which improved the grade of a concentrate representing the average
mill product of the first five years of operation from 92.1% total
carbon to 97.1% total carbon.





The
overall graphitic carbon recovery into the final concentrate is
87.8% based on the metallurgical response of composites using
samples from all drill holes within the five-year pit design of the
original FS at the higher concentrate production rate of 53,000
tpa. The average composition of the combined concentrate grade is
presented in Table 5. The size fraction analysis results were
converted into a grouping reflecting a typical pricing matrix,
which is shown in Table 6.


All
assays were completed using control quality analysis and cross
checks were completed during the mass balancing process to verify
that the results were within the estimated measurement uncertainly
of up to 1.7% relative for graphite concentrate grades greater than
90% total carbon.





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Table
5: Metallurgical Data - Flake Size Distribution and Product
Grade


Product Size
% Distribution
Product Grade (%) Carbon+48 mesh (jumbo flake)
23.6
96.9+65 mesh (coarse flake)
14.6
97.1+80 mesh (large flake)
8.2
97.0+100 mesh (medium flake)
6.9
97.3+150 mesh (medium flake)
15.5
98.1+200 mesh (small flake)
10.1
98.1-200 mesh (fine flake)
21.1
97.5





Table
6: Pricing Matrix - Flake Size Distribution Grouping and Product
Grade


Product Size
% Distribution
Product Grade (%) Carbon>50 mesh
23.6
96.9-50 to +80 mesh
22.7
97.1-80 to +100 mesh
6.9
97.2-100 mesh
46.8
97.6





Vendor
testing including solid-liquid separation of tailings and
concentrate, screening and dewatering of concentrate, and drying of
concentrate was completed successfully.





1.11
 Recovery Methods





The
process design is based on an annual Phase1 feed plant throughput
capacity of 240 kilotonnes at a nominal head grade of 8.05% C(t)
producing an estimated average of 17 kilotonnes per annum (ktpa) of
final concentrate. The same process design has been applied to an
annual Phase 2 feed plant throughput capacity of 720 kilotonnes at
a nominal head grade of 8.05% C, which would produce an estimated
average of 45 ktpa of final graphite concentrate.





The ore
processing circuit consists of three stages of crushing which
comprises jaw crushing in the primary circuit, followed by
secondary cone crushing and tertiary cone crushing; the secondary
and tertiary crushers operate in closed circuit with a double deck
classification screen. Crushing is followed by primary milling and
screening, graphite recovery by froth flotation and concentrate
upgrading circuit by attritioning, and graphite product and
tailings effluent handling unit operations. The crusher circuit is
designed to operate 365 days per annum for 24 hours per day at
±55% utilization. The crushed product (P80 of approximately 13
mm) passes through a surge bin from where it is fed to the milling
circuit.





The
milling and flotation circuits are designed to operate 365 days per
annum for 24 hours per day at 92% utilization. A single stage
primary ball milling circuit is employed, incorporating a
closed-circuit classifying screen and a scalping screen ahead of
the mill. The scalping screen undersize feeds into a flash
flotation cell before combining with the mill discharge material.
Scalping and classification screen oversize are the fed to the
primary mill.





Primary
milling is followed by rougher flotation which, along with flash
flotation, recovers graphite to concentrate from the main stream.
Rougher flotation employs six forced-draught trough cells. The
recovered concentrate is then upgraded in the primary, fine-flake
and attritioning cleaning circuits to an estimated final product
grade of above 94% C(t). The primary cleaning circuit consists
essentially of a dewatering screen, a polishing ball mill, a column
flotation cell and flotation cleaner/cleaner scavenger trough
cells.





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The
primary cleaner column cell concentrate gravitates to a 212 μm
classifying screen, from where the large-flake oversize stream is
pumped to a high rate thickener located in the concentrate
attritioning circuit whilst the undersize is pumped to the
fine-flake cleaning circuit.





The
fine flake cleaning circuit consists primarily of a dewatering
screen, a polishing ball mill, a column flotation cell and
flotation cleaner/cleaner scavenger trough cells. The attritioning
cleaning circuit employs a high rate thickener, an attritioning
stirred media mill, a column flotation cell and flotation
cleaner/cleaner scavenger trough cells. Fine flake column
concentrate is combined with the +212 μm primary cleaner
classifying screen oversize as it feeds the attritioning circuit
thickener. Concentrate from the attrition circuit is pumped to the
final concentrate thickener.





The
combined fine flake cleaner concentrate and the +212 μm may
also be processed through the secondary attrition circuit which
consists of a dewatering screen, an attrition scrubber, column
flotation cell and cleaner/cleaner scavenger trough cells.
Concentrate from this circuit is pumped to the final concentrate.
The secondary attrition circuit is optimal.





Combined rougher
and cleaner flotation final tailings are pumped to the final
tailings thickener. Thickened final concentrate is pumped to a
filter press for further dewatering before the filter cake is
stockpiled prior to load and haul.





The
concentrate thickener underflow is pumped to a linear belt filter
for further dewatering and fed to a diesel-fired rotary kiln for
drying. The dried concentrate is then screened into four size
fraction:





●
 +48
mesh





●
 -48 + 80
Mesh





●
 -80 +100
mesh





●
 -100
mesh





The
various product sizes are bagged and readied for
shipping.





Chemical reagents
are used throughout the froth flotation circuits and thickeners.
Diesel fuel is used as collector and liquid MIBC (methyl isobutyl
carbinol) frother are used within the flotation circuits. Diesel
collector is pumped from a diesel storage isotainer, from where it
enters a manifold system which supplies multiple variable speed
peristaltic pumps which discretely pump the collector at set rates
to the various points-of-use within the flotation
circuits.





MIBC
(methyl isobutyl carbinol) frother is delivered by road to an
isotainer. A manifold system on the storage isotainer supplies
multiple variable speed peristaltic pumps, which discretely pump
the frother at set rates to the various points-of-use within the
flotation circuits.


Flocculant powder
(Magnafloc 24) is delivered by road to the plant reagent store in
25 kg bags. The bags are collected by forklift as required and
delivered to a flocculant mixing and dosing area. Here the
flocculant is diluted as required using parallel, duplicate
vendor-package automated make-up plants, each one being dedicated
to supplying the concentrate and tailings thickeners due to the
flocculant types required being different for each application.
Variable speed peristaltic pumps discretely pump the flocculant at
set rates to the thickeners’ points-of-use.





Coagulant powder
(Magnafloc 1707) for thickening enhancement is handled similarly to
the flocculant as described above, the exception being that a
single make-up system is provided to supply both the concentrate
and tailings thickeners. Again, variable speed peristaltic pumps
discretely pump the coagulant at set rates to the thickeners’
points-of-use.





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1.12
 Infrastructure





The
project is located in a relatively remote part of South Western
Madagascar, approximately 13 km NE of the local village of
Fotadrevo. There is currently limited infrastructure on site and
project infrastructure will have to be constructed.


The
following elements are all part of the project scope:





●
 Raw water supply
(from a network of bore holes extracting ground water)





●
 Power supply
(temporary during construction) and then a permanent diesel power
station to supply the plant and permanent camp





●
 Sanitation for the
plant, permanent camp, and temporary during
construction





●
 Storm water control
and management





●
 All permanent
buildings (offices, workshops, stores, laboratory)





●
 All buried services
(potable water, sewage, stormwater, electrical
reticulation)





●
 In plant
roads





●
 Haul
road





●
 Waste, high and low
grade -Rock dumps.





As the
proposed Phase1 plant is a small plant, and with the
Company’s intention to rapidly expand to a larger Phase 2
process plant and mining operation, the brief from the Company was
to develop a “fit for purpose” and cost-effective
design without compromising on safety or quality.





1.13
 Geotechnical





The
geotechnical investigation conducted by SRK Consulting in 2014 was
used as reference document for the design and planning of this
phase of the project. (Report 479297/Plant
Geotech/Final).





In
summary, transported soils are present across all areas
investigated to shallow depths not exceeding a maximum depth of 0.6
m. From the consistencies noted during test pit excavations the
transported soils are anticipated to have a maximum allowable
bearing capacity of 100 kPa, limiting total consolidation
settlement to 25 mm.





Residual soils were
noted in the majority of the test pits excavated and comprised
dense to very dense silty and/ or clayey sands. The residual soils
are expected to have a maximum allowable bearing capacity of 200
kPa, limiting total consolidation settlement to 25 mm (differential
settlement expected to be half this value).





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As rock
is located at a shallow depth at most locations it is recommended
that structures generally be founded on rock rather than the
overlying thin soils. However, light structures with loads of less
than 100 kPa could be founded on the soils if
necessary.





1.14
 Concrete





Concrete grades and
mix design were selected taking into consideration durability
requirements. Particular attention will be given to wet process
plant areas and wash down slabs. All foundations were designed as
pad or raft type foundations with load bearing pressures not
exceeding 150kPa. Foundations were designed to minimize
settlement.





1.15
 Storm Water





Storm
water runoff within the process plant areas are dealt with by a
minimum slope on the terrace platform. Runoff is then collected in
concrete lined V-drains.


Storm
water within the process plant area will be collected though
dedicated storm water containment channels and then handled
accordingly.





1.16
 Product Pricing





As an
industrial mineral, flake graphite pricing is determined by three
factors: 1) flake size, 2) carbon purity and 3) industry-specific
technical attributes of the flakes (Benchmark, 2017a; Roskill,
2017). Flake sizing is broadly classified into four ranges: small
(-100 mesh, or <75μm) medium (-80 to 100 mesh, or 75μm
to 180μm), large (-50 to 80 mesh, or 180μm to
300μm), and extra-large or jumbo (+50 mesh, or
>300μm). These flake sizes are in turn classified by carbon
content (”C”), and are typically sold in ranges of
88-93% C, 94-95% C, and 95-97% C. The specific technical attributes
of the flakes are then defined by end-user parameters such as
expansion coefficient, thermal and electrical conductivity, and
charge-discharge stability and efficiency. As the technical
parameters sought by end-users are proprietary to their processes,
pricing is not publicly available. There are however subscription
pricing services that provide monthly graphite pricing for various
flake sizes and carbon purities based upon input from graphite
purchasers. The Company utilized the average pricing for the past
12 months for flake graphite sold on an FOB China basis, provided
by UK-based Benchmark Mineral Intelligence, with the flake size
distribution of Molo graphite to arrive at a “basket”
sale price of US $1207.55 per tonne as outlined in Section
19.3





1.17
 Logistics





The
Port of Ehoala at Fort Dauphin is a modern (2009) port developed by
Rio Tinto for the QMM project. It has a 15m draft with shipping
lines calling on a regular basis. There are however no crane
facilities and vessels require their own cranes.


The
following equipment are available at the port.





●
 1 x 3.5T
Telehandler


●
 5 x Trailers for
container movement (2x40ft, 3x20ft)


●
 1 x
Tractor


●
 2 x Reach
stacker


●
 6 x Forklifts (1 x
2.5T; 2 x 5T; 3 x 7T)





The
port is fenced and there is a security service (G4S) for days and
nights port guarding. Despite the presence of a national airport,
the port of Ehaola is mainly connected to the hinterland
destinations by road. All types of trucks can obtain access to the
port and his berth for cargo off loading, however the majority are
container trucks (20ft and 40ft).





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Customs
are available on site and clearance can be streamlined via
pre-clearance in order to lessen standing time of the containers
once arrived. It is to be noted that all cargo items imported into
the Republic of Madagascar, needs to have a BSC online cargo
tracking note. Failing to submit the BSC certificate, cargo cannot
be cleared, and the shipment will be sent back to origin and be
subject to a fine of 2500 USD per Bill of lading, plus regulations
charges. All containers, vehicles, bulk commodities, including
airfreight requires a BSC certificate.





The
route from Molo to Fort Dauphin runs either via the RN 10 or the RN
13. Both these routes are in relatively poor condition and trucks
are expected to take between four and five days to make the round
trip. A truck was run over the route by a Madagascan trucking
contractor to gauge cycle times and they managed to complete the
journey in two long days each way. This was in the dry season and
in the wet season there may be periods of time when the roads
become impassable. No money has been budgeted for roads repairs or
upgrades.





Due to
the poor road conditions, majority of cargo would have to be
transported to site during the dry season. Cargo transport
limitations include:





●
 12m (L) x 3.5m (W)
x 2.8m (H) at a maximum of 35 T per 3-axle trailer.


●
 12m (L) x 2.5m (W)
x 3.5m (H) at a maximum of 26 T per 2-axle trailer.





Cargo
exceeding 4m width pose problems to transport due to the Manambaro
Bridge, as there is no possibility to divert. Some access areas
would also need to be adjusted for items holding a width of 2.3m
– 3.6m. (Ex. Raft of Bevilana). Any cargo exceeding the
above-mentioned limitations would have to be considered on a
case-by-case basis prior to importation.





Specialised
trailers and equipment for transporting out-of-gauge items are
limited. The design of equipment / plant would have to consider
above mentioned limitations in order to ensure equipment can be
transported to Site from Port.





1.18
 CAPEX and OPEX





The
Phase 1 initial CAPEX is estimated at $21.0 M, including a 10%
contingency, with an additional $3.1 M required to cover the first
3 months of working capital. Phase 2 CAPEX is estimated at $67.4 M,
including a 12.5% contingency, with an additional $7.3 m required
to cover the first 3 months of working capital. Over the life of
the mine, sustaining capital of $3.3 M will be required for
equipment replacement and for rehabilitation at the end of the
project. Table 7 summarizes the capital requirements.





The
base date for the capital costs is May 2019 and no provision has
been made for escalation. The accuracy of capital costs is
considered to be with +/- 10%.





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 For the year ended June 30, 2020





Table
7: Capital Costs


Capital Cost Breakdown
Phase 1 (240ktpa)
Phase 2 (720ktpa)Process Equipment
$8,438,609.00
$25,315,827.00Civil & Infrastructure
$2,103,672.21
$6,661,016.63Tailings
$0.00
$0.00Mining
$2,574,143.85
$4,913,341.38Buildings
$1,154,609.43
$2,886,523.59Electrical Infrastructure
$128,804.10
$386,412.30Project Services/EPCM
$931,481.79
$2,794,445.38Construction Services
$1,474,775.11
$3,686,937.78Indirect Costs
$372,750.00
$1,118,250.00Environmental & Permitting costs
$729,827.94
$1,459,655.89Owner's Costs
$1,197,000.00
$4,189,500.00Sub-total
$19,105,673.44
$53,411,909.93Contingency (10%/12.5%)
$1,910,567.34
$6,676,488.743 Months Working Capital
$3,100,000
$7,300,000CAPEX TOTAL
$24,116,241
$67,388,398.67Sustaining CAPEX over Life of Mine

$3,300,000





The
operating costs per tonne of finished graphite flake concentrate
delivered on a FOB basis at the Port of Fort Dauphin, Madagascar
are outlined in Table 8.





Table
8: Operating Costs per Tonne of Finished Graphite
Concentrate


Category
Phase 1
Phase 2Operating
costMining
(US$/T)
102.81
65.34Processing
(US$/T)
265.82
265.82Trucking
to local port / Ft. Dauphin (US$/T)
133.01
133.01General
and Administration (US$/T)
64.29
50.00TOTAL
$565.93
$514.17





Please
note that these operating costs assume that the plant is able to
successfully handle the variability in the ore body, as shown by
the SGS test work discussed in detail in Section 13. Should the
plant not perform as expected this could have a material impact on
operating costs as:





●
 The flake size
distribution could be worse than expected





●
 The product grade
could be lower than expected





●
 The recoveries
could be lower than expected or a combination of all of
these





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1.19
 Economic analysis





Table 9
below summarizes the economic analysis of the project using
discounted cash flow methods.





Table 9: Economic Analysis of
the Project


Metric
Unit
ValueBefore TaxTotal Project Cash Flows
USDm
841NPV @ 8%
USDm
237.1NPV @ 10%
USDm
182.9NPV @ 12%
USDm
143.3IRR
%
43.10%Payback Period
year
3.4After TaxTotal Project Cash Flows
USDm
671.6NPV @ 8%
USDm
184.3NPV @ 10%
USDm
140.5NPV @ 12%
USDm
108.4IRR
%
36.20%Payback Period
year
3.8





Note


All
values in the above table do not account for inflation in costs or
product pricing.





The
assumptions used in the financial model are as
follows:


●
 13 South African
Rand (ZAR) to US$1





●
 1.1 Euro to
US$1





●
 12% Import Duties
and Taxes





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1.20
 Environmental & Permitting





The
Madagascar Ministry of Environment’s Office National pour
l'Environnement (the National Office for the Environment) or
“ONE”, granted the Company its Environmental License
for the 240ktpa (Phase 1) Project on April 8, 2019 after reviewing
the following:





●
 Exploitation Permit
PE #39807





●
 Environmental &
Social Impact Assessment (“ESIA”) and Relocation Action
Plan (“RAP”) to International Finance Corporation (IFC)
Performance and World Bank Standards





●
 Completion of local
and regional stakeholder and community engagement, with
overwhelming support from both the local community and local
government, as well as regional government





●
 Signed agreements
with all potentially affected land occupants to accept compensation
for any affected crops and grazing land and relocation if
needed





●
 Approved capital
investment certification from the BCMM





●
 Receipt of Cahier
des Charges Miniér (mining specification) from the BCMM as
pre-requisite to submitting the ESIA & RAP to ONE for
review





●
 Successful
completion of the ONE’s technical evaluation process which
consisted of a site visit and four separate community
consultations





●
 Joint agreement and
signature of the Cahier des Charges Environnementales
(environmental specification) with the ONE.








1.20.1
 Environmental and Social Impact Assessment





A
comprehensive Environmental and Social Impact Assessment was
completed and submitted to Malagasy government as part of the
Environmental Permit process.





Early
integration of environmental and social sensitivities and risks
ensured that the final impact assessment component revealed that
there are no fatal flaws from an environmental and social
perspective. The significance levels of impacts range from minor to
major before any mitigation measures are applied and from minor to
average with mitigation measures included. Notably, all major risks
require significant reduction in risk via stringent controls. These
controls have been incorporated into the Project design and
planning with additional operational controls specified within the
various environmental and social management plans.





To this
end, the ESIA contains a chapter which details specific management
measures which either remove the risks completely or reduce their
significance to an acceptable level.





In
addition, each specific environmental and social component has a
prescribed monitoring plan which will be followed during each
Project developmental phase. This is aimed at monitoring compliance
against various specifications such as the baseline environment and
predicted impact removal and reduction measures.





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1.21
 Conclusions





1.21.1
 Geology





The
Company’s 2011 exploration programme delineated a number of
new graphitic trends in southern Madagascar. The resource
delineation drilling undertaken during 2012-2014 focussed on only
one of these, the Molo Deposit, and this has allowed for an
Independent, CIM compliant, updated resource statement for the Molo
deposit.





The
total Measured and Indicated Resource is estimated at 100.37 Mt,
grading at 6.27% C. Additionally, an Inferred Resource of 40.91 Mt,
grading at 5.78% C is stated. When compared to the November 2012
resource statement (Hancox and Subramani, 2013), this shows a 13.7%
increase in tonnage, a 3.4 % decrease in grade, and a 9.8% increase
in graphite content. The reason for the increase in tonnage is due
to the 2014 drilling on the previously untested north eastern limb
of the deposit, which added additional new resources. Additionally,
23.62 Mt, grading at 6.32% Carbon, have been upgraded by infill
drilling from the Indicated to Measured Resource
category.





1.21.2
 Mining





Maiden
mineral reserves of 22 300 000 tonnes have been declared for
the Molo 2019 720ktpa (Phase 2) FS at an average grade of 7.0% and
based on the information contained in the FS, it is possible to
economically mine this deposit.





1.21.3
 Tailings





Due to
the substantially reduced tonnages for the project as envisaged,
tailings will be dried and co-disposed with the waste rock
generated as part of the open cast mining. Despite this co-disposal
approach, a detailed design has been completed, complete with
environmental and social impact assessment and closure to allow for
the upgrade to a more conventional, cyclone facility, should the
throughput be increased during the life of the mine with an
expansion to Phase 2 production. This approach has been pursued to
ensure that sufficient flexibility is built into the project
development strategy to accommodate the anticipated increase in
market demand.





1.21.4
 Risks





In
addition to the qualitative risk assessment completed during the
Molo 2015 FS, a comprehensive HAZID study was completed as part of
this Molo 2019 720ktpa (Phase 2) FS.





1.21.5
 Permitting





The
Mining and Environmental Permits have been obtained for the
project, but supplementary sectoral permits will be
required.





1.21.6
 Metallurgical Test Work





Comprehensive
metallurgical test programs culminated in a process flowsheet that
is capable of treating the Molo ore using conventional and
established mineral processing techniques.





Process
risks associated with the variability with regards to metallurgical
performance have been mostly mitigated through the addition of an
upgrading circuit.  The upgrading circuit treated the combined
concentrate after the secondary cleaning circuit.  Reduced
flake degradation and an improved process flexibility may be
obtained by employing separate upgrading circuits for the coarse
and fine flakes.





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1.22
 Recommendations








1.22.1
 Geology





No
further recommendations.





1.22.2
 Mining





The
Project will allow for potential optimization of drilling and
blasting designs during execution that could reduce operating costs
slightly.





From a
pure mining perspective, the Project is robust and provided
reasonable levels of short-term planning are applied it should have
very few challenges in delivering the required tonnages at the
required grade to meet the production targets set out in this
study.





1.22.3
 Metallurgical Test Work





The
following recommendations are made for the detailed engineering
stage:





●
 Investigate the
metallurgical impact of different attrition mill technologies such
as stirred media mills or attrition scrubbers;





●
 Evaluate a range of
different grinding media (e.g. different size, shape, material) to
determine if flake degradation can be reduced without affecting the
concentrate grade;





●
 Develop a grinding
energy versus concentrate grade relationship for the best grinding
media. This will allow a more accurate prediction of the required
attrition mill grinding energy as a function of the final
concentrate grade;





●
 Conduct attrition
mill vendor tests to aid in the sizing of the
equipment;





●
 Carry out vendor
testing on graphite tailings using the optimized reagent regime
proposed by the reagent supplier.





●
 Complete a series
of flotation tests on samples covering mine life intervals for the
Molo 2019 720ktpa (Phase 2) FS pit design.








1.22.4
 Recovery Methods





The
process plant has been designed to easily optimize the final
product grade, this is achieved by having two options in the
attrition cleaning step. It is however recommended that additional
laboratory test work be conducted to test the current plant
configuration for treatment for higher feed grade material.
Provision is to be made for attritioning circuit tailings to be
recycled back into the process.





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1.22.5
 Infrastructure





The
following are recommended prior to the detailed design
stage:





●
 Additional
geotechnical investigations at the proposed new construction and
permanent camp site, particularly at the location of the new
potable water storage tanks





●
 A detailed
geotechnical investigation will need to be undertaken to identify
and confirm suitable sources of concrete aggregate and concrete
sand materials at the location of the project site. This testing
will need to include for concrete material testing and the
production of concrete trial mixes with the material
identified





●
 The geotechnical
information will also need to confirm the suitability for
construction of all the material to be excavated from the Return
Water Dam. It is proposed that all the material excavated from the
Return Water Dam is utilized in the works as processed fill
material





●
 Confirmation as to
whether the material from the proposed borrow pit near Fotadrevo
(which will be used to supply all fill material for the TSF starter
wall construction) can be utilized as fill material, or if this
material can be stabilized in some manner and used in the
works





●
 A detailed
topographical survey will need to be undertaken of the proposed
construction site, borrow pit areas and the access road between
Fotadrevo and the mine site. This information is required prior to
the final detailed design of the plant layout and associated
earthworks








1.22.6
 Water





The
following is recommended during the detailed design
phase:





●
 Water quality and
quantity data is required to provide a baseline for comparison once
the Molo Mine is commissioned. To provide the necessary baseline
data, regular ground and surface water quality monitoring must be
carried out leading up to the date when the Molo Mine will be
commissioned. Additionally, proposed monitoring boreholes must be
installed. This also should include the installation of flow meters
on relevant pipelines to verify the dynamic water balance with
measured flow rates during operations.





●
 The installation of
a weather station on the Project site should be done as soon as
possible.





●
 Quantitative and
predictive water balance, groundwater and geochemical analyses
should be undertaken on regular intervals in order to update the
water management plan.





1.22.7
 Environmental, Social





●
 The installation of
a suitable weather station at or as near as possible to the
proposed project site, even before construction commences, is
recommended. Accurate, local weather data is almost non-existent in
Madagascar. This data will prove invaluable for model calibration,
improvement in baseline understanding and for future energy supply
options which could utilise wind and or solar power
generation.





●
 Clean and or
renewable energy supply should be considered as a medium to long
term target.





●
 Appointment of a
community representative and the establishment of a mandate to
sensitize the local communities prior to any project
activities.





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●
 Monitoring and
auditing to commence at project preparation phase.





●
 Compilation of
Standard Operating Procedures for Environmental and Social aspects
requiring direct management and intervention.





●
 It is recommended
that actual activity data, (e.g. kilometres travelled, or litres of
diesel consumed) for a financial year is used when a GHG Assessment
is being calculated. Given that this project involves an estimation
of a future GHG assessment for activities yet to begin, a series of
assumptions have been made in order to obtain the activity data
required to undertake this calculation.





●
 Community
recruitment, skills development and training should begin at
project preparation phase.





1.22.8
 Permitting





●
 Security of land
tenure is a process and is estimated to take 6-9 months, thus this
process should be commissioned as early as possible.





●
 Application for all
other necessary permits (water use, construction, mineral
processing, transportation, export, labour and so forth should be
undertaken.





●
 Compilation of a
comprehensive legal register.





●
 Application for an
amendment of the environmental approval would be required for the
expansion to 720ktpa (Phase 2).





19.3
 Flake Graphite Pricing





As an
industrial mineral, flake graphite pricing is determined by three
factors: 1) flake size, 2) carbon purity and 3) industry-specific
technical attributes of the flakes (Benchmark, 2017a; Roskill,
2017). Flake sizing is broadly classified into four ranges: small
(-100 mesh, or <75lm) medium (-80 to 100 mesh, or 75lm to
180lm), large (-50 to 80 mesh, or 180lm to 300lm), and extra-large
or jumbo (+50 mesh, or >300lm). These flake sizes are in turn
classified by carbon content (”C”), and are typically
sold in ranges of 88-93% C, 94-95% C, and 95-97% C. The specific
technical attributes of the flakes are then defined by end-user
parameters such as expansion coefficient, thermal and electrical
conductivity, and charge-discharge stability and efficiency. As the
technical parameters sought by end-users are proprietary to their
processes, pricing is not publicly available. There are however
subscription pricing services that provide monthly graphite pricing
for various flake sizes and carbon purities based upon input from
graphite purchasers. Figure 86 identifies the average monthly flake
graphite pricing for the past 12 months as provided by Benchmark
Mineral Intelligence (Benchmark, 2019).





Figure
86: Monthly Flake Graphite Pricing For Various Flake Sizes And
Carbon Contents (Benchmark, 2019).








As
Table 43 illustrates, the final flake graphite concentrate from the
Molo deposit metallurgical work yielded material ranging from 96.9%
C to 98.1% C. Table 43 summarizes FOB China flake graphite pricing
from Benchmark (2019) over the past 12 months for material with a
carbon content ranging between 96-97% C.





30
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





Table
43: 12 Month Flake Graphite Pricing With Carbon Contents Between
96-97% C And On A Fob China Basis.











Using
the flake size distribution arrived at from metallurgical testing
(Table 26) with the average pricing as identified in Table 43,
yields a 12 month average “basket price” of US $1207.55
for Molo graphite as per Table 44 below.





Table
44: Average 12 Month (March 2018 Through March 2019) Flake Graphite
Pricing For Molo Distribution.











Further details regarding the Molo Graphite Project, incorporated
by reference, is the Molo Feasibility Study dated May 31, 2019
prepared in accordance with Canada’s National Instrument
43-101 - Standards of Disclosure for Mineral Projects (“NI
43-101”), which can be found on the our website
at www.nextsourcematerials.com
(which website is expressly not incorporated by reference into this
filing) or in our Canadian regulatory filings at www.sedar.com(which
website and content is expressly not incorporated by reference into
this filing).





31
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





5.
 Green Giant Vanadium Project,
Southern Madagascar Region, Madagascar





In
2007, the Company entered into a joint venture agreement with
Madagascar Minerals and Resources Sarl ("MMR") to acquire a 75%
interest in the Green Giant property. Pursuant to the agreement,
the Company paid $765,000 in cash, issued 2,500,000 common shares
and issued 1,000,000 common share purchase warrants, which have now
expired.





On July
9, 2009, the Company acquired the remaining 25% interest by paying
$100,000. MMR retains a 2% NSR. The first 1% NSR can be acquired at
the Company's option by paying $500,000 in cash or common shares
and the second 1% NSR can be acquired at the Company’s option
by paying $1,000,000 in cash or common shares.





On
April 16, 2014, the Company signed a Joint Venture Agreement with
Malagasy, whereby Malagasy acquired a 75% interest in
non-industrial minerals on the Company's 100% owned Green Giant
Property. On May 21, 2015, Malagasy terminated the Joint Venture
Agreement, which as a result, the Company reverted to its original
100% interest in all minerals on the property.





The
Green Giant property is located within exploration permits issued
by the Bureau de Cadastre Minier de Madagascar (“BCMM”)
pursuant to the Mining Code 1999 (as amended) and its implementing
decrees. The Green Giant property exploration permits are currently
held under the name of our Madagascar subsidiary NextSource
Minerals (Madagascar) SARLU. Our Madagascar subsidiary has paid all
taxes and administrative fees to the Madagascar government and its
mining ministry with respect to all the mining permits held in
country. These taxes and administrative fee payments have been
acknowledged and accepted by the Madagascar
government.





Since
early 2012, the Company has focused its efforts on the Molo
Graphite Project and as such only limited work has been completed
on the Green Giant Vanadium Project since that time.





6.
 Sagar Property, Labrador Trough
Region, Quebec, Canada





In
2006, the Company purchased from Virginia Mines Inc. ("Virginia") a
100% interest in 369 claims located in northern Quebec, Canada.
Virginia retains a 2% net smelter return royalty ("NSR") on certain
claims within the property. Other unrelated parties also retain a
1% NSR and a 0.5% NSR on certain claims within the property, of
which half of the 1% NSR can be acquired by the Company by paying
$200,000 and half of the 0.5% NSR can be acquired by the Company by
paying $100,000.





On
February 28, 2014, the Company signed an agreement to sell a 35%
interest in the Sagar property to Honey Badger Exploration Inc.
(“Honey Badger”), a public company that is a related
party through common management. The terms of the agreement were
subsequently amended on July 31, 2014 and again on May 8, 2015. To
earn the 35% interest, Honey Badger was required to complete a
payment of $36,045 (CAD$50,000) by December 31, 2015, incur
exploration expenditures of $360,450 (CAD$500,000) by December 31,
2016 and issue 20,000,000 common shares to the Company by December
31, 2015. Honey Badger did not complete the earn-in requirements by
December 31, 2015 resulting in the termination of the option
agreement.





Since
early 2012, the Company has focused its efforts on the Molo
Graphite Project and as such only minimal work has been completed
on the Sagar Property since that time.





As of
June 30, 2020, the Sagar property consisted of 184 claims covering
a total area of 8,539.58 ha.





32
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





7.
 Risk Factors





The
Company manages risks inherent to its business and has procedures
to identify and manage significant operational and financial risks.
The reader is cautioned to carefully review the risk factors
identified below in addition to the risk factors disclosed in our
financial statements for the year ended June 30, 2019 and our most
recent AIF.





Any
such risk factors could materially affect the Corporation’s
business, financial condition and/or future operating results and
prospects and could cause actual events to differ materially from
those described in forward-looking statements and information
relating to the Corporation. Additional risks and uncertainties not
currently identified by the Corporation or that the Corporation
currently believes not to be material also may materially and
adversely affect the Corporation’s business, financial
condition, operations or prospects.





The Corporation’s ability to continue as a going
concern.





The
independent auditor’s report on the financial statements of
the Corporation contains explanatory language that substantial
doubt exists about the Corporation’s ability to continue as a
going concern. Due to the Corporation’s lack of operating
history and present inability to generate revenues, the Corporation
has sustained operating losses since its inception.





If the
Corporation is unable to obtain sufficient financing in the near
term as required or achieve profitability, then the Corporation
would, in all likelihood, experience severe liquidity problems and
may have to curtail business activities. If the Corporation
curtails business activities, the Corporation may be placed into
bankruptcy or undergo liquidation, the result of which will
adversely affect the value of the securities of the
Corporation.





Development projects are uncertain, and it is possible that actual
capital and operating costs and economic returns will differ
significantly from those estimated for a project prior to
production.





Mine
development projects, including the Molo Graphite Project, require
significant expenditures during the development phase before
production is possible.





Development
projects are subject to the completion of successful feasibility
studies and environmental assessments, issuance of necessary
governmental permits and availability of adequate financing. The
economic feasibility of development projects is based on many
factors such as: estimation of mineral reserves, anticipated
recoveries, environmental considerations and permitting, future
commodity prices, and anticipated capital and operating costs of
these projects. It is not unusual in new mining operations to
experience unexpected problems during the start-up phase, and
delays can often occur at the start of production.





Particularly for
development projects, mineral reserve estimates and cash operating
costs are, to a large extent, based upon the interpretation of
geologic data obtained from drill holes and other sampling
techniques, and feasibility studies that derive estimates of cash
operating costs based upon anticipated tonnage and grades of ore to
be mined and processed, the configuration of the ore body, expected
recovery rates of metals from the ore, estimated operating costs,
anticipated climatic conditions and other factors. As a result, it
is possible that actual capital and operating costs and economic
returns will differ significantly from those currently estimated
for a project prior to production.





Any of
the following events, among others, could affect the profitability
or economic feasibility of the Molo Graphite Project: unanticipated
changes in grade and tonnes of material to be mined and processed,
unanticipated adverse geological conditions, unanticipated recovery
problems, incorrect data on which engineering assumptions are made,
availability and costs of labor, costs of processing, availability
of economic sources of power, adequacy of water supply,
availability of surface on which to locate processing facilities,
adequate access to the site, unanticipated transportation costs,
government regulations (including regulations with respect to
prices, royalties, duties, taxes, permitting, restrictions on
production, quotas on exportation of minerals, environmental),
fluctuations in commodity prices, accidents, labor actions, the
availability and delivery of critical equipment, successful
commissioning and start-up of operations, including the achievement
of designed plant recovery rates and force-majeure
events.





33
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





The
Molo Graphite Project has not yet been built and accordingly has no
operating history upon which to base estimates of future production
and cash operating costs. The price of graphite can fluctuate
significantly on a month-to-month and year-to-year basis. Declining
graphite prices can impact operations by forcing a reassessment of
the feasibility of the Molo Graphite Project.





It is
likely that actual results for the Molo Graphite Project will
differ from current estimates and assumptions, and these
differences may be material. In addition, experience from actual
mining or processing operations may identify new or unexpected
conditions that could reduce production below, or increase capital
or operating costs above, current estimates. If actual results are
less favorable than currently estimated, the Corporation’s
business, results of operations, financial condition and liquidity
could be materially adversely affected.





The Corporation’s development and exploration projects are in
the African country of Madagascar and are subject to country
political and regulatory risks.





A new
president of Madagascar was inaugurated in January 2019 following
democratic elections. The Corporation is actively monitoring the
political climate in Madagascar and continues to hold meetings with
new representatives of the government and the Ministries in charge
of mining. Depending on future actions taken by the newly elected
government, or any future government, the Corporation’s
business operations could be impacted.





Companies in the
mining and metals sector continue to be targeted to raise
government revenue, particularly as governments struggle with
deficits and concerns over the effects of depressed economies. Many
governments are continually assessing the fiscal terms of the
economic rent for mining companies to exploit resources in their
countries.





The
government of Madagascar has granted mining claims, permits, and
licenses that will enable us to conduct anticipated operations or
exploration and development activities. Notwithstanding, these
arrangements, the Corporation’s ability to conduct
operations, exploration and/or development activities at any of its
properties is subject to obtaining and/or renewing permits or
concessions, changes in laws or government regulations or shifts in
political attitudes beyond its control.


Any
adverse developments to the political and regulatory situation in
Madagascar could have a material effect on the Corporation’s
business, results of operations and financial condition. The
Corporation’s operations may also be affected in varying
degrees by terrorism; military conflict or repression; crime;
populism; activism; labour unrest; attempts to renegotiate or
nullify existing concessions, licenses, permits and contracts;
unstable or unreliable legal systems; changes in fiscal regimes
including taxation, and other risks arising out of sovereignty
issues.





The
Corporation does not currently carry political risk insurance
covering its investments in Madagascar. It may not be possible for
investors to enforce judgments in Canada against a loss suffered on
the Corporation’s assets and operations in
Madagascar.





Dependence on the Molo Graphite Project.





The
Corporation’s principal mineral property is the Molo Graphite
Project. As a result, unless the Corporation acquires or develops
any additional material properties or projects, any adverse
developments affecting this project or our rights to develop the
Molo Graphite Project could materially adversely affect the
Corporation’s business, financial condition and results of
operations.





34
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





Additional permits and licenses are necessary to complete the
development of the Molo Graphite Project.





The
Corporation successfully converted its exploration permit for the
Molo Graphite Project into a mining permit. However, the
Corporation requires additional permits necessary to construct and
operate the mine, including water use, construction, mineral
processing, transportation, export, and labour. Applications for
these additional permits and licenses will be undertaken in due
course at the appropriate time.





The
Corporation cannot provide any assurance as to the timing of the
receipt of any of the additional permits and licenses necessary to
initiate construction of the mine.





Mining companies are increasingly required to consider and provide
benefits to the communities and countries in which they operate,
and are subject to extensive environmental, health and safety laws
and regulations.





As a
result of public concern about the real or perceived detrimental
effects of economic globalization and global climate impacts,
businesses generally and large multinational corporations in
natural resources industries face increasing public scrutiny of
their activities. These businesses are under pressure to
demonstrate that, as they seek to generate satisfactory returns on
investment to shareholders, other stakeholders, including
employees, governments, communities surrounding operations and the
countries in which they operate, benefit and will continue to
benefit from their commercial activities. Such pressures tend to be
particularly focused on companies whose activities are perceived to
have a high impact on their social and physical environment. The
potential consequences of these pressures include reputational
damage, legal suits, increasing social investment obligations and
pressure to increase taxes and royalties payable to governments and
communities.





In
addition, the Corporation’s ability to successfully obtain
key permits and approvals to explore for, develop and operate mines
and to successfully operate in communities around the world will
likely depend on the Corporation’s ability to develop,
operate and close mines in a manner that is consistent with the
creation of social and economic benefits in the surrounding
communities, which may or may not be required by law. The
Corporation’s ability to obtain permits and approvals and to
successfully operate in particular communities may be adversely
impacted by real or perceived detrimental events associated with
the Corporation’s activities or those of other mining
companies affecting the environment, human health and safety of
communities in which the Corporation operates. Delays in obtaining
or failure to obtain government permits and approvals may adversely
affect the Corporation’s operations, including its ability to
explore or develop properties, commence production or continue
operations. Key permits and approvals may be revoked or suspended
or may be varied in a manner that adversely affects the
Corporation’s operations, including its ability to explore or
develop properties, commence production or continue
operations.





The
Corporation’s business operations are subject to extensive
laws and regulations governing worker health and safety and land
use and the protection of the environment, which generally apply to
air and water quality, protection of endangered, protected or other
specified species, hazardous waste management and reclamation. The
Corporation has made, and expect to make in the future, significant
expenditures to comply with such laws and regulations. Compliance
with these laws and regulations imposes substantial costs and
burdens, and can cause delays in obtaining, or failure to obtain,
government permits and approvals which may adversely impact the
Corporation’s closure processes and operations.





Fluctuations in the market price of graphite and other metals may
adversely affect the value of the Corporation’s securities
and the ability of the Corporation to develop the Molo Graphite
Project.





The
value of the Corporation’s securities may be significantly
affected by the market price of graphite and other metals, which
are cyclical and subject to substantial price fluctuations. Market
prices can be affected by numerous factors beyond the
Corporation’s control, including levels of supply and demand
for a broad range of industrial products, economic growth rates of
various international economies, expectations with respect to the
rate of inflation, the relative strength of various currencies,
interest rates, speculative activities, global or regional
political or economic circumstances. The Chinese market is a
significant source of global demand for commodities, including
graphite. Chinese demand has been a major driver in global
commodities markets for a number of years and recent reductions in
Chinese demand have adversely affected prices for graphite. A
further slowing in China’s economic growth could result in
even lower prices and could negatively impact the value of the
Corporation’s securities. Prolonged decreases in the price of
graphite or other metals could adversely impact the ability of the
Corporation to proceed with the development of the Molo Graphite
Project.





35
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





The Corporation may not have access to sufficient capital to
develop the Molo Graphite Project.





The
Corporation has limited capital, which is insufficient to
development the Molo Graphite Project. The Corporation’s
ability to develop the project will depend primarily on its ability
to obtain additional capital in the form of private or public
equity or debt financing. Access to mine financing has been
negatively impacted by the prolonged decline in commodities prices.
Therefore, there is no assurance that the Corporation will secure
sufficient financing, or the Corporation may be unable to locate
and secure capital on terms and conditions that are acceptable to
the Corporation. Any equity financing may have a dilutive effect on
the value of the Corporation’s securities. Any debt
financing, if available, may involve financial covenants which
limit operations and could be secured against all of the
Corporation’s assets. If the Corporation cannot obtain
additional capital, the Corporation may not be able to complete the
development of the Molo Graphite Project, which would have a
material adverse effect on the business, operating results and
financial condition of the Corporation.





The Corporation has a limited operating history and expects to
incur operating losses for the foreseeable future.





The
Corporation has principally operated as a mineral exploration
company since incorporation and has just received its first mining
permit. There are numerous difficulties normally encountered by
mineral exploration and development companies, and these companies
experience a high rate of failure.





The
Corporation has not earned any revenues and the Corporation has not
been profitable. It is anticipated that the Corporation will
continue to report negative operating cash flow in future periods,
likely until after the Molo Graphite Project generates recurring
revenues from being placed into production of which there is no
assurance. The Corporation has no history upon which to base any
assumption as to the likelihood that the business will prove
successful, and the Corporation can provide no assurance to
investors that it will generate any operating revenues or ever
achieve profitable operations.





Due to the speculative nature of mineral property exploration,
there is substantial risk that the Corporation’s assets will
not go into commercial production and the business will
fail.





Exploration for
minerals is a speculative venture involving substantial risk. The
Corporation cannot provide investors with any assurance that the
Corporation’s claims and properties will ever enter into
commercial production. The exploration work that the Corporation
has completed on the Molo Graphite Project claims may not result in
the commercial production of graphite. The exploration work that
the Corporation has completed on the Green Giant Vanadium Project
may not result in the commercial production of vanadium or other
minerals.





Estimates of mineral resources and mineral reserves may not be
realized.





Mineral
resource and mineral reserve estimates are only estimates and no
assurance can be given that any particular level of recovery of
minerals will be realized or that an identified mineral resource
will ever qualify as a commercially mineable (or viable) deposit
which can be legally and economically exploited. The Corporation
relies on laboratory-based recovery models to project estimated
ultimate recoveries by mineral type. There can be no assurance that
mineral recovery in small scale laboratory tests will be duplicated
in large scale tests under on-site conditions or in production
scale operations. Actual recoveries may exceed or fall short of
projected laboratory test results. In addition, the grade of
mineralization ultimately mined may differ from the one indicated
by the drilling results and the difference may be material.
Production can be affected by such factors as permitting
regulations and requirements, weather, environmental factors,
unforeseen technical difficulties, unusual or unexpected geological
formations, inaccurate or incorrect geologic, metallurgical or
engineering work, and work interruptions, among other things. Short
term factors, such as the need for an orderly development of
deposits or the processing of new or different grades, may have an
adverse effect on mining operations or the results of those
operations. Material changes in mineral reserves or mineral
resources, grades, waste-to-ore ratios or recovery rates may affect
the economic viability of projects. The estimated mineral reserves
and mineral resources should not be interpreted as assurances of
mine life or of the profitability of future operations





36
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





Because of the inherent dangers involved in mineral exploration,
there is a risk that the Corporation may incur liability or damages
as the Corporation conducts business.





The
search for valuable minerals involves numerous hazards. As a
result, the Corporation may become subject to liability for such
hazards, including pollution, cave-ins and other hazards against
which the Corporation cannot, or may elect not, to insure against.
The Corporation currently has no such insurance, but management
intends to periodically review the availability of commercially
reasonable insurance coverage. If a hazard were to occur, the costs
of rectifying the hazard may exceed the Corporation’s asset
value and cause us to liquidate all of its assets.


The
Corporation’s operations are subject to environmental
regulations, which could result in additional costs and operational
delays. Environmental legislation is evolving in a manner that may
require stricter standards, and enforcement, increased fines and
penalties for non-compliance, more stringent environmental
assessments of proposed projects, and a heightened degree of
responsibility for companies and their officers, directors, and
employees. There is no assurance that any future changes in
environmental regulation will not negatively affect the
Corporation’s projects.





The Corporation has no insurance for environmental
problems.


Insurance against
environmental risks, including potential liability for pollution or
other hazards as a result of the disposal of waste products
occurring from exploration and production, has not been available
generally in the mining industry. The Corporation has no insurance
coverage for most environmental risks. In the event of a problem,
the payment of environmental liabilities and costs would reduce the
funds available to us for future operations. If the Corporation is
unable to full pay for the cost of remedying an environmental
problem, the Corporation might be required to enter into an interim
compliance measure pending completion of the required
remedy.





Should the Corporation lose the services of key executives, the
Corporation’s financial condition and proposed expansion may
be negatively impacted.





The
Corporation depends on the continued contributions of the
Corporation’s executive officers to work effectively as a
team, to execute its business strategy and to manage its business.
The loss of key personnel, or their failure to work effectively,
could have a material adverse effect on its business, financial
condition, and results of operations. Specifically, the Corporation
relies on Craig Scherba, the President and Chief Executive Officer
and Marc Johnson, the Chief Financial Officer.





The
Corporation does not maintain key man life insurance. Should the
Corporation lose any or all of their services and the Corporation
is unable to replace their services with equally competent and
experienced personnel, the Corporation’s operational goals
and strategies may be adversely affected, which will negatively
affect potential revenues.





Because access to the Corporation’s properties may be
restricted by inclement weather or proper infrastructure, its
exploration programs are likely to experience delays.





Access
to most of the properties underlying the Corporation’s claims
and interests is restricted due to their remote locations and
because of weather conditions. Some of the Corporation’s
properties are only accessible by air. As a result, any attempts to
visit, test, or explore the property are generally limited to those
periods when weather permits such activities. These limitations can
result in significant delays in exploration efforts, as well as
mining and production efforts in the event that commercial amounts
of minerals are found. This could cause the Corporation’s
business to fail.





Climate change and related regulatory responses may impact the
Corporation’s business.





Climate
change as a result of emissions of greenhouse gases is a current
topic of discussion and may generate government regulatory
responses in the near future. It is impracticable to predict with
any certainty the impact of climate change on the
Corporation’s business or the regulatory responses to it,
although the Corporation recognizes that they could be significant.
However, it is too soon for us to predict with any certainty the
ultimate impact, either directionally or quantitatively, of climate
change and related regulatory responses.





37
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





To the
extent that climate change increases the risk of natural disasters
or other disruptive events in the areas in which the Corporation
operates, the Corporation could be harmed. While the Corporation
maintains rudimentary business recovery plans that are intended to
allow us to recover from natural disasters or other events that can
be disruptive to the Corporation’s business, its plans may
not fully protect us from all such disasters or
events.





Compliance with changing regulation of corporate governance and
public disclosure will result in additional expenses and pose
challenges for management.





The
Corporation’s management team needs to devote significant
time and financial resources to comply with both existing and
evolving standards for public companies, which will lead to
increased general and administrative expenses and a diversion
of management time and attention from revenue generating activities
to compliance activities.





Tax risks.





Changes
in tax laws or tax rulings could materially affect the
Corporation’s financial position and results of operations.
Changes to, or differing interpretations of, taxation laws or
regulations in Canada, Madagascar, the United States of America, or
any of the countries in which the Corporation’s assets or
relevant contracting parties are located could result in some or
all of the Corporation’s profits being subject to additional
taxation or other tax liabilities being applicable to the
Corporation or its subsidiaries. Taxation laws are complex, subject
to differing interpretations and applications by the relevant tax
authorities. In particular, the tax treatment relating to the
Corporation’s corporate redomicile from the US to Canada is
complex. There is no assurance that new taxation rules or
accounting policies will not be enacted or that existing rules will
not be applied in a manner which could result in the
Corporation’s profits being subject to additional taxation or
which could otherwise have a material adverse effect on
profitability, results of operations, financial condition and the
trading price of the Corporation’s securities. Additionally,
the introduction of new tax rules or accounting policies, or
changes to, or differing interpretations of, or application of,
existing tax rules or accounting policies could make investments in
or by the Corporation less attractive to counterparties. Such
changes could adversely affect the Corporation’s ability to
raise additional funding or make future investments.





The Corporation’s business is subject to anti-corruption and
anti-bribery laws, a breach or violation of which could lead to
civil and criminal fines and penalties, loss of licenses or permits
and reputational harm.





The
Corporation operates in certain jurisdictions that have experienced
governmental and private sector corruption to some degree, and, in
certain circumstances, strict compliance with anti-bribery laws may
conflict with certain local customs and practices. Anti-corruption
and anti-bribery laws in certain jurisdictions generally prohibit
companies and their intermediaries from making improper payments
for the purpose of obtaining or retaining business or other
commercial advantage. The Corporation’s corporate policies
mandate compliance with these anti-bribery laws, which often carry
substantial penalties. There can be no assurance that the
Corporation’s internal control policies and procedures always
will protect it from recklessness, fraudulent behavior, dishonesty
or other inappropriate acts committed by the Corporation’s
affiliates, employees or agents. As such, the Corporation’s
corporate policies and processes may not prevent all potential
breaches of law or other governance practices. Violations of these
laws, or allegations of such violations, could lead to civil and
criminal fines and penalties, litigation, and loss of operating
licenses or permits, and may damage the Corporation’s
reputation, which could have a material adverse effect on its
business, financial position and results of operations or cause the
market value of the Common Shares to decline.





The Corporation does not intend to pay dividends.





The
Corporation does not anticipate paying cash dividends in the
foreseeable future. The Corporation may not have sufficient funds
to legally pay dividends. Even if funds are legally available to
pay dividends, the Corporation may nevertheless decide, in its sole
discretion, not to pay dividends. The declaration, payment and
amount of any future dividends will be made at the discretion of
the board of directors, and will depend upon, among other things,
the results of the Corporation’s operations, cash flows and
financial condition, operating and capital requirements, and other
factors the board of directors may consider relevant. There is no
assurance that the Corporation will pay any dividends in the
future, and, if dividends are paid, there is no assurance with
respect to the amount of any such dividend.





38
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





Because from time to time the Corporation holds a significant
portion of cash reserves in Canadian dollars, the Corporation may
experience losses due to foreign exchange
translations.





From
time to time the Corporation holds a significant portion of cash
reserves in Canadian dollars. Due to foreign exchange rate
fluctuations, the value of these Canadian dollar reserves can
result in translation gains or losses in U.S. dollar terms. If
there was a significant decline in the Canadian dollar versus the
U.S. dollar, the Corporation’s converted Canadian dollar cash
balances presented in U.S. dollars on its balance sheet would
significantly decline. If the US dollar significantly declines
relative to the Canadian dollar the Corporation’s quoted US
dollar cash position would significantly decline as it would be
more expensive in US dollar terms to pay Canadian dollar expenses.
The Corporation has not entered into derivative instruments to
offset the impact of foreign exchange fluctuations. In addition,
certain of the Corporation’s ongoing expenditures are in
South African Rand, Madagascar Ariary and Euros requiring us to
occasionally hold reserves of these foreign currencies with a
similar risk of foreign exchange currency translation
losses.





The Corporation is exposed to general economic conditions, which
could have a material adverse impact on its business, operating
results and financial condition.





Recently there have
been adverse conditions and uncertainty in the global economy as
the result of unstable global financial and credit markets,
inflation, and recession. These unfavorable economic conditions and
the weakness of the credit market may continue to have, an impact
on the Corporation’s business and the Corporation’s
financial condition. The current global macroeconomic environment
may affect the Corporation’s ability to access the capital
markets may be severely restricted at a time when the Corporation
wishes or needs to access such markets, which could have a
materially adverse impact on the Corporation’s flexibility to
react to changing economic and business conditions or carry on
operations.





The current financial environment may impact the
Corporation’s business and financial condition that cannot
predict.





The
continued instability in the global financial system and related
limitation on availability of credit may continue to have an impact
on the Corporation’s business and financial condition, and
the Corporation may continue to face challenges if conditions in
the financial markets do not improve. The Corporation’s
ability to access the capital markets has been restricted as a
result of the economic downturn and related financial market
conditions and may be restricted in the future when the Corporation
would like, or need, to raise capital. The difficult financial
environment may also limit the number of prospects for potential
joint venture, asset monetization or other capital raising
transactions that the Corporation may pursue in the future or
reduce the values the Corporation is able to realize in those
transactions, making these transactions uneconomic or difficult to
consummate.





The market price for the Common Shares is particularly volatile
given the Corporation’s status as a relatively unknown
company with a small and thinly traded public float, limited
operating history and lack of profits which could lead to wide
fluctuations in the market price for the Common
Shares.





The
market price for the Common Shares is characterized by significant
price volatility when compared to seasoned issuers, and the
Corporation expect that its share price will continue to be more
volatile than a seasoned issuer. Such volatility is attributable to
a number of factors. First, the Common Shares, at times, are thinly
traded. As a consequence of this lack of liquidity, the trading of
relatively small quantities of Common Shares by shareholders may
disproportionately influence the price of those Common Shares in
either direction. The price for the Common Shares could, for
example, decline precipitously in the event that a large number of
Common Shares are sold on the market without commensurate demand,
as compared to a seasoned issuer which could better absorb those
sales without adverse impact on its share price. Second, the
Corporation are a speculative or “risky” investment due
to the Corporation’s limited operating history, lack of
profits to date and uncertainty of future market acceptance for the
Corporation’s potential products. As a consequence, more
risk-adverse investors may, under the fear of losing all or most of
their investment in the event of negative news or lack of progress,
be more inclined to sell their shares on the market more quickly
and at greater discounts than would be the case with the stock of a
seasoned issuer. Many of these factors are beyond the
Corporation’s control and may decrease the market price of
the Common Shares, regardless of the Corporation’s
performance. The Corporation cannot make any predictions as to what
the prevailing market price for the Common Shares will be at any
time or as to what effect that the sale of Common Shares or the
availability of Common Shares for sale at any time will have on the
prevailing market price.





39
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





Securities of
small-cap and mid-cap companies have experienced substantial
volatility in the recent past, often based on factors unrelated to
the financial performance or prospects of the companies involved.
These factors include macroeconomic developments in North America
and globally and market perceptions of the attractiveness of
particular industries. The price of the Common Shares is also
likely to be significantly affected by short-term changes in
graphite prices and demand, the U.S. dollar, the Malagasy ariary,
the Canadian dollar, and the Corporation’s financial
condition or results of operations as reflected in its financial
statements. Other factors unrelated to the performance of the
Corporation that may have an effect on the price of the Common
Shares include the following: the extent of analytical coverage
available to investors concerning the Corporation’s business
may be limited if investment banks with research capabilities do
not follow the Corporation’s securities; lessening in trading
volume and general market interest in the Corporation’s
securities may affect an investor’s ability to trade
significant numbers of Common Shares; the size of the
Corporation’s public float may limit the ability of some
institutions to invest in its securities; and a substantial decline
in the price of the Common Shares that persists for a significant
period of time could cause its securities, if listed on an
exchange, to be delisted from such exchange, further reducing
market liquidity.





As a
result of any of these factors, the market price of the Common
Shares at any given point in time may not accurately reflect the
long-term value of the Corporation. Class action litigation often
has been brought against companies following periods of volatility
in the market price of their securities. The Corporation may in the
future be the target of similar litigation. Securities litigation
could result in substantial costs and damages and divert
management’s attention and resources.





8.
 Market for
Securities





Trading Price and Volume





The
table below sets forth the high and low closing sale prices and
volume of our common shares on the TSX for each month of the most
recently completed financial year. Over-the-counter market
quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not necessarily represent actual
transactions.





TSX (in CAD$)Month
High
Low
VolumeJuly
2019
$0.095
$0.080
3,142,282August
2019
$0.085
$0.060
5,701,351September
2019
$0.070
$0.030
29,601,898October
2019
$0.055
$0.040
13,014,999November
2019
$0.065
$0.050
5,082,298December
2019
$0.055
$0.040
4,809,663January
2020
$0.055
$0.045
4,601,569February
2020
$0.055
$0.040
4,706,178March
2020
$0.045
$0.020
8,134,999April
2020
$0.050
$0.030
10,099,835May
2020
$0.050
$0.035
12,646,918June
2020
$0.045
$0.035
5,058,173





40
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





9.
 Directors and
Officers





The
following are the directors and officers 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
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%)Dean
Comand (3)(4)(5)(6)
(Ancaster,
ON,
Canada)
54
Director
Professional
Engineer,
President
and Chief Executive Officer of TCG corporation
October
2014
444,445
(0.1%)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%)Marc
Johnson
(Toronto,
ON,
Canada)
44
Chief
Financial Officer


633,334
(0.1%)Brent
Nykoliation
(Toronto,
ON,
Canada)
51
Senior
Vice President – Corporate Development


Nil
(0.0%)





(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, Dean Comand, Christopher Kruba and David McNeely are
independent directors of the Company.


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


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


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





41
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





The
following is a brief biography of each of our
directors:





Brett Whalen (Markham, Canada)





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





Robin Borley (Johannesburg, South Africa)





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





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





Mr.
Comand has served as a director of the Company since October 2014.
He is a Mechanical Engineer and holds his P. Eng designation in the
province of Ontario as well as designation as a Certified
Engineering Technologist. Mr. Comand earned his Maintenance Manager
Professional Designation (MMP) license in 2006 and his Charter
Director designation (CDir) in 2012. Mr. Comand is currently the
President and Chief Executive Officer of TCG corporation, which
provides strategic, consulting and execution services predominantly
in energy, resource and manufacturing sectors. He was previously
the President and Chief Executive officer of Hamilton Utilities
Corporation. 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.





42
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





Christopher Kruba (Windsor, Canada)





Christopher R.
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 was elected to the Board of Directors in 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.





The
following is a brief biography of each of our executive
officers:





Craig Scherba, P.Geol. (Oakville, Canada) – President and
Chief Executive Officer





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





Marc Johnson, CFA, CPA (Toronto, Canada) - Chief Financial
Officer





Mr.
Johnson was appointed as Chief Financial Officer (CFO) of the
Company in October 2015. Mr. Johnson is a senior executive with
over 22 years of experience in corporate finance, accounting and
investment banking. He is a Director and CFO of IC Capitalight
Corp., and CFO of Andean Drilling Services Inc. He was previously
CFO of Red Pine Exploration Inc. and of Honey Badger Exploration
Inc., Equity Research Mining Analyst at M Partners, Investment
Banking Associate at Toll Cross Securities Inc., Accounting Manager
at Teleglobe Inc., Risk Management Analyst at Bell Canada and
started his career in Network Cost Control at Fonorola Inc. Mr.
Johnson holds the Chartered Professional Accountant (CPA)
designation and the Chartered Financial Analyst (CFA) designation.
He also holds a Bachelor of Commerce (Finance) from the John Molson
School of Business at Concordia University in
Montreal.





43
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





Brent Nykoliation (Toronto, Canada) – SVP Corporate
Development





Mr.
Nykoliation joined the senior management team at NextSource
Materials as Vice President, Corporate Development in 2007 and
oversees all communication initiatives with offtake partners,
institutional investors and analysts for the Company. He brings
over 20 years of management experience, having held senior
marketing and strategic development positions with several Fortune
500 corporations in Canada, notably Nestlé, Home Depot and
Whirlpool. Mr. Nykoliation holds a Bachelor of Commerce with
Honours degree from Queen's University.





Robin Borley (Johannesburg, South Africa) – SVP Mine
Development





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





Director Term Limits and Female Representation in Management and on
the Board





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.





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





While
the Nomination Committee does not have a formal diversity policy
for Board membership, the Nomination Committee seeks directors who
represent a mix of backgrounds and experiences that will enhance
the quality of the Board’s deliberations and decisions. The
Nomination Committee considers, among other factors, diversity with
respect to viewpoint, skills, experience, character and behavior
qualities in its evaluation of candidates for Board membership. The
Company currently has six Board members and four executive
officers, none of whom are female. The Nomination Committee has
been tasked with identifying and nominating a woman as an eventual
seventh director. The Company has not considered the level of
representation of women in its executive officer positions or on
its Board in previous nominations or appointments (including a
targeted number or percentage).





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





44
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





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.





As at
the date hereof, No directors or executive officers of the Company
has 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 Stockholder 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 annual
information form, there are no known existing or potential
conflicts of interest between us and any of our directors or
officers, except that certain of the directors and officers serve
as directors and officers of other public companies and therefore
it is possible that a conflict may arise between their duties as a
director or officer of NextSource and their duties as a director or
officer of such other companies. See “Risk Factors —
Certain of our directors and officers also serve as directors
and/or officers of other companies involved in natural resource
exploration and development and consequently there exists the
possibility for these directors and officers to be in a position of
conflict” above.





Audit Committee





The
Audit Committee consists of Chris Kruba (Chair), Dean Comand and
David McNeely each of whom is financially literate as per the
meaning of NI 52-110 and independent as per the independence
standards of NI 58-101 (each is an independent director as each is
not involved in the day-to-day operations of the
Company).





The
following is a brief description of the education and experience of
each of the committee members:





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.





45
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





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





Mr.
Comand has served as a director of the Company since October 2014.
He is a Mechanical Engineer and holds his P. Eng designation in the
province of Ontario as well as designation as a Certified
Engineering Technologist. Mr. Comand earned his Maintenance Manager
Professional Designation (MMP) license in 2006 and his Charter
Director designation (CDir) in 2012. Mr. Comand is currently the
President 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 was elected to the Board of Directors in 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.





During
fiscal 2020, the Audit Committee met six (6) times in person or by
telephone.





The
Audit Committee is responsible for monitoring our systems and
procedures for financial reporting and internal control, reviewing
certain public disclosure documents and monitoring the performance
and independence of our external auditors. The Audit Committee is
also responsible for reviewing our audited annual consolidated
financial statements, unaudited interim consolidated financial
statements and management’s discussion and analysis of
financial results of operations for both annual and interim
consolidated financial statements and review of related operations
prior to their approval by the Board.





The
Audit Committee’s charter sets out its responsibilities and
duties, qualifications for membership, procedures for committee
member removal and appointments and reporting to the Board. A copy
of the charter is attached as Schedule
“A”.





10.
 Legal Proceedings and
Regulatory Actions





We are
not currently involved in any litigation that we believe could have
a material adverse effect on our financial condition or results of
operations. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the executive officers of our Company or any of our
subsidiaries, threatened against or affecting our company, our
common stock, any of our subsidiaries or of our companies or our
subsidiaries' officers or directors in their capacities as such, in
which an adverse decision could have a material adverse
effect.





We are
not currently involved in any regulatory actions and no penalties,
sanctions, or settlements have been imposed against the Company by
a court or by a securities regulatory authority during the
financial year.





46
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





11.
 Interest of Management and
Others in Material Transactions





No
director or executive officer of the Company, no person owning or
exercising control over more than 5% of the Company’s issued
and outstanding Shares, and no associate or affiliate of any such
person has had any material interest, direct or indirect, in any
material transaction involving the Company within the fiscal year
ended June 30, 2020.





12.
 Interest of
Experts





Craig
Scherba, P.Geo., the Company’s President and Chief Executive
Officer is the Qualified Person, as defined by NI 43-101, and has
reviewed and approved the scientific and technical information
disclosed in this Annual Information Form. See “Directors and
Officers”





Johann
Knipe de Bruin, Pr. Eng, has acted as a qualified person on the
Molo Feasibility Study and has reviewed and approved the
information related to the Molo Feasibility Study in this Annual
Information Form. Johann Knipe de Bruin, Pr. Eng, is independent of
the Company in accordance with NI 43-101. As at the date hereof,
Johann Knipe de Bruin hold less than one percent of the
Company’s outstanding securities.





MNP LLP
(“MNP”) was engaged to audit our consolidated financial
statements and is independent within the meaning of the Rules
of


Professional
Conduct of the Institute of Chartered Professional Accountants of
Ontario.





13.
 Material Contracts





Other
than contracts entered into in the ordinary course of business, we
have not entered into any material contracts within the financial
year ended June 30, 2020 or before such time that are still in
effect.





14.
 Transfer Agent and
Registrar





The
Company’s principal transfer agent and registrar for our
common shares is TSX Trust Company and its principal offices are in
Toronto, Canada.





15.
 Auditors





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.





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).





47
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





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).





16.
 Additional
Information





Additional
information related to the Company, including the 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.








48
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020








SCHEDULE A


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.





49
  NEXTSOURCE MATERIALS INC.
 ANNUAL INFORMATION FORM
 For the year ended June 30, 2020





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 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.


50