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The challenge: valuing a new North American critical minerals project
Graphite is crucial to the modern economy, and the mineral’s importance will only increase as the world transitions towards clean energy. As an essential component in lithium-ion batteries, graphite helps power electric vehicles, renewable energy storage, and portable electronics. Graphite is used in the anodes of lithium-ion batteries, playing a key role in power storage and influencing both the battery's capacity and longevity. Anode active material (AAM) comes from graphite specially processed and refined to have the right particle size, structure and purity to efficiently store lithium ions in batteries. As demand for renewable energy solutions and electric vehicles continues to rise, graphite solidifies its position as a critical resource for the future of sustainable technology.
While China provides most of the world’s graphite currently, increasing demand and geopolitical tensions are forcing new supply chains to exclude the Asian giant. For instance, Canadian graphite mining and processing company Nouveau Monde Graphite Inc. (NMG) aims to supply North American markets with local AAM. If developed, NMG’s Matawinie Mine and Bécancour Processing Plant would be a fully integrated natural graphite AAM operation.
Canada Growth Fund Inc. (CGF) is a C$15-billion arm’s length and independent investment fund managed by Canada Growth Fund Investment Management Inc. (CGFIM), a subsidiary of PSP Investments. CGF’s mandate is to build a portfolio of investments that unlocks important economic and environmental benefits on behalf of Canadians. CGF does this by using innovative financial instruments that absorb certain risks to encourage private investment in low-carbon projects, technologies, businesses and supply chains. While considering an investment in NMG, CGF retained Wood Mackenzie as an advisor to leverage its market analytics, conduct due diligence and provide commercial advisory on the global graphite and anode material landscape.
“Through our collaboration on aspects of investment due diligence, we leveraged Wood Mackenzie's technical expertise in a strategic mineral and a complex landscape. This engagement supported CGF as it developed a comprehensive commercial view on the investment opportunity.”
Canada Growth Fund Investment Management
Our approach: deliver expert commercial advisory and market due diligence based on proprietary data and in-depth analysis
Throughout the engagement, Wood Mackenzie’s Metals and Mining Consulting Team worked closely with CGFIM to break down the global graphite market and assess the viability of the integrated NMG project. Wood Mackenzie provided a comprehensive and insightful analysis of the NMG project and the future of North American graphite markets.
Wood Mackenzie’s approach considered the following key topics:
- Industry overview: provided a detailed breakdown of the different types of graphite, specification measures and refining methods, including benchmarking product and processing techniques, and how active anode material is produced from graphite.
- Graphite market fundamentals: analyzed the global and North American supply/demand dynamics for graphite and anode materials. This also included a forecast of graphite end-use products and key market players.
- Policy review: examined policies affecting the North American graphite and anode material markets, giving particular focus on the growing geopolitical tensions and the push to develop resilient critical mineral supply chains.
- North American graphite dynamics: discussed different geopolitical scenarios following policy review and assessed potential imbalances in Canada and the US’ anode material supply chains given the scenarios.
- NMG’s position in the future: evaluated NMG’s strategic role in the market and identified similar projects currently operating and in development.
- Competitive analysis: compared NMG’s expected cost of production against other global projects currently operating and in development. In addition, we analyzed competitive anode technologies, such as silicon, and their likely impact in the future.
The result: CGF invests in NMG
In December 2024, CGF entered into a definitive agreement for a private placement of about C$35.6 million with NMG. As part of the investment, CGF subscribed to around 19.8 million common shares of NMG. In addition, CGF received an equal number of common share purchase warrants, which can be exercised upon the occurrence of a positive final investment decision for the project to acquire additional common shares of NMG.