Trusted.
Critical.
Growing.
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2023 Annual Report
Content
The 5N+ Advantage
Message from the Chair
Message from the CEO
Advanced Materials for
Critical Applications
Enabling a Sustainable Future
Management’s Discussion
and Analysis
Management’s Responsibility
for Financial Reporting
Independent Auditor’s Report
2
4
6
8
10
12
38
39
Consolidated Financial Statements
44
Corporate Information
87
5N Plus (TSX:VNP) is a leading global
producer of specialty semiconductors and
performance materials. Our ultra-pure
materials often form the core element of
our customers’ products.
Mission
Vision
To be critical to our
customers, valued
by our employees
and trusted by our
shareholders.
To enable critical
industries
through essential
products based on
advanced material
technology.
Values
Commitment
Continuous improvement
Customer focus
Health and safety
Integrity
Sustainable development
The 5N+ Advantage
4 Strong R&D
capabilities and
world-class technical
team with decades
of manufacturing
experience, robust
technologies and
processes
5 Sourcing advantage
with strategic global
presence and upstream
refining capabilities,
including closed-loop
metals management
6 Continuous
investments in
capacity expansion in
high-growth sectors to
meet long-term customer
demand
7 Preferred partner
to our customers
focused on fostering
long-term relationships
and commercial
excellence
1 Trusted global
developer,
manufacturer and
marketer of specialty
semiconductors and
performance materials
2 Market leader
in majority of
end-markets served:
terrestrial renewable
energy, space solar power,
imaging and sensing,
health and pharma,
technical materials
3 Leading supplier
of ultra-high
purity semiconductor
compounds based
outside of China
2
5N +
202 3 AN NUAL REPORT
38.3%
Record Reported
FY 2023 Adjusted
EBITDA
$15.4M
FY 2023 Net
Earnings
29.0%
Adjusted
Gross Margin
292 DAYS
Backlog as at
December 31,
2023
8
800
strategically located
manufacturing facilities
employees on
three continents
4
R&D centres
Headquartered in
Montréal
Global Presence
North America
Canada
Montréal
United States
Bridgeport
St. George
Europe
Germany
Eisenhüttenstadt
Heilbronn
Lübeck
Commercial Activities
Manufacturing
Research & Development
Asia
China
Hong Kong
Shangyu
Laos
Vientiane
Malaysia
Kulim
Selected Financial Highlights
.
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4
6
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4
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4
2
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8
2
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2
21
22
23
21
22
23
21
22
23
21
22
23
Revenues
(in millions of dollars)
Adjusted
EBITDA(1)
(in millions of dollars)
Adjusted
Gross Margin(1)
(as a percentage)
Backlog(1)
(number of days of last
quarter annualized
revenue)
(1) These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not
be comparable to similar measures presented by other companies. For further details of these non-IFRS measures, including a reconciliation to
the most directly comparable IFRS measures, refer to our MD&A for the year ended December 31, 2023 available on SEDAR+ at sedarplus.ca.
All amounts in this document are expressed in U.S. dollars unless otherwise indicated.
3
2023 ANNUAL REPORT 5N+
Letter from the Chair of the Board
Delivering Growth
and Profitability
On behalf of your board, I am pleased to have this
opportunity to provide you with our perspective on
2023 at 5N+. We take our responsibility of corporate
With a strong and stable
management team in place,
oversight very seriously and, in particular, providing
the company is well-positioned
strategic counsel and guidance to the executive team
to ensure responsible and sustainable management
and growth of your company.
We are very proud of the progress the team has
made over the last several years, both in terms of
executing on the corporate strategy and with respect
to delivering on individual objectives. After more than
a year since being implemented, management’s
commercial excellence program is producing strong
returns on the investments in high-growth markets
with the right product mix. This focus, coupled with
the deep customer relationships and long-term
contracts, has generated improved profitability and
margins, as well as greater predictability of future
results, with a constant focus on value-added growth.
As such, we expect this strategy to continue to
create long-term value for shareholders as we
leverage our unique competitive advantages
and high demand in several of our key sectors of
operation, namely terrestrial renewable energy
and space solar power, among others. With a
strong and stable management team in place,
the company is well-positioned to capitalize further
on this strategy in 2024 and for years to come.
to capitalize further on this
strategy in 2024 and for
years to come.
As shareholders, you can also have confidence
that your board maintains its commitment to
good governance in the proper establishment and
review of policies and processes at both the board
and corporate level. With the board charters and
guidelines having last had a comprehensive update
in 2021, the board continues its regular review of its
policies to ensure they reflect best practices.
One area in which we persistently seek to improve
is the strength of the board itself. We are committed
to maintaining diversity of the board and the right
skill set to meet the needs of the company as it
grows and evolves. To that end, in February 2023,
Blair Dickerson joined the board. Her experience in
the resource sector combined with her expertise
in sustainability, communications, corporate
affairs and public policy have been invaluable to
our deliberations. Our goal is to maintain a board
that is composed of strong leaders with relevant
experience ensuring a balance of history and
fresh perspectives to help meet the needs of the
company now and in the future.
4
5N+ 2023 ANNUAL REPORT With respect to sustainable development, in 2023, not
only did the company issue its first comprehensive
Sustainability Report, but also the board officially
integrated the oversight of environmental, social and
governance factors into the mandate of our Governance
and Compensation Committee. Previously, as part
of our enterprise risk management, we had already
added oversight of climate risks to the Audit and Risk
Management Committee. We will continue to ingrain
these important factors into our decision-making as
we gear up for impending regulatory requirements.
We continue to do our part to enable a sustainable future
through our own operations and through the products
we help bring to market.
As we look ahead to 2024, I would like to extend the board’s
appreciation to management and the entire team at 5N+
for their outstanding achievements over the last year
and their unwavering commitment to and disciplined
execution on our strategy for sustainable growth.
As always, management and the board wish to thank you,
our shareholders, for your ongoing trust and support.
On behalf of the Board,
Board of Directors
Luc Bertrand
Jean Marie Bourassa
Corporate Director
Corporate Director
Québec, Canada
Québec, Canada
Director since
January 2016
Director since
December 2007
Nathalie Le Prohon
Blair Dickerson
President, IBM
Quebec Technologies
Québec, Canada
Director since
May 2014
Vice President,
Canadian Public
Affairs, Paper
Excellence Canada
Ontario, Canada
Director since
February 2023
Luc Bertrand
Chair of the Board
Gervais Jacques
President and CEO
Québec, Canada
Director since
May 2020
5
2023 ANNUAL REPORT 5N+ Letter from President and CEO
Levelling Up,
Year After Year
As we close out a year marked by earnings growth and
margin expansion, and with our advanced materials power-
ing history-making events on land and in space, we can look
back with pride on all we have accomplished and forward
with excitement at a promising 2024. I credit the exceptional
efforts of our entire team for executing on our growth strategy
and for meeting the unique requirements of our customers
operating in critical and high-growth end markets.
The strategic changes we have made in recent years paired
with robust demand in key sectors bore fruit last year,
enabling us to deliver excellent financial results in 2023
despite macro-economic uncertainties. Our business model
also now affords us better visibility and predictability of our
expected performance over the coming years, which we
expect to continue levelling up year after year.
A Strong Financial Performance
For 2023, in line with our projections, we generated $38.3
million in consolidated Adjusted EBITDA, or 28% growth year
over year, representing the Company’s strongest reported
Adjusted EBITDA performance since inception. Adjusted gross
margin was 29.0% in 2023, up from 23.7% in 2022. We capped
off the year with an even higher backlog than at previous
year-end, while also further deleveraging our balance sheet.
Our Specialty Semiconductors segment continues to be key
in supporting our profitable growth. Growth in this segment
is being driven by increasing demand in the high-growth
solar space power and terrestrial renewable energy sectors.
This year, we saw our products being used in some very
exciting projects, including Chandrayaan-3 – India’s mission to
the moon; the European Space Agency’s mission to Jupiter;
and the world’s largest next-generation long-duration energy
storage project opened by RayGen in Australia.
In Performance Materials, earnings and margins improved
dramatically following our strategic exit of the extractive and
catalytic sector in the second half of 2022. We expect future
growth in this segment to stem primarily from the health
and pharmaceutical markets. We will also continue to explore
product expansion opportunities and development initiatives
both independently and through partnerships.
Commercial and Operational Excellence
Our strong financial performance is a testament to our
commitment to a value-added product mix that addresses
the needs of high-growth market segments, our deep
expertise, commercial excellence and partnership approach.
It also reflects our geographical competitive advantage as a
leading provider of advanced materials and trusted partner
to major corporations, global space agencies and western
governments.
Through our commercial excellence program, we have been
fostering our long-standing customer relationships and
strategic partnerships. Our success is evident in the strength
of our backlog, which stood at 292 days at December 31, 2023,
eight days higher than the previous quarter and 39 days
higher than at the same date last year. Our approach
ensures we are an integral and valued part of our customers’
solutions, focusing on working collaboratively to produce
innovative products that meet their unique needs.
Operationally, we continue to invest in our production
capacity to meet increasing demand and our strong pipeline
of contracted work. In 2023, we increased our capacity to
serve the renewable energy sector by 40%, with a further
expansion of 60% on track for 2024. Once completed, we will
have doubled our output capacity to serve this critical sector.
With respect to our space solar technology, we are investing
to increase our production capacity by 30% in 2024. Finally, as
we secure additional complex feeds and secondary market
streams for the recovery of critical minerals, we expect
recently expanded operations in recycling and refining in
Montréal to reach capacity in 2024.
Evolving our Sustainability Roadmap
Whether through our products that enable critical power
alternatives or through our commitment to the circular
economy, sustainability is engrained in our operations.
Last year, we published our inaugural Sustainability Report,
which outlined our priority areas and commitment to
responsible and sustainable operations. Since then, we have
taken further steps to align with recognized ESG standards
including TCFD recommendations, undertaking additional
6
5N+ 2023 ANNUAL REPORT climate risk assessments that will better inform our climate
and energy management strategy. In addition, we are working
across our organization to improve data tracking and disclosure,
including on GHG emissions, to reduce our carbon footprint
and ensure we meet emerging global legislative requirements.
Beyond our operations, we increased our engagement with
suppliers on ESG in 2023 and published our first Report on forced
labour and child labour in supply chains. We intend to detail our
continued progress in our second annual Sustainability Report as
we continue on our sustainability journey.
Poised for Continued Growth
As we expand capacity to meet contracted demand and
continue to execute on our strategy, we aim to build on the
success of 2023 and deliver continued earnings growth.
Records are made to be broken and it is our objective to do just
that in the coming years because we firmly believe that our
future holds even more opportunities and growth potential.
With our commercial excellence program and customer-
centric approach, we will further cement our position as a
critical supplier of advanced materials to critical industries
with compelling growth profiles.
In conclusion, I would like to thank our entire team for their
commitment to our strategy for growth, our board for their
oversight and guidance and our customers and partners for
their confidence in our products and processes. Our remarkable
performance this year would not have been possible without
all these contributions. Finally, I would like to express my
appreciation to all our shareholders for their ongoing support
and trust. We look forward to continuing to provide value to all
our stakeholders as we pursue our growth trajectory and aim to
maintain our record-setting pace.
Gervais Jacques
President and CEO
Executive Committee
Gervais Jacques
Richard Perron
President and CEO
since March 2022
Chief Financial Officer
since March 2014
Roland Dubois
Paul Tancell
Chief Commercial
Officer and Executive
Vice President,
Specialty
Semiconductors
since September 2022
Executive Vice
President,
Performance
Materials
since February 2017
7
2023 ANNUAL REPORT 5N+ Advanced Materials for
Critical Applications
Performance Materials
Health &
Pharma
Technical
Materials
Non-toxic to human health or the
Whether a substitute of toxic heavy
environment, we produce bismuth
metals in various applications or
chemicals that are essential to the
specialty alloys and chemicals, our
creation of everyday human care
technical materials are customizable
products. Our bismuth products
and critical to a broad range of
are used as active pharmaceutical
industries from aviation to optics.
ingredients in over-the-counter
antacids and antibiotic creams
as well as in cosmetics product
applications.
8
5N+ 2023 ANNUAL REPORT Over the past few years, 5N+ has evolved its product mix to focus on
providing value-added products to both critical and high-growth end
markets. Through our unique and proprietary processes and world-class
technological expertise, we create advanced materials that enable a broad
range of applications.
Specialty Semiconductors
Terrestrial
Renewable Energy
Space Solar
Power
Imaging &
Sensing
As a leading supplier to the
Our high-purity germanium wafers
Our materials are used to
renewable energy sector, our
and epitaxial semiconductor
manufacture radiation detector
specialty semiconductor products
substrates are used to produce
chips in medical, infrared and earth
are critical in moving towards a
ultra-high efficiency photovoltaic
imaging applications in the medical,
sustainable future. With gigawatts
(PV) solar cells for satellite power
security and defense industries,
of solar panels incorporating our
generation and concentrated
helping to reduce patient exposure
materials installed in utility-scale
PV systems. Our enabling materials
to x-rays and keep nations safe.
projects, our products convert the
are frequently in orbit powering
sun’s power into renewable energy
satellites, as well as various
to provide electricity for consumers
space vehicles.
worldwide. In addition, our enabling
materials are used in next generation
energy storage infrastructure.
9
2023 ANNUAL REPORT 5N+ Enabling a
Sustainable Future
5N+ is committed to being a reliable source for high-purity performance
materials and specialty semiconductors enabling innovative products
critical to our everyday lives, from converting solar power into electricity
to active pharmaceutical ingredients.
From our inception, we have applied a sustainability lens to our business operations
and developed robust supply chains and practices. We aim to continue to do our part
to enable a sustainable future by leading the sustainable economy, enabling critical
industries and new technology, and through community responsibility.
We published our first comprehensive Sustainability Report in early 2023 and intend
to continue to update the market annually on our progress against our evolving goals
and commitments.
A Sustainable and Closed-looped Model
Suppliers
Critical
Industries
Clients
10
5N+ 2023 ANNUAL REPORT Strong
R&D
Proprietary Technology &
Robust Processes
Responsible Sourcing
and Upcycling
New technological developments
5N+ is an integrated manufacturer of
We take an integrated, lifecycle
are critical to ensure we are prepared
advanced materials utilizing unique
approach to materials management.
for future global challenges from
and proprietary process technologies.
We have deep expertise and unique
medical advancements to increasing
We hold several certifications for
technologies for the recovery,
energy efficiency. 5N+ has strong
various aspects of our business to
treatment and valuation of degraded
R&D capabilities with a world-class
demonstrate our commitment to
resources, with a mineral recycling
technical team strategically located
high standards in health and safety,
program that spans three continents.
around the globe and close to
quality, energy, environment and
We are also constantly investing
suppliers and customers. We are
resource management. We leverage
in sustainably sourcing our raw
constantly enhancing our processes,
our strong technological platform
materials.
developing new materials or
and skillset to gain a first-to-market
accelerating their path to market to
advantage and to make continuous
address the needs of our customers
improvements.
and their end markets.
Our ISO Certifications by Manufacturing Site
ISO 9001
ISO 14001
ISO 45001
ISO 50001
Eisenhüttenstadt (Germany)
Heilbronn (Germany)
Lübeck (Germany)
Montréal (Canada)
Shangyu (China)
St. George (USA)
We procure degraded resources
containing low grades of critical
metals from upstream suppliers and
extract the critical metals to develop
and manufacture enabling materials
for our customers. As an upcycler of
by-products from other industries,
we help reduce waste by promoting
reuse, while broadening our source
market, thereby strengthening our
diversified supply chain.
11
2023 ANNUAL REPORT 5N+ Management's Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations is intended to
assist readers in understanding 5N Plus Inc. (the “Company” or “5N+”), its business environment, strategies,
performance and risk factors. This MD&A should be read in conjunction with the audited consolidated financial
statements and the accompanying notes for the year ended December 31, 2023, based on International Financial
Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards" or "IFRS"),
unless otherwise stated. This MD&A has been prepared in accordance with the requirements of the Canadian Securities
Administrators.
All amounts in this MD&A are expressed in U.S. dollars, and all amounts in the tables are in thousands of U.S. dollars,
unless otherwise indicated.
Information contained herein includes any significant developments until February 27, 2024, the date on which the
MD&A was approved by the Company’s Board of Directors. Unless otherwise indicated, the terms “we”, “us”, “our” and
“the group” as used herein refer to the Company together with its subsidiaries. “Q4 2023” and “Q4 2022” refer to the
three-month periods ended December 31, 2023 and December 31, 2022, respectively; “FY 2023” and “FY 2022” refer to
the years ended December 31, 2023, and December 31, 2022, respectively.
Non-IFRS Measures
This MD&A contains certain non-IFRS financial measures and ratios, which do not have a standard meaning under IFRS
Accounting Standards and, therefore, may not be comparable to similar measures presented by other issuers. Such non-
IFRS measures and ratios include backlog, bookings, EBITDA, EBITDA margin percentage, Adjusted EBITDA, Adjusted
EBITDA margin, Adjusted operating expenses, Adjusted net earnings (loss), Basic adjusted earnings (loss) per share,
Adjusted gross margin, Adjusted gross margin percentage, Total debt, Net debt, Net debt to EBITDA ratio, Working
capital and Working capital ratio.
For definitions, further information and reconciliation of these measures to the most directly comparable measures
under IFRS Accounting Standards, see the “Non-IFRS Measures” section.
Notice Regarding Forward-Looking Statements
Certain statements in this MD&A may be forward-looking within the meaning of applicable securities laws. Such forward-
looking statements are based on a number of estimates and assumptions that the Company believes are reasonable
when made, including that 5N+ will be able to retain and hire key personnel and maintain relationships with customers,
suppliers and other business partners, that 5N+ will continue to operate its business in the normal course, that 5N+ will
be able to implement its growth strategy, that 5N+ will be able to successfully and timely complete the realization of its
backlog, that 5N+ will not suffer any supply chain challenges or any material disruption in the supply of raw materials on
competitive terms, that 5N+ will be able to generate new sales, produce, deliver, and sell its expected product volumes
at the expected prices and control its costs, as well as other factors believed to be appropriate and reasonable in the
circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. These
statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult
to predict and may cause the Company’s actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by such forward-looking statements. Factors of
uncertainty and risk that might result in such differences include the risks associated with interest rate, foreign currency,
credit, liquidity, global economic conditions, international operations including China, environmental regulations, crisis
and climate change management, environmental social and governance (ESG) considerations, safety and hazards,
prolonged armed conflict in Ukraine, disease outbreaks, availability and retention of qualified professional employees,
collective agreements, litigation, our growth strategy, competition, commodity price, sources of supply, protection of
intellectual property, inventory price, business interruptions, loss of an important customer, changes to backlog,
acquisitions, systems, network infrastructure and data failure, privacy, market price of the common shares, as well as
grants and other incentive programs. A description of the risks affecting the Company’s business and activities appears
under the heading “Risk and Uncertainties” of this MD&A dated February 27, 2024.
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Forward-looking statements can generally be identified by the use of terms such as “may”, “should”, “would”, “believe”,
“expect”, the negative of these terms, variations of them or any similar terms. No assurance can be given that any events
anticipated by the forward-looking statements in this MD&A will transpire or occur, or if any of them do so, what benefits
that 5N+ will derive therefrom. In particular, no assurance can be given as to the future financial performance of 5N+.
The forward-looking statements contained in this MD&A is made as of the date hereof and the Company has no
obligation to publicly update such forward-looking information to reflect new information, subsequent or otherwise,
unless required by applicable securities laws. The reader is warned against placing undue reliance on these forward-
looking statements.
Overview
5N+ is a leading global producer of specialty semiconductors and performance materials. The Company’s ultra-pure
materials often form the core element of its customers’ products. These customers rely on 5N+’s products to enable
performance and sustainability in their own products. 5N+ deploys a range of proprietary and proven technologies to
develop and manufacture its products. The Company’s products enable various applications in several key industries,
including renewable energy, security, space, pharmaceutical, medical imaging and industrial. Headquartered in
Montréal, Québec, 5N+ operates R&D, manufacturing and commercial centers in strategically-located facilities around
the world including Europe, North America and Asia.
The Company’s vision is to enable critical industries through essential products based on advanced material technology
and 5N+’s aim is to propel the growth of these markets by developing and manufacturing advanced materials to enable
Vision, Mission and Values
product performance.
The Company’s mission is to be critical to its customers, valued by its employees and trusted by its shareholders. The
Company’s core values are integrity, commitment and customer development, with an emphasis on sustainable
development, continuous improvement, and health and safety.
Reporting Segments
The Company has the following two reportable segments: Specialty Semiconductors and Performance Materials.
Corresponding operations and activities are managed accordingly by the Company’s key decision makers. Segmented
operating and financial information and labelled key performance indicators are available and used to manage these
business segments, review performance and allocate resources. Financial performance of any given segment is evaluated
primarily in terms of revenues and Adjusted EBITDA1, which are reconciled to consolidated numbers considering
corporate income and expenses.
Operating in North America and Europe, the Specialty Semiconductors segment manufactures and sells products used
in several applications, such as renewable energy, space satellites and imaging. Typical end markets include
photovoltaics (terrestrial and spatial solar energy), medical imaging, infrared imaging, optoelectronics and advanced
electronics. These products are sold either as semiconductor compounds, semiconductor wafers, ultra high purity
metals, epitaxial semiconductor substrates and solar cells. Revenues and earnings associated with recycling services and
activities provided to Specialty Semiconductors customers are captured in this segment.
The Performance Materials segment operates in North America, Europe and Asia and manufactures and sells products
that are used in several applications in pharmaceutical and healthcare and industrial. Main products are sold as active
pharmaceutical ingredients, animal feed additives, specialized chemicals, commercial grade metals, alloys and
engineered powders. All commercial grade metal and engineered powder sales have been regrouped under Performance
Materials. Revenues and earnings associated with recycling services and activities provided to Performance Materials
customers are captured in this segment.
Corporate expenses associated with the head office and unallocated selling, general and administrative expenses
(SG&A), together with financial expenses (income), are grouped under “Corporate”.
12
Management’s Discussion and Analysis ▪ 1
Management’s Discussion and Analysis ▪ 2
1 These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations is intended to
assist readers in understanding 5N Plus Inc. (the “Company” or “5N+”), its business environment, strategies,
performance and risk factors. This MD&A should be read in conjunction with the audited consolidated financial
statements and the accompanying notes for the year ended December 31, 2023, based on International Financial
Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards" or "IFRS"),
unless otherwise stated. This MD&A has been prepared in accordance with the requirements of the Canadian Securities
Administrators.
unless otherwise indicated.
All amounts in this MD&A are expressed in U.S. dollars, and all amounts in the tables are in thousands of U.S. dollars,
Information contained herein includes any significant developments until February 27, 2024, the date on which the
MD&A was approved by the Company’s Board of Directors. Unless otherwise indicated, the terms “we”, “us”, “our” and
“the group” as used herein refer to the Company together with its subsidiaries. “Q4 2023” and “Q4 2022” refer to the
three-month periods ended December 31, 2023 and December 31, 2022, respectively; “FY 2023” and “FY 2022” refer to
the years ended December 31, 2023, and December 31, 2022, respectively.
Non-IFRS Measures
This MD&A contains certain non-IFRS financial measures and ratios, which do not have a standard meaning under IFRS
Accounting Standards and, therefore, may not be comparable to similar measures presented by other issuers. Such non-
IFRS measures and ratios include backlog, bookings, EBITDA, EBITDA margin percentage, Adjusted EBITDA, Adjusted
EBITDA margin, Adjusted operating expenses, Adjusted net earnings (loss), Basic adjusted earnings (loss) per share,
Adjusted gross margin, Adjusted gross margin percentage, Total debt, Net debt, Net debt to EBITDA ratio, Working
capital and Working capital ratio.
For definitions, further information and reconciliation of these measures to the most directly comparable measures
under IFRS Accounting Standards, see the “Non-IFRS Measures” section.
Notice Regarding Forward-Looking Statements
Certain statements in this MD&A may be forward-looking within the meaning of applicable securities laws. Such forward-
looking statements are based on a number of estimates and assumptions that the Company believes are reasonable
when made, including that 5N+ will be able to retain and hire key personnel and maintain relationships with customers,
suppliers and other business partners, that 5N+ will continue to operate its business in the normal course, that 5N+ will
be able to implement its growth strategy, that 5N+ will be able to successfully and timely complete the realization of its
backlog, that 5N+ will not suffer any supply chain challenges or any material disruption in the supply of raw materials on
competitive terms, that 5N+ will be able to generate new sales, produce, deliver, and sell its expected product volumes
at the expected prices and control its costs, as well as other factors believed to be appropriate and reasonable in the
circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. These
statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult
to predict and may cause the Company’s actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by such forward-looking statements. Factors of
uncertainty and risk that might result in such differences include the risks associated with interest rate, foreign currency,
credit, liquidity, global economic conditions, international operations including China, environmental regulations, crisis
and climate change management, environmental social and governance (ESG) considerations, safety and hazards,
prolonged armed conflict in Ukraine, disease outbreaks, availability and retention of qualified professional employees,
collective agreements, litigation, our growth strategy, competition, commodity price, sources of supply, protection of
intellectual property, inventory price, business interruptions, loss of an important customer, changes to backlog,
acquisitions, systems, network infrastructure and data failure, privacy, market price of the common shares, as well as
grants and other incentive programs. A description of the risks affecting the Company’s business and activities appears
under the heading “Risk and Uncertainties” of this MD&A dated February 27, 2024.
Management's Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Forward-looking statements can generally be identified by the use of terms such as “may”, “should”, “would”, “believe”,
“expect”, the negative of these terms, variations of them or any similar terms. No assurance can be given that any events
anticipated by the forward-looking statements in this MD&A will transpire or occur, or if any of them do so, what benefits
that 5N+ will derive therefrom. In particular, no assurance can be given as to the future financial performance of 5N+.
The forward-looking statements contained in this MD&A is made as of the date hereof and the Company has no
obligation to publicly update such forward-looking information to reflect new information, subsequent or otherwise,
unless required by applicable securities laws. The reader is warned against placing undue reliance on these forward-
looking statements.
Overview
5N+ is a leading global producer of specialty semiconductors and performance materials. The Company’s ultra-pure
materials often form the core element of its customers’ products. These customers rely on 5N+’s products to enable
performance and sustainability in their own products. 5N+ deploys a range of proprietary and proven technologies to
develop and manufacture its products. The Company’s products enable various applications in several key industries,
including renewable energy, security, space, pharmaceutical, medical imaging and industrial. Headquartered in
Montréal, Québec, 5N+ operates R&D, manufacturing and commercial centers in strategically-located facilities around
the world including Europe, North America and Asia.
Vision, Mission and Values
The Company’s vision is to enable critical industries through essential products based on advanced material technology
and 5N+’s aim is to propel the growth of these markets by developing and manufacturing advanced materials to enable
product performance.
The Company’s mission is to be critical to its customers, valued by its employees and trusted by its shareholders. The
Company’s core values are integrity, commitment and customer development, with an emphasis on sustainable
development, continuous improvement, and health and safety.
Reporting Segments
The Company has the following two reportable segments: Specialty Semiconductors and Performance Materials.
Corresponding operations and activities are managed accordingly by the Company’s key decision makers. Segmented
operating and financial information and labelled key performance indicators are available and used to manage these
business segments, review performance and allocate resources. Financial performance of any given segment is evaluated
primarily in terms of revenues and Adjusted EBITDA1, which are reconciled to consolidated numbers considering
corporate income and expenses.
Operating in North America and Europe, the Specialty Semiconductors segment manufactures and sells products used
in several applications, such as renewable energy, space satellites and imaging. Typical end markets include
photovoltaics (terrestrial and spatial solar energy), medical imaging, infrared imaging, optoelectronics and advanced
electronics. These products are sold either as semiconductor compounds, semiconductor wafers, ultra high purity
metals, epitaxial semiconductor substrates and solar cells. Revenues and earnings associated with recycling services and
activities provided to Specialty Semiconductors customers are captured in this segment.
The Performance Materials segment operates in North America, Europe and Asia and manufactures and sells products
that are used in several applications in pharmaceutical and healthcare and industrial. Main products are sold as active
pharmaceutical ingredients, animal feed additives, specialized chemicals, commercial grade metals, alloys and
engineered powders. All commercial grade metal and engineered powder sales have been regrouped under Performance
Materials. Revenues and earnings associated with recycling services and activities provided to Performance Materials
customers are captured in this segment.
Corporate expenses associated with the head office and unallocated selling, general and administrative expenses
(SG&A), together with financial expenses (income), are grouped under “Corporate”.
1 These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
Management’s Discussion and Analysis ▪ 1
Management’s Discussion and Analysis ▪ 2
13
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Q4 & FY 2023 Highlights – A Year Poised for Continued Strong Growth
Throughout FY 2023, 5N+ has successfully executed on its growth strategy to provide higher margin, value-added
products under both its Specialty Semiconductor and Performance Materials segments. Its record reported Adjusted
EBITDA and strong Gross Margin results for FY 2023 are proof that the Company is effectively leveraging its industry
position as a supplier outside China in space solar power and terrestrial renewable energy technology. As
management continues with its commercial excellence program, which has led to strong customer relationships and
a sustained backlog1, the investments made in production capacity will support the strong demand contracted through
2024 and 2025.
All amounts are expressed in U.S. dollars.
The Company met its expectations of delivering excellent performance in FY 2023 with Adjusted EBITDA results for
FY 2023 reaching the highest level reported since the Company’s creation. The Company achieved Adjusted EBITDA
growth of 35% in Q4 2023 and 28% in FY 2023, compared to the same periods in 2022. Adjusted gross margin1 came in
at 29.0% in FY 2023, compared to 23.7% in FY 2022, as a result of its commercial excellence program, which focuses on
improved margins, value-added product development and a customer-first approach. 5N+ also ended the year with a
particularly strong backlog1 under Specialty Semiconductors.
In Specialty Semiconductors, revenue was up $13.7 million in Q4 2023 and up $34.6 million for FY 2023, compared to
the corresponding periods last year. Adjusted EBITDA was 31% higher in Q4 2023 compared to Q4 2022 and 13% higher
on a full-year basis.
Under Performance Materials, the exit from the low-margin extractive and catalytic products in the second half of 2022
continued to impact results. As such, revenue for the quarter and FY 2023 was lower compared to the same periods in
2022. However, because of the improved product mix, the segment generated a 15% increase in Adjusted EBITDA in
Q4 2023 and a 27% increase for FY 2023, compared to the corresponding periods last year.
While the Company continued to invest in building capacity and inventory to meet increasing demand in its Specialty
Semiconductor segment, it was able to lower net debt1 by $4.5 million in 2023.
In 2023, 5N+ invested to increase capacity by 40% over 2022 to serve the renewable energy sector, with a further 60%
expansion to be completed in 2024. Once completed, the Company will have doubled its output capacity to serve this
critical sector. Other capacity expansion plans for 2024 remain on track, with the Company committed to increasing its
production capability for AZUR SOLAR Space GmbH (“AZUR”) by 30% to support space solar sector important demand.
In addition, 5N+ has been actively working to secure additional complex feeds and secondary market streams for the
recovery of critical minerals and management expects operations in recycling and refining to be at capacity in 2024.
Financial Highlights
Revenue in Q4 2023 reached $65.1 million, compared to $61.0 million for the same period last year. The 7% increase
is primarily attributable to higher demand in the Specialty Semiconductors segment, offset by lower revenue in the
Performance Materials segment following the strategic exit from the manufacturing of low-margin extractive and
catalytic products in 2022.
Net earnings in Q4 2023 were $2.3 million compared to a net loss of $8.1 million in Q4 2022. Net earnings in FY 2023
were $15.4 million compared to a net loss of $23.0 million in FY 2022.
Adjusted EBITDA in Q4 2023 was $9.0 million, a 35% increase over the $6.7 million for the same period last year.
Adjusted EBITDA was $38.3 million in FY 2023, a 28% increase compared to $30.0 million in FY 2022.
Adjusted gross margin in FY 2023 was 29.0%, compared to 23.7% in FY 2022.
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
On December 31, 2023, the backlog represented 292 days of annualized revenue, 8 days higher than the previous
quarter and 39 days higher than the same period last year, primarily due to increasing demand in both terrestrial
renewable energy and space solar power.
Net debt was $73.8 million as at December 31, 2023, compared to $78.3 million as at December 31, 2022. Net debt
to EBITDA ratio1 of 1.69x as at December 31, 2023.
Outlook
customers.
In Specialty Semiconductors, 5N+ continues to benefit from its unique position as the leading global supplier of ultra-
high purity semiconductor compounds outside China, with extensive expertise and a favourable global footprint resulting
in a reliable supply chain. The Company’s products can be found in a wide range of technologies used in critical
applications and everyday products.
Growing demand remains the rule in Specialty Semiconductors end markets, particularly in terrestrial renewable energy
and space solar power. This positions 5N+ well to capitalize on future opportunities in these high-growth sectors, as well
as other markets, including defense, security and medical imaging, and through its long-term partnerships with key
Management expects growth in the Performance Materials segment to be primarily derived from health and
pharmaceutical products, which provide high profitability and predictable cashflows. Additional long-term opportunities
are expected to stem from product expansion and development initiatives, including through partnerships.
Furthermore, management continues to seek opportunities to increase operational efficiency, while exploring potential
acquisitions and partnerships to enhance its own organic growth and leadership market position.
With the visibility afforded to management as a result of the solid execution of its business strategy over the last few
years, its improved product mix and strong backlog, management is committed to sustaining its trajectory with respect
to Adjusted EBITDA growth and margin improvements.
To meet these objectives, 5N+ will continue to execute on its value-added focused strategy and commercial excellence
program, leveraging its competitive advantages stemming from its unique positioning both from a geographic and
expertise standpoint. As a trusted partner in the development and manufacturing of critical specialty semiconductors
and performance materials with a customer-centric mentality, the Company will also continue methodically investing in
its production capacity to serve high-growth markets and strategic global customers.
1
These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
1 These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
14
Management’s Discussion and Analysis ▪ 3
Management’s Discussion and Analysis ▪ 4
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Q4 & FY 2023 Highlights – A Year Poised for Continued Strong Growth
Throughout FY 2023, 5N+ has successfully executed on its growth strategy to provide higher margin, value-added
products under both its Specialty Semiconductor and Performance Materials segments. Its record reported Adjusted
EBITDA and strong Gross Margin results for FY 2023 are proof that the Company is effectively leveraging its industry
position as a supplier outside China in space solar power and terrestrial renewable energy technology. As
management continues with its commercial excellence program, which has led to strong customer relationships and
a sustained backlog1, the investments made in production capacity will support the strong demand contracted through
2024 and 2025.
All amounts are expressed in U.S. dollars.
The Company met its expectations of delivering excellent performance in FY 2023 with Adjusted EBITDA results for
FY 2023 reaching the highest level reported since the Company’s creation. The Company achieved Adjusted EBITDA
growth of 35% in Q4 2023 and 28% in FY 2023, compared to the same periods in 2022. Adjusted gross margin1 came in
at 29.0% in FY 2023, compared to 23.7% in FY 2022, as a result of its commercial excellence program, which focuses on
improved margins, value-added product development and a customer-first approach. 5N+ also ended the year with a
particularly strong backlog1 under Specialty Semiconductors.
In Specialty Semiconductors, revenue was up $13.7 million in Q4 2023 and up $34.6 million for FY 2023, compared to
the corresponding periods last year. Adjusted EBITDA was 31% higher in Q4 2023 compared to Q4 2022 and 13% higher
on a full-year basis.
Under Performance Materials, the exit from the low-margin extractive and catalytic products in the second half of 2022
continued to impact results. As such, revenue for the quarter and FY 2023 was lower compared to the same periods in
2022. However, because of the improved product mix, the segment generated a 15% increase in Adjusted EBITDA in
Q4 2023 and a 27% increase for FY 2023, compared to the corresponding periods last year.
While the Company continued to invest in building capacity and inventory to meet increasing demand in its Specialty
Semiconductor segment, it was able to lower net debt1 by $4.5 million in 2023.
In 2023, 5N+ invested to increase capacity by 40% over 2022 to serve the renewable energy sector, with a further 60%
expansion to be completed in 2024. Once completed, the Company will have doubled its output capacity to serve this
critical sector. Other capacity expansion plans for 2024 remain on track, with the Company committed to increasing its
production capability for AZUR SOLAR Space GmbH (“AZUR”) by 30% to support space solar sector important demand.
In addition, 5N+ has been actively working to secure additional complex feeds and secondary market streams for the
recovery of critical minerals and management expects operations in recycling and refining to be at capacity in 2024.
Financial Highlights
Revenue in Q4 2023 reached $65.1 million, compared to $61.0 million for the same period last year. The 7% increase
is primarily attributable to higher demand in the Specialty Semiconductors segment, offset by lower revenue in the
Performance Materials segment following the strategic exit from the manufacturing of low-margin extractive and
catalytic products in 2022.
Net earnings in Q4 2023 were $2.3 million compared to a net loss of $8.1 million in Q4 2022. Net earnings in FY 2023
were $15.4 million compared to a net loss of $23.0 million in FY 2022.
Adjusted EBITDA in Q4 2023 was $9.0 million, a 35% increase over the $6.7 million for the same period last year.
Adjusted EBITDA was $38.3 million in FY 2023, a 28% increase compared to $30.0 million in FY 2022.
Adjusted gross margin in FY 2023 was 29.0%, compared to 23.7% in FY 2022.
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
On December 31, 2023, the backlog represented 292 days of annualized revenue, 8 days higher than the previous
quarter and 39 days higher than the same period last year, primarily due to increasing demand in both terrestrial
renewable energy and space solar power.
Management's Discussion and Analysis
Net debt was $73.8 million as at December 31, 2023, compared to $78.3 million as at December 31, 2022. Net debt
to EBITDA ratio1 of 1.69x as at December 31, 2023.
Outlook
In Specialty Semiconductors, 5N+ continues to benefit from its unique position as the leading global supplier of ultra-
high purity semiconductor compounds outside China, with extensive expertise and a favourable global footprint resulting
in a reliable supply chain. The Company’s products can be found in a wide range of technologies used in critical
applications and everyday products.
Growing demand remains the rule in Specialty Semiconductors end markets, particularly in terrestrial renewable energy
and space solar power. This positions 5N+ well to capitalize on future opportunities in these high-growth sectors, as well
as other markets, including defense, security and medical imaging, and through its long-term partnerships with key
customers.
Management expects growth in the Performance Materials segment to be primarily derived from health and
pharmaceutical products, which provide high profitability and predictable cashflows. Additional long-term opportunities
are expected to stem from product expansion and development initiatives, including through partnerships.
Furthermore, management continues to seek opportunities to increase operational efficiency, while exploring potential
acquisitions and partnerships to enhance its own organic growth and leadership market position.
With the visibility afforded to management as a result of the solid execution of its business strategy over the last few
years, its improved product mix and strong backlog, management is committed to sustaining its trajectory with respect
to Adjusted EBITDA growth and margin improvements.
To meet these objectives, 5N+ will continue to execute on its value-added focused strategy and commercial excellence
program, leveraging its competitive advantages stemming from its unique positioning both from a geographic and
expertise standpoint. As a trusted partner in the development and manufacturing of critical specialty semiconductors
and performance materials with a customer-centric mentality, the Company will also continue methodically investing in
its production capacity to serve high-growth markets and strategic global customers.
1
These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
1 These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
Management’s Discussion and Analysis ▪ 3
Management’s Discussion and Analysis ▪ 4
15
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Summary of Results
(in thousands of U.S. dollars, except per share amounts)
Revenue
Adjusted operating expenses1
Adjusted EBITDA
Share-based compensation (expense) recovery
Litigation and restructuring (costs) income
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Foreign exchange and derivative (loss) gain
EBITDA1
Interest on long-term debt, imputed interest and other interest expense
Depreciation and amortization
Earnings (loss) before income taxes
Income tax expense (recovery)
Current
Deferred
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Q4 2023
$
65,063
(56,030)
9,033
(414)
(458)
(64)
-
-
-
(361)
7,736
2,129
4,057
1,550
612
(1,346)
(734)
2,284
$0.03
$0.03
Q4 2022
$
61,042
(54,337)
6,705
171
(3,210)
-
-
(7,834)
-
497
(3,671)
716
4,051
(8,438)
43
(335)
(292)
(8,146)
($0.09)
($0.09)
FY 2023
$
242,371
(204,048)
38,323
(1,432)
8,314
(672)
(1,051)
-
-
136
43,618
8,834
16,110
18,674
6,674
(3,399)
3,275
15,399
$0.17
$0.17
FY 2022
$
264,223
(234,195)
30,028
(999)
(3,823)
(12,478)
-
(7,834)
(216)
(42)
4,636
5,192
17,732
(18,288)
6,865
(2,154)
4,711
(22,999)
($0.26)
($0.26)
Revenue by Segment and Adjusted Gross Margin
(in thousands of U.S. dollars)
Q4 2023
Q4 2022
Change
FY 2023
FY 2022
Change
Specialty Semiconductors
Performance Materials
Total revenue
Cost of sales
Depreciation included in cost of sales
Adjusted gross margin
Adjusted gross margin percentage1
$
45,661
19,402
65,063
$
31,951
29,091
61,042
(49,677)
(47,909)
3,189
18,575
28.5%
3,155
16,288
26.7%
43%
(33%)
7%
4%
1%
14%
$
156,479
85,892
242,371
$
121,918
142,305
264,223
(184,833)
(215,715)
12,656
70,194
29.0%
14,208
62,716
23.7%
28%
(40%)
(8%)
(14%)
(11%)
12%
Revenue in Q4 2023 increased by 7%, reaching $65.1 million, compared to $61.0 million for the same period last year.
The increase is primarily attributable to the growth experienced under Specialty Semiconductors from the renewable
energy and space power sectors, exceeding the lower revenue under Performance Materials following the Company’s
strategic exit from the manufacturing of low-margin extractive and catalytic products in the second half of 2022 and the
related divestiture of its Tilly, Belgium operations in Q4 2022.
Adjusted gross margin in FY 2023 was favourably impacted by the consolidated product mix, supported by the
implementation of the Company’s commercial excellence program last year, and the Company’s exit from the
manufacturing of low-margin extractive and catalytic products. Adjusted gross margin reached $18.6 million, or 28.5%,
compared to $16.3 million, or 26.7%, in Q4 2022, and $70.2 million, or 29.0%, in FY 2023, compared to $62.7 million, or
23.7%, in FY 2022.
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Specialty Semiconductors Segment
Revenue in Q4 2023 reached $45.7 million, compared to $32.0 million in Q4 2022. In FY 2023, revenue reached
$156.5 million, compared to $121.9 million in FY 2022, supported by higher demand in specific sectors. Adjusted gross
margin in Q4 2023 was 26.7% compared to 31.0% in Q4 2022 impacted by a less favourable revenue mix. In FY 2023,
Adjusted gross margin was 26.3%, compared to 28.1% in FY 2022.
Performance Materials Segment
Revenue in Q4 2023 reached $19.4 million, compared to $29.1 million in Q4 2022. In FY 2023, revenue reached
$85.9 million, compared to $142.3 million in FY 2022. The decrease is primarily attributable to the Company’s strategic
exit from the manufacturing of low-margin extractive and catalytic products in the second half of 2022 and the related
divestiture of its Tilly, Belgium operations in Q4 2022. In FY 2023, Adjusted gross margin was 34.6%, compared to 20.4%
in FY 2022.
Operating Earnings (Loss), EBITDA and Adjusted EBITDA
(in thousands of U.S. dollars)
Q4 2023
Q4 2022
Change
FY 2022
Change
Specialty Semiconductors
Performance Materials
Corporate
Adjusted EBITDA
EBITDA
Operating earnings (loss)
$
7,480
4,615
(3,062)
9,033
7,736
4,040
$
5,690
3,997
(2,982)
6,705
(3,671)
(8,219)
31%
15%
3%
35%
FY 2023
$
27,544
21,948
(11,169)
38,323
43,618
27,372
$
24,318
17,277
(11,567)
30,028
4,636
(13,054)
13%
27%
(3%)
28%
Adjusted EBITDA in Q4 2023 reached $9.0 million, an increase of $2.3 million or 35%, compared to $6.7 million in
Q4 2022. Adjusted EBITDA was $38.3 million in FY 2023, a 28% increase compared to $30.0 million in FY 2022.
In Q4 2023, EBITDA reached $7.7 million, compared to negative $3.7 million in Q4 2022. The increase of $11.4 million is
mainly explained by a loss of divestiture of the Tilly, Belgium operations, as well as higher costs for litigation and
restructuring recorded by the Company in Q4 2022. For more information, see the “Expenses” section.
In Q4 2023, operating earnings amounted to $4.0 million, compared to an operating loss of $8.2 million in Q4 2022. In
FY 2023, operating earnings amounted to $27.4 million, compared to an operating loss of $13.1 million in FY 2022.
Specialty Semiconductors Segment
Adjusted EBITDA in Q4 2023 increased by $1.8 million, or 31%, under Specialty Semiconductors to reach $7.5 million.
Adjusted EBITDA in FY 2023 increased by $3.2 million to $27.5 million, representing an Adjusted EBITDA margin 1 of 18%,
compared to 20% for the same period in FY 2022.
Performance Materials Segment
Adjusted EBITDA in Q4 2023 increased by $0.6 million, or 15%, to $4.6 million, representing an Adjusted EBITDA margin
of 24%, compared to 14% in Q4 2022. Adjusted EBITDA in FY 2023 increased by $4.7 million to $21.9 million, representing
an Adjusted EBITDA margin of 26%, compared to 12% in the same period in 2022. The increase is primarily attributable
to the Company’s strategic exit from the manufacturing of low margin extractive and catalytic products in the second
half of FY 2022 and the related divestiture of its Tilly, Belgium operations in Q4 2022.
1 These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
1
These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
16
Management’s Discussion and Analysis ▪ 5
Management’s Discussion and Analysis ▪ 6
5N+ 2023 ANNUAL REPORT
(in thousands of U.S. dollars, except per share amounts)
Q4 2023
Q4 2022
FY 2023
FY 2022
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Summary of Results
Revenue
Adjusted operating expenses1
Adjusted EBITDA
Share-based compensation (expense) recovery
Litigation and restructuring (costs) income
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Foreign exchange and derivative (loss) gain
EBITDA1
Depreciation and amortization
Earnings (loss) before income taxes
Income tax expense (recovery)
Current
Deferred
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Interest on long-term debt, imputed interest and other interest expense
$
65,063
(56,030)
9,033
(414)
(458)
(64)
-
-
-
(361)
7,736
2,129
4,057
1,550
612
(1,346)
(734)
2,284
$0.03
$0.03
$
61,042
(54,337)
6,705
171
(3,210)
-
-
-
(7,834)
497
(3,671)
716
4,051
(8,438)
43
(335)
(292)
(8,146)
($0.09)
($0.09)
$
242,371
(204,048)
38,323
(1,432)
8,314
(672)
(1,051)
-
-
136
43,618
8,834
16,110
18,674
6,674
(3,399)
3,275
15,399
$0.17
$0.17
$
264,223
(234,195)
30,028
(999)
(3,823)
(12,478)
-
(7,834)
(216)
(42)
4,636
5,192
17,732
(18,288)
6,865
(2,154)
4,711
(22,999)
($0.26)
($0.26)
Revenue by Segment and Adjusted Gross Margin
(in thousands of U.S. dollars)
Q4 2023
Q4 2022
Change
FY 2023
FY 2022
Change
Specialty Semiconductors
Performance Materials
Total revenue
Cost of sales
Depreciation included in cost of sales
Adjusted gross margin
Adjusted gross margin percentage1
$
45,661
19,402
65,063
3,189
18,575
28.5%
$
31,951
29,091
61,042
3,155
16,288
26.7%
43%
(33%)
7%
4%
1%
14%
$
156,479
85,892
242,371
12,656
70,194
29.0%
$
121,918
142,305
264,223
14,208
62,716
23.7%
28%
(40%)
(8%)
(14%)
(11%)
12%
(49,677)
(47,909)
(184,833)
(215,715)
Revenue in Q4 2023 increased by 7%, reaching $65.1 million, compared to $61.0 million for the same period last year.
The increase is primarily attributable to the growth experienced under Specialty Semiconductors from the renewable
energy and space power sectors, exceeding the lower revenue under Performance Materials following the Company’s
strategic exit from the manufacturing of low-margin extractive and catalytic products in the second half of 2022 and the
related divestiture of its Tilly, Belgium operations in Q4 2022.
Adjusted gross margin in FY 2023 was favourably impacted by the consolidated product mix, supported by the
implementation of the Company’s commercial excellence program last year, and the Company’s exit from the
manufacturing of low-margin extractive and catalytic products. Adjusted gross margin reached $18.6 million, or 28.5%,
compared to $16.3 million, or 26.7%, in Q4 2022, and $70.2 million, or 29.0%, in FY 2023, compared to $62.7 million, or
23.7%, in FY 2022.
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Specialty Semiconductors Segment
Revenue in Q4 2023 reached $45.7 million, compared to $32.0 million in Q4 2022. In FY 2023, revenue reached
$156.5 million, compared to $121.9 million in FY 2022, supported by higher demand in specific sectors. Adjusted gross
margin in Q4 2023 was 26.7% compared to 31.0% in Q4 2022 impacted by a less favourable revenue mix. In FY 2023,
Adjusted gross margin was 26.3%, compared to 28.1% in FY 2022.
Management's Discussion and Analysis
Performance Materials Segment
Revenue in Q4 2023 reached $19.4 million, compared to $29.1 million in Q4 2022. In FY 2023, revenue reached
$85.9 million, compared to $142.3 million in FY 2022. The decrease is primarily attributable to the Company’s strategic
exit from the manufacturing of low-margin extractive and catalytic products in the second half of 2022 and the related
divestiture of its Tilly, Belgium operations in Q4 2022. In FY 2023, Adjusted gross margin was 34.6%, compared to 20.4%
in FY 2022.
Operating Earnings (Loss), EBITDA and Adjusted EBITDA
(in thousands of U.S. dollars)
Specialty Semiconductors
Performance Materials
Corporate
Adjusted EBITDA
EBITDA
Operating earnings (loss)
Q4 2023
$
7,480
4,615
(3,062)
9,033
7,736
4,040
Change
31%
15%
3%
35%
Q4 2022
$
5,690
3,997
(2,982)
6,705
(3,671)
(8,219)
FY 2023
$
27,544
21,948
(11,169)
38,323
43,618
27,372
Change
13%
27%
(3%)
28%
FY 2022
$
24,318
17,277
(11,567)
30,028
4,636
(13,054)
Adjusted EBITDA in Q4 2023 reached $9.0 million, an increase of $2.3 million or 35%, compared to $6.7 million in
Q4 2022. Adjusted EBITDA was $38.3 million in FY 2023, a 28% increase compared to $30.0 million in FY 2022.
In Q4 2023, EBITDA reached $7.7 million, compared to negative $3.7 million in Q4 2022. The increase of $11.4 million is
mainly explained by a loss of divestiture of the Tilly, Belgium operations, as well as higher costs for litigation and
restructuring recorded by the Company in Q4 2022. For more information, see the “Expenses” section.
In Q4 2023, operating earnings amounted to $4.0 million, compared to an operating loss of $8.2 million in Q4 2022. In
FY 2023, operating earnings amounted to $27.4 million, compared to an operating loss of $13.1 million in FY 2022.
Specialty Semiconductors Segment
Adjusted EBITDA in Q4 2023 increased by $1.8 million, or 31%, under Specialty Semiconductors to reach $7.5 million.
Adjusted EBITDA in FY 2023 increased by $3.2 million to $27.5 million, representing an Adjusted EBITDA margin 1 of 18%,
compared to 20% for the same period in FY 2022.
Performance Materials Segment
Adjusted EBITDA in Q4 2023 increased by $0.6 million, or 15%, to $4.6 million, representing an Adjusted EBITDA margin
of 24%, compared to 14% in Q4 2022. Adjusted EBITDA in FY 2023 increased by $4.7 million to $21.9 million, representing
an Adjusted EBITDA margin of 26%, compared to 12% in the same period in 2022. The increase is primarily attributable
to the Company’s strategic exit from the manufacturing of low margin extractive and catalytic products in the second
half of FY 2022 and the related divestiture of its Tilly, Belgium operations in Q4 2022.
1 These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
1
These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
Management’s Discussion and Analysis ▪ 5
Management’s Discussion and Analysis ▪ 6
17
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Net Earnings (Loss) and Adjusted Net Earnings (Loss)
(in thousands of U.S. dollars, except per share amounts)
Net earnings (loss)
Basic earnings (loss) per share
Reconciling items:
Share-based compensation expense (recovery)
Litigation and restructuring costs (income)
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Income tax recovery on taxable items above
Adjusted net earnings (loss)1
Basic adjusted earnings (loss) per share1
Q4 2023
$
2,284
$0.03
Q4 2022
$
(8,146)
($0.09)
414
458
64
-
-
-
(226)
2,994
$0.03
(171)
3,210
-
-
7,834
-
(595)
2,132
$0.02
FY 2023
$
15,399
$0.17
1,432
(8,314)
672
1,051
-
-
(854)
9,386
$0.11
FY 2022
$
(22,999)
($0.26)
999
3,823
12,478
-
7,834
216
(2,618)
(267)
$-
In Q4 2023, net earnings were $2.3 million or $0.03 per share, compared to a net loss of $8.1 million or $0.09 per share
in Q4 2022. Adjusted net earnings were $3.0 million or $0.03 per share in Q4 2023, compared to $2.1 million or
$0.02 per share in Q4 2022.
In FY 2023, net earnings were $15.4 million or $0.17 per share, compared to a net loss of $23.0 million or $0.26 per share
in FY 2022. Adjusted net earnings were $9.4 million or $0.11 per share in FY 2023, compared to an Adjusted net loss of
$0.3 million or $nil per share in FY 2022.
Excluding income tax recovery, the items reconciling Adjusted net earnings in Q4 2023 are share-based compensation
expense and litigation and restructuring costs. For FY 2023, the items are share-based compensation expense, litigation
and restructuring income of $8.3 million, an impairment charge on non-current assets of $0.7 million and a loss on
disposal of PPE of $1.1 million. For more information, see the “Expenses” section.
Backlog and Bookings
(in thousands of U.S. dollars)
Specialty Semiconductors
Performance Materials
Total
Q4 2023
$
174,957
33,346
208,303
BACKLOG
Q3 2023
$
167,709
28,205
195,914
BACKLOG
Q4 2022
$
129,710
39,611
169,321
Q4 2023
$
52,909
24,543
77,452
BOOKINGS1
Q3 2023
$
50,710
21,239
71,949
BOOKINGS
(number of days based on annualized
revenues)*
Specialty Semiconductors
Performance Materials
Weighted average
* Backlog and bookings are also presented in number of days to normalize the impact of commodity prices.
365
124
253
111
92
104
350
157
292
106
115
109
365
122
284
Q4 2023
Q4 2023
Q4 2022
Q3 2023
Q3 2023
Q4 2022
$
57,325
33,648
90,973
Q4 2022
164
106
136
Q4 2023 vs. Q3 2023
Backlog on December 31, 2023, represented 292 days of annualized revenue, 8 days higher than the backlog on
September 30, 2023.
The backlog for Specialty Semiconductors represented 350 days of annualized revenue, a decrease of 15 days or 4%,
over the backlog on September 30, 2023, due to the timing of signing and/or renewal of contracts.
1 These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
18
Management’s Discussion and Analysis ▪ 7
Management’s Discussion and Analysis ▪ 8
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The backlog for Performance Materials represented 157 days of annualized revenue, an increase of 35 days, or 29%,
compared to the backlog on September 30, 2023, mainly due to the signing and/or renewal of contracts, which typically
occur in the fourth and first quarters of the year for this segment.
Bookings for Specialty Semiconductors decreased by 5 days, from 111 days in Q3 2023 to 106 days in Q4 2023. Bookings
for Performance Materials increased by 23 days, from 92 days in Q3 2023 to 115 days in Q4 2023. Bookings are
calculated by adding revenues to the increase or decrease in backlog for the period divided by annualized revenue. As
such, the increase or decrease in bookings is attributable to the same factors as the increase or decrease in backlog.
Backlog on December 31, 2023, for Specialty Semiconductors decreased by 15 days compared to on December 31, 2022.
The backlog for Performance Materials, represented 157 days, an increase of 33 days, compared to 124 days on
Bookings for Specialty Semiconductors decreased by 58 days for the same factors mentioned above, and increased by
9 days for Performance Materials, compared to the previous year quarter.
Q4 2023 vs. Q4 2022
December 31, 2022.
Expenses
(in thousands of U.S. dollars)
Q4 2023
Q4 2022
Depreciation and amortization
SG&A
Share-based compensation expense (recovery)
Litigation and restructuring costs (income)
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Financial expense
Income tax (recovery) expense
Total expenses
Depreciation and Amortization
$
4,057
8,699
414
458
64
-
-
-
2,490
(734)
15,448
$
4,051
7,183
(171)
3,210
-
-
-
7,834
219
(292)
22,034
FY 2023
$
16,110
29,410
1,432
(8,314)
672
1,051
-
-
8,698
3,275
52,334
FY 2022
$
17,732
28,565
999
3,823
12,478
-
7,834
216
5,234
4,711
81,592
Depreciation and amortization expenses in Q4 2023 and FY 2023 amounted to $4.1 million and $16.1 million,
respectively, compared to $4.1 million and $17.7 million, respectively, for the same periods in 2022. The decrease in
FY 2023 is mainly associated with the Company’s divestiture of its Tilly, Belgium operations in Q4 2022.
SG&A
SG&A expenses in Q4 2023 and FY 2023 were $8.7 million and $29.4 million, respectively, compared to $7.2 million and
$28.6 million, respectively, for the same periods in FY 2022. The increase in Q4 2023 is mainly explained by a punctual
need for third-party support, while in FY 2023, the increase is mainly caused by inflation impacting various expenses
partially mitigated by the Company’s divestiture of its Tilly, Belgium operations in Q4 2022.
Share-based Compensation Expense (Recovery)
Share-based compensation expense in Q4 2023 amounted to $0.4 million, compared to a recovery of $0.2 million in
Q4 2022. In FY 2023, share-based compensation expense amounted to $1.4 million, compared to $1.0 million in FY 2022.
Litigation and restructuring costs (income)
In Q4 2023, the Company recorded litigation and restructuring costs of $0.5 million consisting of severances and other
related costs and a charge related to a non-trade receivable which became non recoverable during the quarter for an
amount of $0.2 million.
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Net Earnings (Loss) and Adjusted Net Earnings (Loss)
(in thousands of U.S. dollars, except per share amounts)
Q4 2023
Q4 2022
Net earnings (loss)
Basic earnings (loss) per share
Reconciling items:
Share-based compensation expense (recovery)
Litigation and restructuring costs (income)
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Income tax recovery on taxable items above
Adjusted net earnings (loss)1
Basic adjusted earnings (loss) per share1
$
2,284
$0.03
414
458
64
-
-
-
(226)
2,994
$0.03
$
(8,146)
($0.09)
(171)
3,210
-
-
-
7,834
(595)
2,132
$0.02
FY 2023
$
15,399
$0.17
1,432
(8,314)
672
1,051
-
-
(854)
9,386
$0.11
FY 2022
$
(22,999)
($0.26)
999
3,823
12,478
-
7,834
216
(2,618)
(267)
$-
In Q4 2023, net earnings were $2.3 million or $0.03 per share, compared to a net loss of $8.1 million or $0.09 per share
in Q4 2022. Adjusted net earnings were $3.0 million or $0.03 per share in Q4 2023, compared to $2.1 million or
$0.02 per share in Q4 2022.
In FY 2023, net earnings were $15.4 million or $0.17 per share, compared to a net loss of $23.0 million or $0.26 per share
in FY 2022. Adjusted net earnings were $9.4 million or $0.11 per share in FY 2023, compared to an Adjusted net loss of
$0.3 million or $nil per share in FY 2022.
Excluding income tax recovery, the items reconciling Adjusted net earnings in Q4 2023 are share-based compensation
expense and litigation and restructuring costs. For FY 2023, the items are share-based compensation expense, litigation
and restructuring income of $8.3 million, an impairment charge on non-current assets of $0.7 million and a loss on
disposal of PPE of $1.1 million. For more information, see the “Expenses” section.
Backlog and Bookings
(in thousands of U.S. dollars)
Specialty Semiconductors
Performance Materials
Total
Q4 2023
$
174,957
33,346
208,303
BACKLOG
Q3 2023
$
167,709
28,205
195,914
BACKLOG
BOOKINGS1
Q4 2022
Q4 2023
Q3 2023
Q4 2022
$
129,710
39,611
169,321
$
52,909
24,543
77,452
$
50,710
21,239
71,949
$
57,325
33,648
90,973
(number of days based on annualized
revenues)*
Specialty Semiconductors
Performance Materials
Weighted average
Q4 2023
Q3 2023
Q4 2022
Q4 2023
Q3 2023
Q4 2022
350
157
292
365
122
284
365
124
253
106
115
109
111
92
104
164
106
136
* Backlog and bookings are also presented in number of days to normalize the impact of commodity prices.
BOOKINGS
Q4 2023 vs. Q3 2023
September 30, 2023.
Backlog on December 31, 2023, represented 292 days of annualized revenue, 8 days higher than the backlog on
The backlog for Specialty Semiconductors represented 350 days of annualized revenue, a decrease of 15 days or 4%,
over the backlog on September 30, 2023, due to the timing of signing and/or renewal of contracts.
1 These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
Management’s Discussion and Analysis ▪ 7
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The backlog for Performance Materials represented 157 days of annualized revenue, an increase of 35 days, or 29%,
compared to the backlog on September 30, 2023, mainly due to the signing and/or renewal of contracts, which typically
occur in the fourth and first quarters of the year for this segment.
Management's Discussion and Analysis
Bookings for Specialty Semiconductors decreased by 5 days, from 111 days in Q3 2023 to 106 days in Q4 2023. Bookings
for Performance Materials increased by 23 days, from 92 days in Q3 2023 to 115 days in Q4 2023. Bookings are
calculated by adding revenues to the increase or decrease in backlog for the period divided by annualized revenue. As
such, the increase or decrease in bookings is attributable to the same factors as the increase or decrease in backlog.
Q4 2023 vs. Q4 2022
Backlog on December 31, 2023, for Specialty Semiconductors decreased by 15 days compared to on December 31, 2022.
The backlog for Performance Materials, represented 157 days, an increase of 33 days, compared to 124 days on
December 31, 2022.
Bookings for Specialty Semiconductors decreased by 58 days for the same factors mentioned above, and increased by
9 days for Performance Materials, compared to the previous year quarter.
Expenses
(in thousands of U.S. dollars)
Depreciation and amortization
SG&A
Share-based compensation expense (recovery)
Litigation and restructuring costs (income)
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Financial expense
Income tax (recovery) expense
Total expenses
Q4 2023
$
4,057
8,699
414
458
64
-
-
-
2,490
(734)
15,448
Q4 2022
$
4,051
7,183
(171)
3,210
-
-
7,834
-
219
(292)
22,034
FY 2023
$
16,110
29,410
1,432
(8,314)
672
1,051
-
-
8,698
3,275
52,334
FY 2022
$
17,732
28,565
999
3,823
12,478
-
7,834
216
5,234
4,711
81,592
Depreciation and Amortization
Depreciation and amortization expenses in Q4 2023 and FY 2023 amounted to $4.1 million and $16.1 million,
respectively, compared to $4.1 million and $17.7 million, respectively, for the same periods in 2022. The decrease in
FY 2023 is mainly associated with the Company’s divestiture of its Tilly, Belgium operations in Q4 2022.
SG&A
SG&A expenses in Q4 2023 and FY 2023 were $8.7 million and $29.4 million, respectively, compared to $7.2 million and
$28.6 million, respectively, for the same periods in FY 2022. The increase in Q4 2023 is mainly explained by a punctual
need for third-party support, while in FY 2023, the increase is mainly caused by inflation impacting various expenses
partially mitigated by the Company’s divestiture of its Tilly, Belgium operations in Q4 2022.
Share-based Compensation Expense (Recovery)
Share-based compensation expense in Q4 2023 amounted to $0.4 million, compared to a recovery of $0.2 million in
Q4 2022. In FY 2023, share-based compensation expense amounted to $1.4 million, compared to $1.0 million in FY 2022.
Litigation and restructuring costs (income)
In Q4 2023, the Company recorded litigation and restructuring costs of $0.5 million consisting of severances and other
related costs and a charge related to a non-trade receivable which became non recoverable during the quarter for an
amount of $0.2 million.
Management’s Discussion and Analysis ▪ 8
19
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
In Q2 2023, the Company recorded a litigation and restructuring income of $8.8 million, which represented the amount
received from the previous shareholder of AZUR, net of related expenses. The income was received as per stipulations
of the share purchase agreement and is not related to AZUR’s performance post-acquisition.
In Q4 2022 and FY 2022, the Company recorded litigation and restructuring costs of $3.2 million and $3.8 million,
respectively. These costs include $2.6 million related to the divestiture of a subsidiary, $0.4 million for a site closure in
Asia, $0.2 million due to a change to its senior executive management recorded in Q2 2022, and $0.4 million for the
settlement of a contract by mutual agreement recorded in Q2 2022.
Impairment of Non-Current Assets
In Q2 2023, the Company recorded an impairment of non-current assets of $0.6 million in relation to PPE included within
the Performance Materials segment, to reflect the assessment of the carrying value of production equipment following
the Company’s decision to switch to higher capacity production equipment.
In Q3 2022, the Company recorded an impairment of non-current assets of $7.1 million ($2.4 million for buildings,
$4.6 million for machinery and $0.1 million for furniture and fixtures) under its Performance Materials segment to reflect
the assessment of the carrying value of PPE following its intention to halt production at its manufacturing facility in Tilly,
Belgium.
In Q1 2022, the Company recorded an impairment of non-current assets of $5.4 million ($5.1 million for customer
relationships and $0.3 million for other intangibles) under its Specialty Semiconductors segment to reflect the
assessment of the carrying value of intangible assets due to the impact of the Russia/Ukraine conflict on the Company’s
Russia-based customer relationships. The Company’s initial assumptions regarding future cashflows from these
customers are no longer supported given the international sanctions in place against Russia and the uncertainty related
to, and the unknown duration of, the Ukraine/Russia conflict.
Loss on disposal of property, plant and equipment
In Q2 2023, the Company recorded a loss of $1.1 million on the disposal of a production equipment following a change
in technical requirements and functionalities by the Company. The Company disposed of this production equipment in
a non-monetary transaction with the supplier in exchange for a credit to be applied against future production equipment
purchases.
Loss on Divestiture of Subsidiary
In Q4 2022, the Company divested its 100% interest in 5N Plus Belgium SA and recognized a loss on divestiture of
$7.8 million. For more information, see the “Divestiture of 5N Plus Belgium SA” section.
Loss on Disposal of Assets Held for Sale
In Q3 2022, the Company recorded a loss of $0.2 million on the disposal of assets held for sale due to the planned
relocation of operations to Canada from one of the Company’s subsidiaries in Asia, announced in Q3 2020.
Financial Expense
Financial expense amounted to $2.5 million in Q4 2023, compared to $0.2 million in Q4 2022. The negative impact is
partly due to interest income earned in Q4 2022, following the settlement of an international tax arbitration between
two jurisdictions in which the Company operated. A foreign exchange and derivatives loss was recorded in Q4 2023,
compared to a gain in the same period last year, which also contributed to the difference.
In FY 2023, financial expense amounted to $8.7 million, compared to $5.2 million in FY 2022. The increase is due to the
significant increase in interest rates from the second half of FY 2022 against interest income earned following the
settlement of an international tax arbitration in Q4 2022 described above.
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Income Taxes
The Company reported earnings before income taxes of $1.6 million in Q4 2023 and $18.7 million in FY 2023. Income tax
recovery in Q4 2023 and income tax expense in FY 2023 was $0.7 million and $3.3 million, respectively, compared to
income tax recovery and income tax expense of $0.3 million and $4.7 million, for the respective periods of 2022. Both
years were impacted by deferred tax assets applicable only in certain jurisdictions.
Liquidity and Capital Resources
(in thousands of U.S. dollars)
Q4 2023
Q4 2022
Cash from operations before the following:
Net changes in non-cash working capital items
Cash from operating activities
Cash used in investing activities
Cash from (used in) financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
$
5,883
5,891
11,774
(8,097)
1,029
125
4,831
$
4,447
8,958
13,405
(8,895)
(2,308)
317
2,519
FY 2023
$
32,051
(14,800)
17,251
(12,362)
(13,002)
128
(7,985)
FY 2022
$
13,498
10,243
23,741
(18,994)
2,409
(405)
6,751
In Q4 2023, cash generated by operating activities amounted to $11.8 million, compared to $13.4 million in Q4 2022. In
FY 2023, cash generated from operating activities amounted to $17.3 million, compared to $23.7 million in FY 2022. The
decrease in FY 2023 is mainly due to an increase in non-cash working capital to support growth in expected demand in
2024, partially mitigated by an increase in contributions of cash from operations of $18.6 million in FY 2023 before net
change in non-cash working capital.
In Q4 2023, cash used in investing activities amounted to $8.1 million, compared to $8.9 million in Q4 2022. In FY 2023,
cash used in investing activities amounted to $12.4 million, compared to $19.0 million in FY 2022. The decrease of
$6.6 million in FY 2023 is mainly explained by the proceeds on settlement of an indexed deposit agreement which was
amended during Q1 2023, resulting in a receipt of cash of $6.5 million, partially offset by increased additions to PPE of
$1.2 million in 2023 and an increase in the Company's minority equity stake in Microbion Corporation (“Microbion”) of
$1.0 million. Compared to FY 2022, cash used in investing activities was impacted by the timing of additions to PPE, such
as the St-Laurent project (Montréal, Canada), and cash disbursements associated with the divestiture of its Tilly, Belgium
operations, partially mitigated by proceeds of $2.8 million on the disposal of assets held for sale in Q3 2022.
In Q4 2023, cash generated by financing activities amounted to $1.0 million, compared to cash used in financing activities
of $2.3 million in Q4 2022. In FY 2023, cash used in financing activities amounted to $13.0 million, compared to cash
generated from financing activities of $2.4 million in FY 2022. The variation of $15.4 million is mainly attributable to the
reimbursements of $7.5 million in Q2 2023 and $5.0 million in Q3 2023 of the credit facility while the Company made a
net drawdown of $5.0 million in FY 2022. In addition, the Company received cash from the issuance of common shares
in FY 2023, while the principal elements of lease payments were similar for both periods.
Working Capital
(in thousands of U.S. dollars)
Inventories
Other current assets
Current liabilities
Working capital1
Working capital current ratio1
As at December 31, 2023
As at December 31, 2022
$
105,850
76,113
(81,807)
100,156
2.22
$
86,254
100,908
(62,846)
124,316
2.98
The $24.2 million decrease in working capital, compared to December 31, 2022, is mainly attributable to higher current
liabilities following the presentation of the subordinated term loan of $25.0 million maturing in March 2024 as a current
portion of long-term debt in Q1 2023, net of lower trade and accrued liabilities. In addition, inventories increased by
$19.6 million in FY 2023 to support demand while other current assets are lower by $24.8 million.
1 These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
20
Management’s Discussion and Analysis ▪ 9
Management’s Discussion and Analysis ▪ 10
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
In Q2 2023, the Company recorded a litigation and restructuring income of $8.8 million, which represented the amount
received from the previous shareholder of AZUR, net of related expenses. The income was received as per stipulations
of the share purchase agreement and is not related to AZUR’s performance post-acquisition.
In Q4 2022 and FY 2022, the Company recorded litigation and restructuring costs of $3.2 million and $3.8 million,
respectively. These costs include $2.6 million related to the divestiture of a subsidiary, $0.4 million for a site closure in
Asia, $0.2 million due to a change to its senior executive management recorded in Q2 2022, and $0.4 million for the
settlement of a contract by mutual agreement recorded in Q2 2022.
Impairment of Non-Current Assets
In Q2 2023, the Company recorded an impairment of non-current assets of $0.6 million in relation to PPE included within
the Performance Materials segment, to reflect the assessment of the carrying value of production equipment following
the Company’s decision to switch to higher capacity production equipment.
In Q3 2022, the Company recorded an impairment of non-current assets of $7.1 million ($2.4 million for buildings,
$4.6 million for machinery and $0.1 million for furniture and fixtures) under its Performance Materials segment to reflect
the assessment of the carrying value of PPE following its intention to halt production at its manufacturing facility in Tilly,
Belgium.
In Q1 2022, the Company recorded an impairment of non-current assets of $5.4 million ($5.1 million for customer
relationships and $0.3 million for other intangibles) under its Specialty Semiconductors segment to reflect the
assessment of the carrying value of intangible assets due to the impact of the Russia/Ukraine conflict on the Company’s
Russia-based customer relationships. The Company’s initial assumptions regarding future cashflows from these
customers are no longer supported given the international sanctions in place against Russia and the uncertainty related
to, and the unknown duration of, the Ukraine/Russia conflict.
Loss on disposal of property, plant and equipment
In Q2 2023, the Company recorded a loss of $1.1 million on the disposal of a production equipment following a change
in technical requirements and functionalities by the Company. The Company disposed of this production equipment in
a non-monetary transaction with the supplier in exchange for a credit to be applied against future production equipment
purchases.
Loss on Divestiture of Subsidiary
In Q4 2022, the Company divested its 100% interest in 5N Plus Belgium SA and recognized a loss on divestiture of
$7.8 million. For more information, see the “Divestiture of 5N Plus Belgium SA” section.
Loss on Disposal of Assets Held for Sale
In Q3 2022, the Company recorded a loss of $0.2 million on the disposal of assets held for sale due to the planned
relocation of operations to Canada from one of the Company’s subsidiaries in Asia, announced in Q3 2020.
Financial Expense
Financial expense amounted to $2.5 million in Q4 2023, compared to $0.2 million in Q4 2022. The negative impact is
partly due to interest income earned in Q4 2022, following the settlement of an international tax arbitration between
two jurisdictions in which the Company operated. A foreign exchange and derivatives loss was recorded in Q4 2023,
compared to a gain in the same period last year, which also contributed to the difference.
In FY 2023, financial expense amounted to $8.7 million, compared to $5.2 million in FY 2022. The increase is due to the
significant increase in interest rates from the second half of FY 2022 against interest income earned following the
settlement of an international tax arbitration in Q4 2022 described above.
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Income Taxes
The Company reported earnings before income taxes of $1.6 million in Q4 2023 and $18.7 million in FY 2023. Income tax
recovery in Q4 2023 and income tax expense in FY 2023 was $0.7 million and $3.3 million, respectively, compared to
income tax recovery and income tax expense of $0.3 million and $4.7 million, for the respective periods of 2022. Both
years were impacted by deferred tax assets applicable only in certain jurisdictions.
Management's Discussion and Analysis
Liquidity and Capital Resources
(in thousands of U.S. dollars)
Cash from operations before the following:
Net changes in non-cash working capital items
Cash from operating activities
Cash used in investing activities
Cash from (used in) financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Q4 2023
$
5,883
5,891
11,774
(8,097)
1,029
125
4,831
Q4 2022
$
4,447
8,958
13,405
(8,895)
(2,308)
317
2,519
FY 2023
$
32,051
(14,800)
17,251
(12,362)
(13,002)
128
(7,985)
FY 2022
$
13,498
10,243
23,741
(18,994)
2,409
(405)
6,751
In Q4 2023, cash generated by operating activities amounted to $11.8 million, compared to $13.4 million in Q4 2022. In
FY 2023, cash generated from operating activities amounted to $17.3 million, compared to $23.7 million in FY 2022. The
decrease in FY 2023 is mainly due to an increase in non-cash working capital to support growth in expected demand in
2024, partially mitigated by an increase in contributions of cash from operations of $18.6 million in FY 2023 before net
change in non-cash working capital.
In Q4 2023, cash used in investing activities amounted to $8.1 million, compared to $8.9 million in Q4 2022. In FY 2023,
cash used in investing activities amounted to $12.4 million, compared to $19.0 million in FY 2022. The decrease of
$6.6 million in FY 2023 is mainly explained by the proceeds on settlement of an indexed deposit agreement which was
amended during Q1 2023, resulting in a receipt of cash of $6.5 million, partially offset by increased additions to PPE of
$1.2 million in 2023 and an increase in the Company's minority equity stake in Microbion Corporation (“Microbion”) of
$1.0 million. Compared to FY 2022, cash used in investing activities was impacted by the timing of additions to PPE, such
as the St-Laurent project (Montréal, Canada), and cash disbursements associated with the divestiture of its Tilly, Belgium
operations, partially mitigated by proceeds of $2.8 million on the disposal of assets held for sale in Q3 2022.
In Q4 2023, cash generated by financing activities amounted to $1.0 million, compared to cash used in financing activities
of $2.3 million in Q4 2022. In FY 2023, cash used in financing activities amounted to $13.0 million, compared to cash
generated from financing activities of $2.4 million in FY 2022. The variation of $15.4 million is mainly attributable to the
reimbursements of $7.5 million in Q2 2023 and $5.0 million in Q3 2023 of the credit facility while the Company made a
net drawdown of $5.0 million in FY 2022. In addition, the Company received cash from the issuance of common shares
in FY 2023, while the principal elements of lease payments were similar for both periods.
Working Capital
(in thousands of U.S. dollars)
Inventories
Other current assets
Current liabilities
Working capital1
Working capital current ratio1
As at December 31, 2023
$
105,850
76,113
(81,807)
100,156
2.22
As at December 31, 2022
$
86,254
100,908
(62,846)
124,316
2.98
The $24.2 million decrease in working capital, compared to December 31, 2022, is mainly attributable to higher current
liabilities following the presentation of the subordinated term loan of $25.0 million maturing in March 2024 as a current
portion of long-term debt in Q1 2023, net of lower trade and accrued liabilities. In addition, inventories increased by
$19.6 million in FY 2023 to support demand while other current assets are lower by $24.8 million.
1 These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
Management’s Discussion and Analysis ▪ 9
Management’s Discussion and Analysis ▪ 10
21
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Net Debt
(in thousands of U.S. dollars)
Bank indebtedness
Long-term debt including current portion
Total Debt1
Cash and cash equivalents
Net Debt
As at December 31, 2023
$
-
108,500
As at December 31, 2022
$
-
121,000
108,500
(34,706)
73,794
121,000
(42,691)
78,309
Total debt stood at $108.5 million as at December 31, 2023, compared to $121.0 million as at December 31, 2022.
Net debt, after considering cash and cash equivalents, decreased by $4.5 million to $73.8 million on December 31, 2023,
from $78.3 million on December 31, 2022.
Available Short-Term Capital Resources
(in thousands of U.S. dollars)
Cash and cash equivalents
Available revolving credit facility
Available short-term capital resources
As at December 31, 2023
$
34,706
40,500
75,206
As at December 31, 2022
$
42,691
28,000
70,691
In June 2022, the Company signed a senior secured multi-currency revolving credit facility of $124.0 million maturing
in April 2026 to replace its existing $124.0 million senior secured revolving facility maturing in April 2023. At any time,
the Company has the option to request that the credit facility be expanded through the exercise of an additional
$30.0 million accordion feature, subject to review and approval by the lenders. This revolving credit facility can be
drawn in U.S. dollars, Canadian dollars or Hong Kong dollars (up to $4.0 million). Drawings bear interest at either the
Canadian prime rate, U.S. base rate, Hong Kong base rate or SOFR, plus a margin based on the Company’s senior net
debt to consolidated EBITDA ratio. Under the terms of its credit facility, the Company is required to satisfy certain
restrictive covenants as to financial ratios. As at December 31, 2023 and December 31, 2022, the Company had met all
covenants.
In February 2019, the Company signed a five-year subordinated term loan with Investissement Québec. The loan was
disbursed in two tranches: the first tranche of $5.0 million on February 6, 2019, and the second tranche of $20.0 million
on March 22, 2019. The two tranches of the term loan bear interest equivalent to the five-year U.S. dollar swap rate plus
a margin of 4.19%, which equals to 6.82% and 6.64%, respectively. Under the terms of the loan, the Company is required
to satisfy certain restrictive covenants as to financial ratios. As at December 31, 2023 and December 31, 2022, the
Company had met all covenants.
Share Information
Issued and outstanding shares
Stock options potentially issuable
As at February 27, 2023
88,704,724
1,365,162
As at December 31, 2023
88,704,724
1,365,162
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Restricted Share Unit and Performance Share Unit Plan
On November 4, 2015, the Company adopted a new Restricted Share Unit (“RSU”) and Performance Share Unit (“PSU”)
Plan (the “RSU & PSU Plan”) to replace the previous RSU Plan. The RSU & PSU Plan enables the Company to award eligible
participants: (i) phantom RSUs that vest no later than three years following the grant date; and (ii) phantom PSUs that
vest after certain periods of time, not exceeding three years, and subject to the achievement of certain performance
criteria as determined by the Board of Directors. Such RSU & PSU Plan provides for the settlement of RSUs and PSUs
through either cash or the issuance of common shares of the Company from treasury, for an amount equivalent to the
volume weighted average of the trading price of the common shares of the Company on the TSX for the five trading days
immediately preceding the applicable RSU vesting determination date or PSU vesting determination date.
In FY 2023, the Company granted 155,873 RSUs (2022 – 95,881), 111,458 RSUs were paid (2022 – 146,549) and
3,000 RSUs were forfeited (2022 – 13,110). On December 31, 2023, 319,896 RSUs were outstanding (2022 – 278,481).
No PSUs were granted or paid in FY 2023 and FY 2022 and 200,000 PSUs were cancelled in FY 2022. On
December 31, 2023 and 2022, nil PSUs were outstanding.
Stock Option Plan
On April 11, 2011, the Company adopted a new stock option plan (the “Stock Option Plan”) under which a maximum
number of options granted cannot exceed 5,000,000. Options granted under the Stock Option Plan may be exercised
during a period not exceeding ten years from the date of grant. The stock options outstanding on December 31, 2023,
may be exercised during a period not exceeding six years from their date of grant. Unless the Board of Directors decides
otherwise at its sole discretion, options vest at a rate of 25% (100% for directors) per year, beginning one year following
the grant date of the options. Any unexercised options will expire one month after the date beneficiary ceases to be an
employee, director or officer (collectively the “optionee”) and one year after the optionee’s death, retirement or
permanent disability, as the case may be, or prior to the expiration of the term of the option, whichever occurs earlier.
The following table presents information concerning all outstanding stock options:
Number of options
exercise price
Number of options
Weighted average
Weighted average
exercise price
2023
CA$
1.91
2.74
2.28
1.90
2.10
825,968
772,970
-
1,598,938
457,749
2022
CA$
2.46
1.33
-
1.91
2.41
Outstanding, beginning of year
Granted
Exercised
Outstanding, end of year
Exercisable, end of year
Off-balance Sheet Arrangements
1,598,938
140,712
(374,488)
1,365,162
458,454
The Company has few off-balance sheet arrangements since most of the leases are recognized on the consolidated
statement of financial position following the adoption of the IFRS 16 – Leases, as at January 1, 2019. Any off-balance
sheet arrangements consist of contractual obligations in the normal course of business.
The Company is exposed to currency risk on sales in euros and other currencies, as well as interest rate fluctuations on
its credit facility, and, therefore, may periodically enter into foreign currency forward contracts and interest rate or
foreign currency swap contracts to protect itself against interest rate and currency fluctuations. The reader will find more
details related to these contracts in Notes 19 and 27 of the audited consolidated financial statements for the year ended
December 31, 2023.
1
These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
22
Management’s Discussion and Analysis ▪ 11
Management’s Discussion and Analysis ▪ 12
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Net Debt
Bank indebtedness
Long-term debt including current portion
Cash and cash equivalents
Total Debt1
Net Debt
from $78.3 million on December 31, 2022.
Available Short-Term Capital Resources
(in thousands of U.S. dollars)
Cash and cash equivalents
Available revolving credit facility
Available short-term capital resources
(in thousands of U.S. dollars)
As at December 31, 2023
As at December 31, 2022
Total debt stood at $108.5 million as at December 31, 2023, compared to $121.0 million as at December 31, 2022.
Net debt, after considering cash and cash equivalents, decreased by $4.5 million to $73.8 million on December 31, 2023,
$
-
108,500
108,500
(34,706)
73,794
$
34,706
40,500
75,206
$
-
121,000
121,000
(42,691)
78,309
$
42,691
28,000
70,691
As at December 31, 2023
As at December 31, 2022
In June 2022, the Company signed a senior secured multi-currency revolving credit facility of $124.0 million maturing
in April 2026 to replace its existing $124.0 million senior secured revolving facility maturing in April 2023. At any time,
the Company has the option to request that the credit facility be expanded through the exercise of an additional
$30.0 million accordion feature, subject to review and approval by the lenders. This revolving credit facility can be
drawn in U.S. dollars, Canadian dollars or Hong Kong dollars (up to $4.0 million). Drawings bear interest at either the
Canadian prime rate, U.S. base rate, Hong Kong base rate or SOFR, plus a margin based on the Company’s senior net
debt to consolidated EBITDA ratio. Under the terms of its credit facility, the Company is required to satisfy certain
restrictive covenants as to financial ratios. As at December 31, 2023 and December 31, 2022, the Company had met all
covenants.
In February 2019, the Company signed a five-year subordinated term loan with Investissement Québec. The loan was
disbursed in two tranches: the first tranche of $5.0 million on February 6, 2019, and the second tranche of $20.0 million
on March 22, 2019. The two tranches of the term loan bear interest equivalent to the five-year U.S. dollar swap rate plus
a margin of 4.19%, which equals to 6.82% and 6.64%, respectively. Under the terms of the loan, the Company is required
to satisfy certain restrictive covenants as to financial ratios. As at December 31, 2023 and December 31, 2022, the
Company had met all covenants.
Share Information
Issued and outstanding shares
Stock options potentially issuable
As at February 27, 2023
As at December 31, 2023
88,704,724
1,365,162
88,704,724
1,365,162
Management's Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Restricted Share Unit and Performance Share Unit Plan
On November 4, 2015, the Company adopted a new Restricted Share Unit (“RSU”) and Performance Share Unit (“PSU”)
Plan (the “RSU & PSU Plan”) to replace the previous RSU Plan. The RSU & PSU Plan enables the Company to award eligible
participants: (i) phantom RSUs that vest no later than three years following the grant date; and (ii) phantom PSUs that
vest after certain periods of time, not exceeding three years, and subject to the achievement of certain performance
criteria as determined by the Board of Directors. Such RSU & PSU Plan provides for the settlement of RSUs and PSUs
through either cash or the issuance of common shares of the Company from treasury, for an amount equivalent to the
volume weighted average of the trading price of the common shares of the Company on the TSX for the five trading days
immediately preceding the applicable RSU vesting determination date or PSU vesting determination date.
In FY 2023, the Company granted 155,873 RSUs (2022 – 95,881), 111,458 RSUs were paid (2022 – 146,549) and
3,000 RSUs were forfeited (2022 – 13,110). On December 31, 2023, 319,896 RSUs were outstanding (2022 – 278,481).
No PSUs were granted or paid in FY 2023 and FY 2022 and 200,000 PSUs were cancelled in FY 2022. On
December 31, 2023 and 2022, nil PSUs were outstanding.
Stock Option Plan
On April 11, 2011, the Company adopted a new stock option plan (the “Stock Option Plan”) under which a maximum
number of options granted cannot exceed 5,000,000. Options granted under the Stock Option Plan may be exercised
during a period not exceeding ten years from the date of grant. The stock options outstanding on December 31, 2023,
may be exercised during a period not exceeding six years from their date of grant. Unless the Board of Directors decides
otherwise at its sole discretion, options vest at a rate of 25% (100% for directors) per year, beginning one year following
the grant date of the options. Any unexercised options will expire one month after the date beneficiary ceases to be an
employee, director or officer (collectively the “optionee”) and one year after the optionee’s death, retirement or
permanent disability, as the case may be, or prior to the expiration of the term of the option, whichever occurs earlier.
The following table presents information concerning all outstanding stock options:
Outstanding, beginning of year
Granted
Exercised
Outstanding, end of year
Exercisable, end of year
Number of options
1,598,938
140,712
(374,488)
1,365,162
458,454
2023
Weighted average
exercise price
CA$
1.91
2.74
2.28
1.90
2.10
Number of options
825,968
772,970
-
1,598,938
457,749
2022
Weighted average
exercise price
CA$
2.46
1.33
-
1.91
2.41
Off-balance Sheet Arrangements
The Company has few off-balance sheet arrangements since most of the leases are recognized on the consolidated
statement of financial position following the adoption of the IFRS 16 – Leases, as at January 1, 2019. Any off-balance
sheet arrangements consist of contractual obligations in the normal course of business.
The Company is exposed to currency risk on sales in euros and other currencies, as well as interest rate fluctuations on
its credit facility, and, therefore, may periodically enter into foreign currency forward contracts and interest rate or
foreign currency swap contracts to protect itself against interest rate and currency fluctuations. The reader will find more
details related to these contracts in Notes 19 and 27 of the audited consolidated financial statements for the year ended
December 31, 2023.
1
These measures are not recognized measures under IFRS and do not have standardized meanings prescribed by IFRS and therefore may not be
comparable to similar measures presented by other companies. See Non-IFRS Measures for more information.
Management’s Discussion and Analysis ▪ 11
Management’s Discussion and Analysis ▪ 12
23
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following table reflects the contractual cash flows of the Company’s financial liabilities as at December 31, 2023:
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Internal Control over Financial Reporting
(in thousands of U.S. dollars)
Trade and accrued liabilities
Long-term debt
Lease liabilities
Total
Carrying
amount
$
37,024
108,500
30,139
175,663
1 year
$
37,024
31,184
2,761
70,969
2 years
$
-
5,766
2,642
8,408
3 years
$
-
85,422
2,558
87,980
4 years
$
-
-
2,534
2,534
Over
5 years
$
-
-
26,803
26,803
Total
$
37,024
122,372
37,298
196,694
Commitments
In the normal course of business, the Company contracted letters of credit for an amount of $0.6 million as at
December 31, 2023 and $0.9 million as at December 31, 2022.
Contingencies
In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or
assets. As at the date of issue of the consolidated financial statements, the Company was not aware of any significant
events that would have a material effect on its consolidated financial statements.
Subsequent Event
In January 2024, the Company increased its minority equity stake in Microbion for an amount of $1.0 million. As at
December 31, 2023, the Company’s stake in Microbion was valued at $3.0 million.
Divestiture of 5N Plus Belgium SA
On December 19, 2022, the Company divested its 100% interest in 5N Plus Belgium SA, previously included within its
Performance Materials segment, and recognized a loss on divestiture of $7.8 million. The decision to cease the
production of lower margin products used in extractive and catalytic applications was made following a strategic review
of the Company’s operations. As part of the transaction, a provision of $2.6 million was recorded under Litigation and
Restructuring costs in Q4 2022, of which 2.0 million euros or $2.1 million is held in escrow, to support the new owners
to ensure site compliance with most recent environmental standards and other related costs. Prior to the divestiture,
the Company recorded an impairment charge of $7.1 million on PPE in Q3 2022 following the announcement of its
intention to halt production at its manufacturing facility in Tilly, Belgium.
If the Company’s exit from the manufacturing of low margin extractive and catalytic products and related divestiture of
5N Plus Belgium SA had been completed as of January 1, 2022, the yearly consolidated Adjusted EBITDA would have
been higher by approximately $2.0 million, and revenue under Performance Materials segment lower by $39.3 million.
Governance
As required by Multilateral Instrument 52-109 of the Canadian Securities Administrators (“MI 52-109”), 5N+ has filed
certificates signed by the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) that, among other things,
attest to the design of the disclosure controls and procedures and the design and effectiveness of internal controls over
financial reporting.
Disclosure Controls and Procedures
The CEO and the CFO have designed disclosure controls and procedures (“DC&P”), or have caused them to be designed
under their supervision, in order to provide reasonable assurance that:
Material information relating to the Company has been made known to them; and
Information required to be disclosed in the Company’s filings is recorded, processed, summarized and reported
within the time periods specified in securities legislation.
An evaluation of the effectiveness of the Company’s disclosure controls and procedures was carried out under the
supervision of the Chief Executive Officer and Chief Financial Officer. Based on this evaluation, the Chief Executive Officer
and the Chief Financial Officer concluded that the disclosure controls and procedures are effective.
The CEO and the CFO have also designed internal controls over financial reporting (ICFR) or have caused them to be
designed under their supervision, using the Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 COSO Framework), to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with IFRS Accounting Standards.
Due to their intrinsic limitations, DC&P and ICFR only provide reasonable assurance and may not prevent or detect all
misstatement or errors.
Changes in Internal Control over Financial Reporting
are reasonably likely to materially affect, the ICFR.
No changes were made to the ICFR during the fiscal year ended December 31, 2023, that have materially affected, or
Adoption of New Accounting Standards and Future Changes in Accounting Policies
Adoption of new accounting standards
For the year ended December 31, 2023, the Company evaluated the new accounting standards issued and effective
under IFRS Accounting Standards and determined that they have no significant impact to its financial statements.
Future Changes in accounting policies
As at December 31, 2023, the Company evaluated the new accounting standards issued but not yet effective under IFRS
Accounting Standards and determined that none are applicable to the Company based on its current operations.
Significant Management Estimation and Judgment in Applying Accounting Policies
The following are significant management judgments used in applying the accounting policies of the Company that have
the most significant effect on the consolidated financial statements.
Estimation uncertainty
When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and
assumptions about recognition and measurement of assets, liabilities, revenues and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected.
Information about the significant judgments, estimates and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, revenues and expenses are discussed below.
Impairment of non-financial assets
Non-financial assets are reviewed for an indication of impairment at each consolidated statement of financial position
date upon the occurrence of events or changes in circumstances indicating that the carrying value of the assets may not
be recoverable, which requires significant judgement.
An impairment loss is recognized for the amount by which an asset’s or cash-generating unit’s (“CGU”) carrying amount
exceeds its recoverable amount, which is the higher of fair value less cost of disposal and value in use.
To determine the recoverable amount, significant judgement is required as management must estimate expected future
cash flows from the asset or CGU and it must determine a suitable interest rate in order to calculate the present value
of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about
future operating results using the estimated forecasted prices obtained from various market sources. These key
assumptions relate to future events and circumstances. The actual results will vary and may cause adjustments to the
Company’s assets in future periods. In most cases, determining the applicable discount rate involves estimating the
appropriate adjustment to market risk and to asset-specific risk factors.
24
Management’s Discussion and Analysis ▪ 13
Management’s Discussion and Analysis ▪ 14
5N+ 2023 ANNUAL REPORT
(in thousands of U.S. dollars)
Trade and accrued liabilities
Long-term debt
Lease liabilities
Total
Commitments
Contingencies
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following table reflects the contractual cash flows of the Company’s financial liabilities as at December 31, 2023:
Carrying
amount
$
37,024
108,500
30,139
175,663
1 year
2 years
3 years
4 years
$
37,024
31,184
2,761
70,969
$
-
5,766
2,642
8,408
$
-
85,422
2,558
87,980
$
-
-
2,534
2,534
Over
5 years
$
-
-
26,803
26,803
Total
$
37,024
122,372
37,298
196,694
In the normal course of business, the Company contracted letters of credit for an amount of $0.6 million as at
December 31, 2023 and $0.9 million as at December 31, 2022.
In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or
assets. As at the date of issue of the consolidated financial statements, the Company was not aware of any significant
events that would have a material effect on its consolidated financial statements.
Subsequent Event
In January 2024, the Company increased its minority equity stake in Microbion for an amount of $1.0 million. As at
December 31, 2023, the Company’s stake in Microbion was valued at $3.0 million.
Divestiture of 5N Plus Belgium SA
On December 19, 2022, the Company divested its 100% interest in 5N Plus Belgium SA, previously included within its
Performance Materials segment, and recognized a loss on divestiture of $7.8 million. The decision to cease the
production of lower margin products used in extractive and catalytic applications was made following a strategic review
of the Company’s operations. As part of the transaction, a provision of $2.6 million was recorded under Litigation and
Restructuring costs in Q4 2022, of which 2.0 million euros or $2.1 million is held in escrow, to support the new owners
to ensure site compliance with most recent environmental standards and other related costs. Prior to the divestiture,
the Company recorded an impairment charge of $7.1 million on PPE in Q3 2022 following the announcement of its
intention to halt production at its manufacturing facility in Tilly, Belgium.
If the Company’s exit from the manufacturing of low margin extractive and catalytic products and related divestiture of
5N Plus Belgium SA had been completed as of January 1, 2022, the yearly consolidated Adjusted EBITDA would have
been higher by approximately $2.0 million, and revenue under Performance Materials segment lower by $39.3 million.
Governance
As required by Multilateral Instrument 52-109 of the Canadian Securities Administrators (“MI 52-109”), 5N+ has filed
certificates signed by the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) that, among other things,
attest to the design of the disclosure controls and procedures and the design and effectiveness of internal controls over
financial reporting.
Disclosure Controls and Procedures
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Internal Control over Financial Reporting
The CEO and the CFO have also designed internal controls over financial reporting (ICFR) or have caused them to be
designed under their supervision, using the Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 COSO Framework), to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with IFRS Accounting Standards.
Management's Discussion and Analysis
Due to their intrinsic limitations, DC&P and ICFR only provide reasonable assurance and may not prevent or detect all
misstatement or errors.
Changes in Internal Control over Financial Reporting
No changes were made to the ICFR during the fiscal year ended December 31, 2023, that have materially affected, or
are reasonably likely to materially affect, the ICFR.
Adoption of New Accounting Standards and Future Changes in Accounting Policies
Adoption of new accounting standards
For the year ended December 31, 2023, the Company evaluated the new accounting standards issued and effective
under IFRS Accounting Standards and determined that they have no significant impact to its financial statements.
Future Changes in accounting policies
As at December 31, 2023, the Company evaluated the new accounting standards issued but not yet effective under IFRS
Accounting Standards and determined that none are applicable to the Company based on its current operations.
Significant Management Estimation and Judgment in Applying Accounting Policies
The following are significant management judgments used in applying the accounting policies of the Company that have
the most significant effect on the consolidated financial statements.
Estimation uncertainty
When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and
assumptions about recognition and measurement of assets, liabilities, revenues and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected.
Information about the significant judgments, estimates and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, revenues and expenses are discussed below.
Impairment of non-financial assets
Non-financial assets are reviewed for an indication of impairment at each consolidated statement of financial position
date upon the occurrence of events or changes in circumstances indicating that the carrying value of the assets may not
be recoverable, which requires significant judgement.
The CEO and the CFO have designed disclosure controls and procedures (“DC&P”), or have caused them to be designed
under their supervision, in order to provide reasonable assurance that:
An impairment loss is recognized for the amount by which an asset’s or cash-generating unit’s (“CGU”) carrying amount
exceeds its recoverable amount, which is the higher of fair value less cost of disposal and value in use.
Material information relating to the Company has been made known to them; and
Information required to be disclosed in the Company’s filings is recorded, processed, summarized and reported
within the time periods specified in securities legislation.
An evaluation of the effectiveness of the Company’s disclosure controls and procedures was carried out under the
supervision of the Chief Executive Officer and Chief Financial Officer. Based on this evaluation, the Chief Executive Officer
and the Chief Financial Officer concluded that the disclosure controls and procedures are effective.
To determine the recoverable amount, significant judgement is required as management must estimate expected future
cash flows from the asset or CGU and it must determine a suitable interest rate in order to calculate the present value
of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about
future operating results using the estimated forecasted prices obtained from various market sources. These key
assumptions relate to future events and circumstances. The actual results will vary and may cause adjustments to the
Company’s assets in future periods. In most cases, determining the applicable discount rate involves estimating the
appropriate adjustment to market risk and to asset-specific risk factors.
Management’s Discussion and Analysis ▪ 13
Management’s Discussion and Analysis ▪ 14
25
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Inventories
Inventories are carried at the lower of cost and net realizable value, with cost determined using the average cost method.
In estimating net realizable values, management takes into account the most reliable evidence available at the time the
estimates are made. The Company’s core business is subject to changes in foreign policies and internationally accepted
metal prices which may cause future selling prices to change rapidly. The Company evaluates its inventories using a
group of similar items basis and considers expected future prices as well as events that have occurred between the
consolidated statement of financial position date and the date of the completion of the consolidated financial
statements. Net realizable value for inventory to satisfy a specific sales contract is measured at the contract price.
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the
period in which such determination is made.
The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of the
Company’s deferred income tax assets is largely dependent on its achievement of projected future taxable income and
the continued applicability of ongoing tax planning strategies. The Company’s judgments regarding future profitability
may change due to future market conditions, changes in tax legislation and other factors that could adversely affect the
ongoing value of the deferred income tax assets. These changes, if any, may require a material adjustment of these
deferred income tax asset balances through an adjustment to the carrying value thereon in the future. This adjustment
would reduce the deferred income tax asset to the amount that is considered to be more likely than not to be realized
and would be recorded in the period such a determination was to be made. Refer to note 18 of the audited consolidated
financial statements for the year ended December 31, 2023.
Related Party Transactions
The Company’s related parties are its directors and executive members. Transactions with these related parties are
described in Note 26 in the 2023 audited consolidated financial statements of the Company.
Financial Instruments and Risk Management
Fair Value of Financial Instruments
A detailed description of the methods and assumptions used to measure the fair value of the Company’s financial
instruments and their fair value is discussed in Note 19 – Fair Value of Financial Instruments of the audited consolidated
financial statements for the year ended December 31, 2023.
The fair value of the financial instruments was as follows:
(in thousands of U.S. dollars)
Total return swap
Indexed deposit agreement
Investment in equity instruments
Restricted investment
2023
$
591
-
3,000
603
2022
$
-
5,517
2,000
620
Financial Risk Management
For a detailed description of the nature and extent of risks arising from financial instruments, and their related risk
management, refer to Note 27 of the audited consolidated financial statements for the year ended December 31, 2023.
Interest Rate
Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest rates. The
Company’s policy is to limit its exposure to interest rate risk fluctuation by ensuring that a reasonable portion of its long-
term debt is made of subordinated debts at fixed rate. The Company is exposed to interest rate fluctuations on its
revolving credit facility, which bears a floating interest rate. A 1% increase/decrease in interest rates would have an
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
impact of approximately $0.8 million on the Company’s earnings before income tax on a twelve-month horizon based
on the balance outstanding on December 31, 2023.
Foreign Currency
Foreign currency risk is defined as the Company’s exposure to a gain or a loss in the value of its financial instruments as
a result of fluctuations in foreign exchange rates. The Company is exposed to foreign exchange rate variability primarily
in relation to certain sales commitments, expected purchase transactions, certain local operating expenses and debt
denominated in a foreign currency. In addition, these operations have exposure to foreign exchange rates primarily
through cash and cash equivalents and other working capital accounts denominated in currencies other than their
functional currencies.
In addition, the Company will occasionally enter into foreign exchange forward contracts to sell U.S. dollars in exchange
for Canadian dollars and Euros. These contracts would hedge a portion of ongoing foreign exchange risk on the
Company’s cash flows since much of its non-US dollar expenses are incurred in Canadian dollars and Euros. The Company
may also enter into foreign exchange contracts to sell Euros for U.S. dollars. As at December 31, 2023, the Company had
no foreign exchange contracts outstanding.
The following table summarizes in U.S. dollar equivalents the Company’s major currency exposures as at
December 31, 2023:
(in thousands of U.S. dollars)
Cash and cash equivalents
Accounts receivable
Derivative financial assets
Other current assets
Other non-current assets
Trade and accrued liabilities
Lease liabilities
Net financial assets (liabilities)
CA$
$
489
1,662
591
-
-
EUR
$
1,999
6,594
-
2,212
603
(6,360)
(16,605)
(297)
1,762
GBP
$
67
-
-
-
-
-
HKD
$
34
-
-
-
-
(116)
(69)
(151)
MYR
Other
$
36
1
-
-
-
-
$
9
-
-
-
-
-
(12,987)
(9,349)
(436)
(166)
(55)
(369)
(129)
(46)
For the Company’s subsidiaries with a functional currency other than the U.S. dollar, their exposures of financial assets
and financial liabilities denominated in U.S. dollars are $10.4 million and $0.5 million, respectively, with a net position of
$9.9 million. A strengthening or weakening in the exchange rate between the functional currencies of these subsidiaries
and the U.S. dollar of five-percentage points results in a decrease or increase of $0.5 million to earnings before income
tax.
The following table shows the impact on earnings before income tax of a five-percentage point strengthening or
weakening of foreign currencies against the U.S. dollar as at December 31, 2023 for the Company’s financial instruments
denominated in non-functional currencies:
(in thousands of U.S. dollars)
CA$
$
(830)
830
EUR
$
88
(88)
GBP
$
(18)
18
HKD
MYR
Other
$
(8)
8
$
(6)
6
$
(2)
2
Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a contract and,
as a result, create a financial loss for the Company. The Company has a credit policy that defines standard credit practice.
This policy dictates that all new customer accounts be reviewed prior to approval and establishes the maximum amount
of credit exposure per customer. The creditworthiness and financial well-being of the customer are monitored on an
5% Strengthening
5% Weakening
Credit
ongoing basis.
26
Management’s Discussion and Analysis ▪ 15
Management’s Discussion and Analysis ▪ 16
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Inventories
Inventories are carried at the lower of cost and net realizable value, with cost determined using the average cost method.
In estimating net realizable values, management takes into account the most reliable evidence available at the time the
estimates are made. The Company’s core business is subject to changes in foreign policies and internationally accepted
metal prices which may cause future selling prices to change rapidly. The Company evaluates its inventories using a
group of similar items basis and considers expected future prices as well as events that have occurred between the
consolidated statement of financial position date and the date of the completion of the consolidated financial
statements. Net realizable value for inventory to satisfy a specific sales contract is measured at the contract price.
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the
period in which such determination is made.
The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of the
Company’s deferred income tax assets is largely dependent on its achievement of projected future taxable income and
the continued applicability of ongoing tax planning strategies. The Company’s judgments regarding future profitability
may change due to future market conditions, changes in tax legislation and other factors that could adversely affect the
ongoing value of the deferred income tax assets. These changes, if any, may require a material adjustment of these
deferred income tax asset balances through an adjustment to the carrying value thereon in the future. This adjustment
would reduce the deferred income tax asset to the amount that is considered to be more likely than not to be realized
and would be recorded in the period such a determination was to be made. Refer to note 18 of the audited consolidated
financial statements for the year ended December 31, 2023.
Related Party Transactions
The Company’s related parties are its directors and executive members. Transactions with these related parties are
described in Note 26 in the 2023 audited consolidated financial statements of the Company.
Financial Instruments and Risk Management
Fair Value of Financial Instruments
A detailed description of the methods and assumptions used to measure the fair value of the Company’s financial
instruments and their fair value is discussed in Note 19 – Fair Value of Financial Instruments of the audited consolidated
financial statements for the year ended December 31, 2023.
The fair value of the financial instruments was as follows:
2023
591
$
-
3,000
603
2022
$
-
5,517
2,000
620
(in thousands of U.S. dollars)
Total return swap
Indexed deposit agreement
Investment in equity instruments
Restricted investment
Financial Risk Management
Interest Rate
For a detailed description of the nature and extent of risks arising from financial instruments, and their related risk
management, refer to Note 27 of the audited consolidated financial statements for the year ended December 31, 2023.
Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest rates. The
Company’s policy is to limit its exposure to interest rate risk fluctuation by ensuring that a reasonable portion of its long-
term debt is made of subordinated debts at fixed rate. The Company is exposed to interest rate fluctuations on its
revolving credit facility, which bears a floating interest rate. A 1% increase/decrease in interest rates would have an
Management’s Discussion and Analysis ▪ 15
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
impact of approximately $0.8 million on the Company’s earnings before income tax on a twelve-month horizon based
on the balance outstanding on December 31, 2023.
Management's Discussion and Analysis
Foreign Currency
Foreign currency risk is defined as the Company’s exposure to a gain or a loss in the value of its financial instruments as
a result of fluctuations in foreign exchange rates. The Company is exposed to foreign exchange rate variability primarily
in relation to certain sales commitments, expected purchase transactions, certain local operating expenses and debt
denominated in a foreign currency. In addition, these operations have exposure to foreign exchange rates primarily
through cash and cash equivalents and other working capital accounts denominated in currencies other than their
functional currencies.
In addition, the Company will occasionally enter into foreign exchange forward contracts to sell U.S. dollars in exchange
for Canadian dollars and Euros. These contracts would hedge a portion of ongoing foreign exchange risk on the
Company’s cash flows since much of its non-US dollar expenses are incurred in Canadian dollars and Euros. The Company
may also enter into foreign exchange contracts to sell Euros for U.S. dollars. As at December 31, 2023, the Company had
no foreign exchange contracts outstanding.
The following table summarizes in U.S. dollar equivalents the Company’s major currency exposures as at
December 31, 2023:
(in thousands of U.S. dollars)
Cash and cash equivalents
Accounts receivable
Derivative financial assets
Other current assets
Other non-current assets
Trade and accrued liabilities
Lease liabilities
Net financial assets (liabilities)
CA$
$
489
1,662
591
-
-
EUR
$
1,999
6,594
-
2,212
603
GBP
$
67
-
-
-
-
(12,987)
(9,349)
(436)
(6,360)
(16,605)
(297)
1,762
-
(369)
HKD
$
34
-
-
-
-
(116)
(69)
(151)
MYR
Other
$
36
1
-
-
-
(166)
-
(129)
$
9
-
-
-
-
(55)
-
(46)
For the Company’s subsidiaries with a functional currency other than the U.S. dollar, their exposures of financial assets
and financial liabilities denominated in U.S. dollars are $10.4 million and $0.5 million, respectively, with a net position of
$9.9 million. A strengthening or weakening in the exchange rate between the functional currencies of these subsidiaries
and the U.S. dollar of five-percentage points results in a decrease or increase of $0.5 million to earnings before income
tax.
The following table shows the impact on earnings before income tax of a five-percentage point strengthening or
weakening of foreign currencies against the U.S. dollar as at December 31, 2023 for the Company’s financial instruments
denominated in non-functional currencies:
(in thousands of U.S. dollars)
5% Strengthening
5% Weakening
CA$
$
(830)
830
EUR
$
88
(88)
GBP
$
(18)
18
HKD
MYR
Other
$
(8)
8
$
(6)
6
$
(2)
2
Credit
Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a contract and,
as a result, create a financial loss for the Company. The Company has a credit policy that defines standard credit practice.
This policy dictates that all new customer accounts be reviewed prior to approval and establishes the maximum amount
of credit exposure per customer. The creditworthiness and financial well-being of the customer are monitored on an
ongoing basis.
Management’s Discussion and Analysis ▪ 16
27
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected
credit loss allowance for trade receivables. The expected loss rates are based on the Company’s historical credit losses
experienced over the three-year period prior to the period end. The historical loss rates are then adjusted for current
and forward-looking information on macroeconomic factors affecting the Company’s customers. Historically, the
Company has not incurred any significant losses in respect of its trade receivables. Therefore, the loss allowance at
the end of each period and the change recorded for each period is insignificant.
As at December 31, 2023 and 2022, the Company had a loss allowance of $nil million and $0.1 million, respectively. The
loss allowance is included in selling, general and administrative expenses in the consolidated statement of earnings
(loss) and is net of any recoveries that were provided for in prior periods.
Liquidity
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company
manages liquidity risk through the management of its capital structure. It also manages liquidity risk by continually
monitoring actual and projected cash flows, taking into account the Company’s sales and receipts and matching the
maturity profile of financial assets and financial liabilities. The Board of Directors reviews and approves the Company’s
annual operating and capital budgets as well as any material transactions out of the ordinary course of business,
including proposals on acquisitions and other major investments. Under the terms of its credit facility, the Company is
required to satisfy certain restrictive covenants. In order to comply with these covenants, the Company will need to
execute on its EBITDA and cash flow estimates. Management believes that the assumptions used by the Company in
preparing its estimates are reasonable. However, risk remains. Successful achievement of these estimates results is
dependent on stability in the price of metals and other raw materials, the reduction of debt due to the optimization of
the Company’s working capital and the continued viability and support of the Company’s banks.
Risk and Uncertainties
In the normal course of business, the Company is subject to a number of risk factors which may limit its ability to execute
on its strategy and achieve its long-term growth objectives. Management identifies these risks and implement strategies
to minimize their impact on the Company's performance. The Audit Committee together with the Corporate Internal
Audit and site leadership teams have the mandate to review all business risks semi-annually. The risks and risk reduction
measures are presented to the Audit Committee and the Board of Directors on an ongoing basis. The realization of the
risks described in any of the following risk factors could have a material adverse effect on the Company’s business, results
of operations and financial condition.
Risks and uncertainties not presently known to the Company or that the Company currently considers as not material
could become material in the future or impair its business operations or cause a decline in the price of shares.
Global Economic Conditions
The Company operates in a volatile economic environment. Current global economic conditions, which have been
subject to increased volatility and contraction in credit markets, may impact the Company's access to public financing,
its ability to obtain equity or debt financing on favourable terms and the valuation of the Company's securities. As a
result, if unemployment, interest or inflation rates fluctuate substantially or increase to significant levels, they could
have an impact on the Company’s operating activities, financial position and profitability. In addition, the Company is
exposed to market risk related to the current global inflationary situation, as the various environmental, social, political,
economic and health factors had significant consequences on the world economy. In order to reduce inflation, several
central banks are now tightening their monetary policies, which has an impact on interest rates, foreign currency
exchange rates and economic development. The risks of recession in one or several of the countries where the Company
operates are growing and could have an adverse impact on the Company’s net earnings, financial position or cash flows.
International Operations
The Company operates in several countries, including China and Laos, and as such, faces risks associated with
international business activities. The Company could be significantly affected by such risks, which include, but are not
limited to, the integration of international operations, challenges associated with dealing with numerous legal and tax
systems, changes in policy that alter regulations impacting the Company's operations, the potential for volatile economic
and labor conditions, political instability, foreign exchange, expropriation, changes in taxes, and other regulatory costs.
Although the Company operates primarily in countries with relatively stable economic and political climates, there can
be no assurance that its business will not be adversely affected by the risks inherent in international operations.
Management’s Discussion and Analysis ▪ 17
28
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following conditions or events could disrupt its supply chain, interrupt production at its facilities or those of its
suppliers or customers, increase its cost of sales and other operating expenses, result in material asset losses, or require
additional capital expenditures to be incurred:
fires, pandemics (including regional and global infectious diseases), extraordinary weather conditions, or
natural disasters, such as hurricanes, tornadoes, floods, tsunamis, typhoons and earthquakes;
political instability, social and labor unrest, war or terrorism;
disruptions in port activities, shipping and freight forwarding services;
interruptions in the availability of basic services and infrastructure, including power and water shortages;
changes in a specific country’s or region’s economic conditions, such as a recession;
new certification requirements;
significant fluctuations in currency exchange rates;
the invasion of Ukraine by Russia;
the current conflict in Israel and Gaza Strip;
new trade barriers, including import and export imposed restrictions;
the imposition of tariffs on its products or input; and
change to legal, political, social, cultural, tax or other regulatory requirements.
The Company’s insurance programs do not cover every potential loss associated with its operations, including potential
damage to assets, lost profits and liability that could result from the aforementioned conditions or events. In addition,
its insurance may not fully cover the consequences resulting from a loss event, due to insurance limits, sub-limits, or
policy exclusions. Any occurrence not fully covered by insurance could have a negative effect on its business.
Risks Related to China
The legal system in mainland China is a civil law system based on written statutes. Unlike common law systems, it is a
system in which decided legal cases have little precedential value. The legal system in mainland China evolves rapidly,
and the interpretations of many laws, regulations and rules may contain inconsistencies and their interpretation and
enforcement involve uncertainties. These uncertainties could limit the legal protections available to the Company. In
addition, the Company cannot predict the effect of future developments in the mainland Chinese legal system, including
the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption
of local regulations by national laws. Such unpredictability towards the Company's contractual, property (including
intellectual property) and procedural rights could adversely affect the Company's business and impede its ability to
continue operations. Furthermore, any litigation in mainland China may be protracted and result in substantial costs and
diversion of resources and management attention.
The mainland Chinese government exercises significant control over mainland China's economic growth through
strategically allocating resources, imposing import and export restrictions, controlling the payment of foreign currency-
denominated obligations, setting monetary policy and providing preferential treatment to particular industries or
companies. Any growth in the Chinese economy may not continue and any slowdown may have a negative effect on the
Company’s business. Any adverse changes in economic conditions in mainland China, in the policies of the mainland
Chinese government or in the laws and regulations in mainland China, could have a material adverse effect on the overall
economic growth of mainland China. Such developments could adversely affect the Company's business, lead to
reduction in demand for its products, impact sourcing of materials and products out of China, and adversely affect the
Company's competitive position.
Environmental Regulations
The Company’s operations involve the use, handling, generation, processing, storage, transportation, recycling and
disposal of hazardous materials and are subject to extensive environmental laws and regulations at the local, provincial,
national, and international level. These environmental laws and regulations include those governing the discharge of
pollutants into the air and water, the use, management and disposal of hazardous materials and wastes, the clean-up of
contaminated sites and occupational health and safety. Failure to comply with such laws, regulations and permits can
have serious consequences, including damage to its reputation; stopping it from pursuing operations at one of its
facilities; being subject to substantial fines, penalties, criminal proceedings, third party property damage or personal
injury claims, clean-up costs, capital expenditures or other costs; increasing the costs of development or production and
litigation or regulatory action against it, and materially adversely affecting its business, results of operations or financial
condition. Environmental legislation is evolving in a manner that will require stricter standards and enforcement, and a
Management’s Discussion and Analysis ▪ 18
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected
credit loss allowance for trade receivables. The expected loss rates are based on the Company’s historical credit losses
experienced over the three-year period prior to the period end. The historical loss rates are then adjusted for current
and forward-looking information on macroeconomic factors affecting the Company’s customers. Historically, the
Company has not incurred any significant losses in respect of its trade receivables. Therefore, the loss allowance at
the end of each period and the change recorded for each period is insignificant.
As at December 31, 2023 and 2022, the Company had a loss allowance of $nil million and $0.1 million, respectively. The
loss allowance is included in selling, general and administrative expenses in the consolidated statement of earnings
(loss) and is net of any recoveries that were provided for in prior periods.
Liquidity
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company
manages liquidity risk through the management of its capital structure. It also manages liquidity risk by continually
monitoring actual and projected cash flows, taking into account the Company’s sales and receipts and matching the
maturity profile of financial assets and financial liabilities. The Board of Directors reviews and approves the Company’s
annual operating and capital budgets as well as any material transactions out of the ordinary course of business,
including proposals on acquisitions and other major investments. Under the terms of its credit facility, the Company is
required to satisfy certain restrictive covenants. In order to comply with these covenants, the Company will need to
execute on its EBITDA and cash flow estimates. Management believes that the assumptions used by the Company in
preparing its estimates are reasonable. However, risk remains. Successful achievement of these estimates results is
dependent on stability in the price of metals and other raw materials, the reduction of debt due to the optimization of
the Company’s working capital and the continued viability and support of the Company’s banks.
Risk and Uncertainties
In the normal course of business, the Company is subject to a number of risk factors which may limit its ability to execute
on its strategy and achieve its long-term growth objectives. Management identifies these risks and implement strategies
to minimize their impact on the Company's performance. The Audit Committee together with the Corporate Internal
Audit and site leadership teams have the mandate to review all business risks semi-annually. The risks and risk reduction
measures are presented to the Audit Committee and the Board of Directors on an ongoing basis. The realization of the
risks described in any of the following risk factors could have a material adverse effect on the Company’s business, results
of operations and financial condition.
Risks and uncertainties not presently known to the Company or that the Company currently considers as not material
could become material in the future or impair its business operations or cause a decline in the price of shares.
Global Economic Conditions
The Company operates in a volatile economic environment. Current global economic conditions, which have been
subject to increased volatility and contraction in credit markets, may impact the Company's access to public financing,
its ability to obtain equity or debt financing on favourable terms and the valuation of the Company's securities. As a
result, if unemployment, interest or inflation rates fluctuate substantially or increase to significant levels, they could
have an impact on the Company’s operating activities, financial position and profitability. In addition, the Company is
exposed to market risk related to the current global inflationary situation, as the various environmental, social, political,
economic and health factors had significant consequences on the world economy. In order to reduce inflation, several
central banks are now tightening their monetary policies, which has an impact on interest rates, foreign currency
exchange rates and economic development. The risks of recession in one or several of the countries where the Company
operates are growing and could have an adverse impact on the Company’s net earnings, financial position or cash flows.
International Operations
The Company operates in several countries, including China and Laos, and as such, faces risks associated with
international business activities. The Company could be significantly affected by such risks, which include, but are not
limited to, the integration of international operations, challenges associated with dealing with numerous legal and tax
systems, changes in policy that alter regulations impacting the Company's operations, the potential for volatile economic
and labor conditions, political instability, foreign exchange, expropriation, changes in taxes, and other regulatory costs.
Although the Company operates primarily in countries with relatively stable economic and political climates, there can
be no assurance that its business will not be adversely affected by the risks inherent in international operations.
Management’s Discussion and Analysis ▪ 17
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis
The following conditions or events could disrupt its supply chain, interrupt production at its facilities or those of its
suppliers or customers, increase its cost of sales and other operating expenses, result in material asset losses, or require
additional capital expenditures to be incurred:
fires, pandemics (including regional and global infectious diseases), extraordinary weather conditions, or
natural disasters, such as hurricanes, tornadoes, floods, tsunamis, typhoons and earthquakes;
political instability, social and labor unrest, war or terrorism;
disruptions in port activities, shipping and freight forwarding services;
interruptions in the availability of basic services and infrastructure, including power and water shortages;
changes in a specific country’s or region’s economic conditions, such as a recession;
new certification requirements;
significant fluctuations in currency exchange rates;
the invasion of Ukraine by Russia;
the current conflict in Israel and Gaza Strip;
new trade barriers, including import and export imposed restrictions;
the imposition of tariffs on its products or input; and
change to legal, political, social, cultural, tax or other regulatory requirements.
The Company’s insurance programs do not cover every potential loss associated with its operations, including potential
damage to assets, lost profits and liability that could result from the aforementioned conditions or events. In addition,
its insurance may not fully cover the consequences resulting from a loss event, due to insurance limits, sub-limits, or
policy exclusions. Any occurrence not fully covered by insurance could have a negative effect on its business.
Risks Related to China
The legal system in mainland China is a civil law system based on written statutes. Unlike common law systems, it is a
system in which decided legal cases have little precedential value. The legal system in mainland China evolves rapidly,
and the interpretations of many laws, regulations and rules may contain inconsistencies and their interpretation and
enforcement involve uncertainties. These uncertainties could limit the legal protections available to the Company. In
addition, the Company cannot predict the effect of future developments in the mainland Chinese legal system, including
the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption
of local regulations by national laws. Such unpredictability towards the Company's contractual, property (including
intellectual property) and procedural rights could adversely affect the Company's business and impede its ability to
continue operations. Furthermore, any litigation in mainland China may be protracted and result in substantial costs and
diversion of resources and management attention.
The mainland Chinese government exercises significant control over mainland China's economic growth through
strategically allocating resources, imposing import and export restrictions, controlling the payment of foreign currency-
denominated obligations, setting monetary policy and providing preferential treatment to particular industries or
companies. Any growth in the Chinese economy may not continue and any slowdown may have a negative effect on the
Company’s business. Any adverse changes in economic conditions in mainland China, in the policies of the mainland
Chinese government or in the laws and regulations in mainland China, could have a material adverse effect on the overall
economic growth of mainland China. Such developments could adversely affect the Company's business, lead to
reduction in demand for its products, impact sourcing of materials and products out of China, and adversely affect the
Company's competitive position.
Environmental Regulations
The Company’s operations involve the use, handling, generation, processing, storage, transportation, recycling and
disposal of hazardous materials and are subject to extensive environmental laws and regulations at the local, provincial,
national, and international level. These environmental laws and regulations include those governing the discharge of
pollutants into the air and water, the use, management and disposal of hazardous materials and wastes, the clean-up of
contaminated sites and occupational health and safety. Failure to comply with such laws, regulations and permits can
have serious consequences, including damage to its reputation; stopping it from pursuing operations at one of its
facilities; being subject to substantial fines, penalties, criminal proceedings, third party property damage or personal
injury claims, clean-up costs, capital expenditures or other costs; increasing the costs of development or production and
litigation or regulatory action against it, and materially adversely affecting its business, results of operations or financial
condition. Environmental legislation is evolving in a manner that will require stricter standards and enforcement, and a
Management’s Discussion and Analysis ▪ 18
29
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
heightened degree of responsibility for the Company and its officers, directors and employees. Future changes in
applicable environmental and health and safety laws and regulations could substantially increase costs and burdens to
achieve or maintain compliance or otherwise have an adverse impact on its business, results of operations or financial
condition.
The Company has incurred and will continue to incur capital expenditures to comply with environmental laws and
regulations. Exceedances in wastewater discharges and air emissions generated by some Company facilities over the
limits prescribed in applicable laws and permits have been registered in the past. At such facilities, the Company is
collaborating with governmental authorities and implementing various measures including upgrading equipment to
ensure compliance. Management believes that dealing with these environmental compliance issues will not have a
material effect on the Company's earnings or competitive position during fiscal 2024. Future developments, such as
more aggressive enforcement policies, the implementation of new, more stringent laws and regulations, or the discovery
of currently unknown environmental conditions, may require expenditures that could have a material adverse effect on
its business, results of operations and financial condition.
Crisis and Climate Change Management
Unexpected events including geopolitical crises, pandemic and epidemic outbreaks, catastrophes and natural disasters,
such as extreme and increasingly frequent weather-related disasters linked to climate change, could have a negative
impact on the continuation of the Company's operations as well as its suppliers.
Environmental, Social and Governance (ESG) Considerations
The Company could be subject to growing stakeholder expectations as it relates to ESG factors, including from investors,
who are increasingly placing a greater emphasis on ESG factors when assessing investment options. Future investments
made in the Company, or future partnerships or business relations made with the Company may depend on various ESG
standards and failure to meet evolving standards may impact the Company's reputation and ability to access capital.
Safety Risks and Hazards
The Company’s health, safety and wellbeing systems, processes and policies are aimed at reducing risks to employees,
subconsultants and others; however, work sites can put employees and others in proximity with large equipment,
moving vehicles, dangerous processes or highly regulated materials in challenging or remote locations which may
increase the risk to health and safety. Failure to implement or follow appropriate safety procedures by the Company or
others could result in personal injury, illness or loss of life to people, or environmental and other damage to the
Company’s property or the property of others, or in regulatory fines or civil suits.
Prolonged Armed Conflict in Ukraine
The outbreak of war in Ukraine has deeply disturbed the global economy and the outcome of the ongoing conflict
remains uncertain at this time. Although AZUR had sales in Russia in the past, the amount of such sales is not material
to the Company as a whole. A prolonged armed conflict in Ukraine or an expansion of the armed conflict to other
European countries could have a negative effect on the European and global economies. As well, Russia is a major
exporter of oil and natural gas. Any disruption of supplies of oil and natural gas from Russia could have a significant
adverse effect on the European and world economies. All the foregoing factors could potentially have a negative impact
on the Company’s sales and results of operations.
Disease Outbreaks
The local or worldwide outbreak of a disease, a virus, including, but not limited to, the COVID-19 pandemic or any other
contagious disease and government actions to address them, could have an adverse impact on the Company’s
operations, operating results and financial position. While it is sudden, its impact on economic cycles can give rise to
unfavourable temporary disruptions in the market where the Company operates as well as on its internal structure, such
as plant closures, shortages of raw materials and labour, and in supply chains and distribution channels.
Availability and Retention of Qualified Employees
The Company relies on the expertise and know-how of its personnel to conduct its operations. The loss of any member
of its team could have a material adverse effect on it. Its future success also depends on its ability to execute succession
plans, attract and retain key employees, train, retain and successfully integrate new talent into its management and
technical teams. Recruiting and retaining talented personnel, particularly those with expertise in the specialty metals
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
industry and refining technology is vital to its success and may prove difficult. The Company cannot provide assurance
that it will be able to attract and retain qualified personnel when needed, especially in light of the current labour shortage
affecting several markets in which it operates. If the Company is unable to recruit and retain additional qualified
personnel in the future, its business, financial condition and operating results could be adversely affected.
Collective Agreements
A portion of the Company’s workforce is unionized, and it is party to collective agreements that are due to expire at
various times in the future. If it is unable to renew these collective agreements on acceptable terms as they become
subject to renegotiation from time to time, this could result in work stoppages or other labour disturbances, such as
strikes, walkouts or lockouts, potentially affecting its performance.
Litigation Risks
The Company may be subject to a variety of civil or other legal proceedings, with or without merit. Although the Company
establishes provisions for such litigation, there can be no assurance that the provisions for all claims correspond to the
settlement amount. A significant judgment against the Company or the imposition of a significant fine or penalty could
have a material adverse effect on its business, financial condition and results of operations.
Risks Associated with our Growth Strategy
The Company’s strategic plan is designed to enhance profitability while reducing earnings volatility, delivering quality
growth from existing growth initiatives, new products introduction, and future M&A opportunities. There can be no
assurance that the expected benefits will materialize or occur within the time periods anticipated by management. The
realization of such benefits may be affected by a number of factors, many of which are beyond its control. The Company
will incur costs in pursuing any particular opportunity, which may be significant.
Competition
The Company is a leading producer of specialty semiconductors and performance materials with a limited number of
competitors, few of which are as fully integrated as it is or have a similar range of products. Accordingly, they have
limitations to provide the same comprehensive set of services and products as 5N+ does. However, there can be no
guarantee that this situation will continue in the future and competition could arise from new low-cost metal refiners or
from certain of its customers who could decide to backward integrate. Greater competition could have an adverse effect
on the Company’s revenues and operating margins if its competitors gain market share and it is unable to compensate
for the volume lost to competition.
Commodity Price
Commodity prices affect the costs and the price the Company pays for, and availability of, various inputs fluctuate due
to numerous factors beyond its control, including political and economic conditions, currency exchange rates, inflation
or deflation, global supply and demand for metal products, fluctuations in the value of the U.S. dollar and foreign
currencies, speculative trading, trade sanctions, tariffs, labour costs, competition, over capacity of producers and price
surcharges. Fluctuations in availability and cost of inputs may materially affect its business, financial condition, results of
operations and cash flows. These fluctuations can be unpredictable and can occur over short periods of time. To the
extent that the Company is not able to pass on any increases, its business, financial condition, results of operations and
cash flows may be materially adversely affected.
Sources of Supply
The Company may not be able to secure the critical raw material feedstock on which it depends for its operations and
there can be no assurance that the prices of such critical feedstock will not rise dramatically. It currently procures raw
materials from a number of suppliers with which it has had long-term commercial relationships. The loss of any one of
these suppliers or a reduction in the level of deliveries to it may reduce production capacity and impact deliveries to
customers. This would, in turn, negatively impact its sales, net margins and may lead to liabilities with respect to some
of its supply contracts.
In addition, supplemental supply-chain challenges created by the economic conjecture following the COVID-19 global
pandemic and most recent geo-political instability and conflicts, could negatively affect the Company’s general
procurement through longer delays of transportation or through an increase in prices to obtain supplies. This may
adversely affect the business, financial condition and operating results of the Company.
30
Management’s Discussion and Analysis ▪ 19
Management’s Discussion and Analysis ▪ 20
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
heightened degree of responsibility for the Company and its officers, directors and employees. Future changes in
applicable environmental and health and safety laws and regulations could substantially increase costs and burdens to
achieve or maintain compliance or otherwise have an adverse impact on its business, results of operations or financial
condition.
The Company has incurred and will continue to incur capital expenditures to comply with environmental laws and
regulations. Exceedances in wastewater discharges and air emissions generated by some Company facilities over the
limits prescribed in applicable laws and permits have been registered in the past. At such facilities, the Company is
collaborating with governmental authorities and implementing various measures including upgrading equipment to
ensure compliance. Management believes that dealing with these environmental compliance issues will not have a
material effect on the Company's earnings or competitive position during fiscal 2024. Future developments, such as
more aggressive enforcement policies, the implementation of new, more stringent laws and regulations, or the discovery
of currently unknown environmental conditions, may require expenditures that could have a material adverse effect on
its business, results of operations and financial condition.
Crisis and Climate Change Management
Unexpected events including geopolitical crises, pandemic and epidemic outbreaks, catastrophes and natural disasters,
such as extreme and increasingly frequent weather-related disasters linked to climate change, could have a negative
impact on the continuation of the Company's operations as well as its suppliers.
Environmental, Social and Governance (ESG) Considerations
The Company could be subject to growing stakeholder expectations as it relates to ESG factors, including from investors,
who are increasingly placing a greater emphasis on ESG factors when assessing investment options. Future investments
made in the Company, or future partnerships or business relations made with the Company may depend on various ESG
standards and failure to meet evolving standards may impact the Company's reputation and ability to access capital.
Safety Risks and Hazards
The Company’s health, safety and wellbeing systems, processes and policies are aimed at reducing risks to employees,
subconsultants and others; however, work sites can put employees and others in proximity with large equipment,
moving vehicles, dangerous processes or highly regulated materials in challenging or remote locations which may
increase the risk to health and safety. Failure to implement or follow appropriate safety procedures by the Company or
others could result in personal injury, illness or loss of life to people, or environmental and other damage to the
Company’s property or the property of others, or in regulatory fines or civil suits.
Prolonged Armed Conflict in Ukraine
The outbreak of war in Ukraine has deeply disturbed the global economy and the outcome of the ongoing conflict
remains uncertain at this time. Although AZUR had sales in Russia in the past, the amount of such sales is not material
to the Company as a whole. A prolonged armed conflict in Ukraine or an expansion of the armed conflict to other
European countries could have a negative effect on the European and global economies. As well, Russia is a major
exporter of oil and natural gas. Any disruption of supplies of oil and natural gas from Russia could have a significant
adverse effect on the European and world economies. All the foregoing factors could potentially have a negative impact
on the Company’s sales and results of operations.
Disease Outbreaks
The local or worldwide outbreak of a disease, a virus, including, but not limited to, the COVID-19 pandemic or any other
contagious disease and government actions to address them, could have an adverse impact on the Company’s
operations, operating results and financial position. While it is sudden, its impact on economic cycles can give rise to
unfavourable temporary disruptions in the market where the Company operates as well as on its internal structure, such
as plant closures, shortages of raw materials and labour, and in supply chains and distribution channels.
Availability and Retention of Qualified Employees
The Company relies on the expertise and know-how of its personnel to conduct its operations. The loss of any member
of its team could have a material adverse effect on it. Its future success also depends on its ability to execute succession
plans, attract and retain key employees, train, retain and successfully integrate new talent into its management and
technical teams. Recruiting and retaining talented personnel, particularly those with expertise in the specialty metals
Management’s Discussion and Analysis ▪ 19
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
industry and refining technology is vital to its success and may prove difficult. The Company cannot provide assurance
that it will be able to attract and retain qualified personnel when needed, especially in light of the current labour shortage
affecting several markets in which it operates. If the Company is unable to recruit and retain additional qualified
personnel in the future, its business, financial condition and operating results could be adversely affected.
Management's Discussion and Analysis
Collective Agreements
A portion of the Company’s workforce is unionized, and it is party to collective agreements that are due to expire at
various times in the future. If it is unable to renew these collective agreements on acceptable terms as they become
subject to renegotiation from time to time, this could result in work stoppages or other labour disturbances, such as
strikes, walkouts or lockouts, potentially affecting its performance.
Litigation Risks
The Company may be subject to a variety of civil or other legal proceedings, with or without merit. Although the Company
establishes provisions for such litigation, there can be no assurance that the provisions for all claims correspond to the
settlement amount. A significant judgment against the Company or the imposition of a significant fine or penalty could
have a material adverse effect on its business, financial condition and results of operations.
Risks Associated with our Growth Strategy
The Company’s strategic plan is designed to enhance profitability while reducing earnings volatility, delivering quality
growth from existing growth initiatives, new products introduction, and future M&A opportunities. There can be no
assurance that the expected benefits will materialize or occur within the time periods anticipated by management. The
realization of such benefits may be affected by a number of factors, many of which are beyond its control. The Company
will incur costs in pursuing any particular opportunity, which may be significant.
Competition
The Company is a leading producer of specialty semiconductors and performance materials with a limited number of
competitors, few of which are as fully integrated as it is or have a similar range of products. Accordingly, they have
limitations to provide the same comprehensive set of services and products as 5N+ does. However, there can be no
guarantee that this situation will continue in the future and competition could arise from new low-cost metal refiners or
from certain of its customers who could decide to backward integrate. Greater competition could have an adverse effect
on the Company’s revenues and operating margins if its competitors gain market share and it is unable to compensate
for the volume lost to competition.
Commodity Price
Commodity prices affect the costs and the price the Company pays for, and availability of, various inputs fluctuate due
to numerous factors beyond its control, including political and economic conditions, currency exchange rates, inflation
or deflation, global supply and demand for metal products, fluctuations in the value of the U.S. dollar and foreign
currencies, speculative trading, trade sanctions, tariffs, labour costs, competition, over capacity of producers and price
surcharges. Fluctuations in availability and cost of inputs may materially affect its business, financial condition, results of
operations and cash flows. These fluctuations can be unpredictable and can occur over short periods of time. To the
extent that the Company is not able to pass on any increases, its business, financial condition, results of operations and
cash flows may be materially adversely affected.
Sources of Supply
The Company may not be able to secure the critical raw material feedstock on which it depends for its operations and
there can be no assurance that the prices of such critical feedstock will not rise dramatically. It currently procures raw
materials from a number of suppliers with which it has had long-term commercial relationships. The loss of any one of
these suppliers or a reduction in the level of deliveries to it may reduce production capacity and impact deliveries to
customers. This would, in turn, negatively impact its sales, net margins and may lead to liabilities with respect to some
of its supply contracts.
In addition, supplemental supply-chain challenges created by the economic conjecture following the COVID-19 global
pandemic and most recent geo-political instability and conflicts, could negatively affect the Company’s general
procurement through longer delays of transportation or through an increase in prices to obtain supplies. This may
adversely affect the business, financial condition and operating results of the Company.
Management’s Discussion and Analysis ▪ 20
31
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Canada has enacted the Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to
amend the Customs Tariff ("Act"), which came into effect on January 1, 2024. The Act requires the Company to examine
its supply chains and produce annual reports, to be published on the Company’s website and submitted to the Minister
of Public Safety and Emergency Preparedness, disclosing measures and steps it has taken to prevent and reduce the risk
that forced labour or child labour is being used in its supply chains. Compliance with the Act may result into increased
costs and failure to comply with the Act could have a material adverse effect on the Company’s reputation, business,
results of operations and financial condition. Despite our effort to take increased actions to ensure our entire supply
chain is free of any forced labour, there is nonetheless a risk of forced labour on products we source from third parties
where we may not have complete visibility into their supply chain. As a result, the Company may face regulatory
challenges in complying with applicable sanctions and trade regulations and reputational challenges with various
stakeholders if we are unable to sufficiently verify the origins for the material sourced.
Protection of Intellectual Property
Protection of the Company’s proprietary processes, methods and other technologies is important to its business. The
Company relies on international patents as well as trade secrets and employee confidentiality agreements to safeguard
its intellectual property. The Company has deliberately chosen to limit its patent position for certain intellectual
properties to avoid disclosing valuable information. Failure to protect and monitor the use of its existing intellectual
property rights could result in the loss of valuable technologies and processes. There can be no assurance that its
confidentiality agreements will provide meaningful protection for its intellectual property rights or other proprietary
information in the event of any unauthorized use or disclosure or that it will be able to meaningfully protect our trade
secrets.
Inventory Price
The Company may be subject to risk associated with the value of our inventories in relation to the market price of such
inventories. The highly illiquid nature of many of its inventories may increase such risk. The Company relies on a
combination of standard risk measurement techniques, such as value at risk as well as a more empirical assessment of
the market conditions to manage inventory levels. Decisions on appropriate physical stock levels are taken by considering
both the value at risk calculations and the market conditions.
Business Interruptions
The Company may incur losses resulting from business interruptions due to equipment failure, power loss, fire or water
damage, and similar events beyond its control. In many instances, especially those related to its long-term contracts, it
has contractual obligations to deliver product in a timely manner. Any disruption in its activities which leads to a business
interruption could harm its customers’ confidence level and lead to the cancellation of contracts and legal recourse
against it. Although the Company believes that it has taken the necessary precautions to avoid business interruptions
and carry all-risk business interruption insurance to protect its assets and business, it could still experience interruptions
which would adversely impact production activities and financial results.
Loss of an Important Customer
The loss of any large customers, unanticipated demand fluctuations from these customers, or the inability of these
customers to perform under their contracts, could significantly reduce the Company’s revenue and negatively impact its
results of operations.
Changes to Backlog
The Company cannot guarantee that the revenues projected in its backlog at any given time will be realized or that they
will perform as expected with respect to margin. In addition, contract delays, suspensions, terminations, cancellations,
reductions in scope or other adjustments may occur from time to time due to considerations beyond the Company’s
control and may have an impact on the value of reported backlog with a corresponding adverse impact on future
revenues and profitability.
Acquisition Risk
The Company completed the acquisition of AZUR in November 2021 and may, from time to time, acquire or propose to
acquire other companies. The Company’s inability to properly integrate acquired companies, unanticipated acquisition
costs, unforeseen delays and unknown liabilities associated with acquisitions, the potential loss of key employees
following acquisitions, challenges with the integration of new operations and new personnel, the diversion of
Management’s Discussion and Analysis ▪ 21
32
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
management’s time and focus from other business concerns, opportunities and operational matters to work on
acquisitions or integrate acquisitions, the loss of momentum in ongoing operations and disruptions to operations,
possible inconsistencies in procedures and policies among the combined companies, and the need to implement new
accounting, information technology, human resources or other administrative systems, may each materially and
adversely affect the Company’s business, results of operations or financial condition.
Systems, Network Infrastructure and Data Failure, Interruption and Breach
The Company’s operations rely on information systems, communications technology, business and other technology
applications, including global and regional networks, complex server infrastructure and operating systems, to operate
properly. If it is unable to continually maintain software and hardware, effectively upgrade its systems and network
infrastructure, and take other steps to improve the efficiency and protect its systems, the Company’s operation systems
could be interrupted or delayed. The same applies if its network, communication and operations systems are damaged
or interrupted by natural disasters, telecommunications failures, acts of war or terrorism, computer viruses, sabotage,
human errors, physical or electronic security breaches, or similar events or disruptions. The Company also faces the
threat of unauthorized system access, computer hackers, malicious code and organized cyber-attacks. Following the
pandemic and the lifting of COVID-19 restrictions, there a significant number of employees who continue to work
remotely, which could contribute to an increase in cyber-attack attempts.
Executive management consultations are held regularly to monitor the progress of various cybersecurity projects, review
significant incidents and review various security-related performance indicators. Executive management reports on its
work to the members of the Board of Directors on a biannual basis. The Corporate IT function sets up and coordinates
prevention, detection, and remediation measures in the area of cybersecurity. Cybersecurity measures include, among
others, setting up strong controls with respect to systems access, implementing information security awareness
programs, and hiring specialized firms to carry out occasional intrusion tests.
Although the Company has not experienced any material losses relating to cyberattacks or other information security
breaches in the past, there can be no assurance that the Company will not experience such losses in the future due to
the evolving nature of these threats.
Privacy
Data privacy breaches could adversely affect the Company’s results of operations and profitability. Personal privacy and
data security have become significant issues in North America and Europe, and in many other jurisdictions in which it
operates. The regulatory framework for privacy and security issues worldwide is rapidly evolving and it may prove to be
difficult to comply with all applicable laws and regulations in Canada and other jurisdictions regarding privacy.
Furthermore, local or foreign government bodies or agencies have in the past adopted, and may in the future adopt,
laws and regulations affecting data privacy, all of which may be subject to invalidation by relevant foreign judicial bodies.
Industry organizations also regularly adopt and advocate for new standards in this area.
Market Price of Common Shares
The common shares of the Company are traded on the Toronto Stock Exchange under the symbol ''VNP''. The market
price of securities of many companies experiences wide fluctuations from time to time that are not necessarily related
to the operating performance, underlying asset values or future growth prospects of such companies. There can be no
assurance that fluctuations in the price of the common shares of the Company, which may result in losses for investors,
will not occur.
Grants and other incentive programs
The reduction, elimination, or expiration of government subsidies, economic incentives, tax incentives, R&D and business
development incentives, or other public policies could negatively impact the Company’s financial performance.
Non-IFRS Measures
In this Management’s Report, certain non-IFRS measures are used. The Company’s management believes that these non-
IFRS measures provide useful information to investors regarding the Company’s financial condition and results of
operations as they provide additional key metrics of its performance. These non-IFRS measures are not recognized under
IFRS Accounting Standards, do not have any standardized meaning prescribed under IFRS Accounting Standards and may
differ from similarly named measures as reported by other issuers, and accordingly may not be comparable. These
Management’s Discussion and Analysis ▪ 22
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Canada has enacted the Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to
amend the Customs Tariff ("Act"), which came into effect on January 1, 2024. The Act requires the Company to examine
its supply chains and produce annual reports, to be published on the Company’s website and submitted to the Minister
of Public Safety and Emergency Preparedness, disclosing measures and steps it has taken to prevent and reduce the risk
that forced labour or child labour is being used in its supply chains. Compliance with the Act may result into increased
costs and failure to comply with the Act could have a material adverse effect on the Company’s reputation, business,
results of operations and financial condition. Despite our effort to take increased actions to ensure our entire supply
chain is free of any forced labour, there is nonetheless a risk of forced labour on products we source from third parties
where we may not have complete visibility into their supply chain. As a result, the Company may face regulatory
challenges in complying with applicable sanctions and trade regulations and reputational challenges with various
stakeholders if we are unable to sufficiently verify the origins for the material sourced.
Protection of Intellectual Property
Protection of the Company’s proprietary processes, methods and other technologies is important to its business. The
Company relies on international patents as well as trade secrets and employee confidentiality agreements to safeguard
its intellectual property. The Company has deliberately chosen to limit its patent position for certain intellectual
properties to avoid disclosing valuable information. Failure to protect and monitor the use of its existing intellectual
property rights could result in the loss of valuable technologies and processes. There can be no assurance that its
confidentiality agreements will provide meaningful protection for its intellectual property rights or other proprietary
information in the event of any unauthorized use or disclosure or that it will be able to meaningfully protect our trade
secrets.
Inventory Price
The Company may be subject to risk associated with the value of our inventories in relation to the market price of such
inventories. The highly illiquid nature of many of its inventories may increase such risk. The Company relies on a
combination of standard risk measurement techniques, such as value at risk as well as a more empirical assessment of
the market conditions to manage inventory levels. Decisions on appropriate physical stock levels are taken by considering
both the value at risk calculations and the market conditions.
Business Interruptions
The Company may incur losses resulting from business interruptions due to equipment failure, power loss, fire or water
damage, and similar events beyond its control. In many instances, especially those related to its long-term contracts, it
has contractual obligations to deliver product in a timely manner. Any disruption in its activities which leads to a business
interruption could harm its customers’ confidence level and lead to the cancellation of contracts and legal recourse
against it. Although the Company believes that it has taken the necessary precautions to avoid business interruptions
and carry all-risk business interruption insurance to protect its assets and business, it could still experience interruptions
which would adversely impact production activities and financial results.
Loss of an Important Customer
The loss of any large customers, unanticipated demand fluctuations from these customers, or the inability of these
customers to perform under their contracts, could significantly reduce the Company’s revenue and negatively impact its
results of operations.
Changes to Backlog
revenues and profitability.
Acquisition Risk
The Company cannot guarantee that the revenues projected in its backlog at any given time will be realized or that they
will perform as expected with respect to margin. In addition, contract delays, suspensions, terminations, cancellations,
reductions in scope or other adjustments may occur from time to time due to considerations beyond the Company’s
control and may have an impact on the value of reported backlog with a corresponding adverse impact on future
The Company completed the acquisition of AZUR in November 2021 and may, from time to time, acquire or propose to
acquire other companies. The Company’s inability to properly integrate acquired companies, unanticipated acquisition
costs, unforeseen delays and unknown liabilities associated with acquisitions, the potential loss of key employees
following acquisitions, challenges with the integration of new operations and new personnel, the diversion of
Management’s Discussion and Analysis ▪ 21
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
management’s time and focus from other business concerns, opportunities and operational matters to work on
acquisitions or integrate acquisitions, the loss of momentum in ongoing operations and disruptions to operations,
possible inconsistencies in procedures and policies among the combined companies, and the need to implement new
accounting, information technology, human resources or other administrative systems, may each materially and
adversely affect the Company’s business, results of operations or financial condition.
Management's Discussion and Analysis
Systems, Network Infrastructure and Data Failure, Interruption and Breach
The Company’s operations rely on information systems, communications technology, business and other technology
applications, including global and regional networks, complex server infrastructure and operating systems, to operate
properly. If it is unable to continually maintain software and hardware, effectively upgrade its systems and network
infrastructure, and take other steps to improve the efficiency and protect its systems, the Company’s operation systems
could be interrupted or delayed. The same applies if its network, communication and operations systems are damaged
or interrupted by natural disasters, telecommunications failures, acts of war or terrorism, computer viruses, sabotage,
human errors, physical or electronic security breaches, or similar events or disruptions. The Company also faces the
threat of unauthorized system access, computer hackers, malicious code and organized cyber-attacks. Following the
pandemic and the lifting of COVID-19 restrictions, there a significant number of employees who continue to work
remotely, which could contribute to an increase in cyber-attack attempts.
Executive management consultations are held regularly to monitor the progress of various cybersecurity projects, review
significant incidents and review various security-related performance indicators. Executive management reports on its
work to the members of the Board of Directors on a biannual basis. The Corporate IT function sets up and coordinates
prevention, detection, and remediation measures in the area of cybersecurity. Cybersecurity measures include, among
others, setting up strong controls with respect to systems access, implementing information security awareness
programs, and hiring specialized firms to carry out occasional intrusion tests.
Although the Company has not experienced any material losses relating to cyberattacks or other information security
breaches in the past, there can be no assurance that the Company will not experience such losses in the future due to
the evolving nature of these threats.
Privacy
Data privacy breaches could adversely affect the Company’s results of operations and profitability. Personal privacy and
data security have become significant issues in North America and Europe, and in many other jurisdictions in which it
operates. The regulatory framework for privacy and security issues worldwide is rapidly evolving and it may prove to be
difficult to comply with all applicable laws and regulations in Canada and other jurisdictions regarding privacy.
Furthermore, local or foreign government bodies or agencies have in the past adopted, and may in the future adopt,
laws and regulations affecting data privacy, all of which may be subject to invalidation by relevant foreign judicial bodies.
Industry organizations also regularly adopt and advocate for new standards in this area.
Market Price of Common Shares
The common shares of the Company are traded on the Toronto Stock Exchange under the symbol ''VNP''. The market
price of securities of many companies experiences wide fluctuations from time to time that are not necessarily related
to the operating performance, underlying asset values or future growth prospects of such companies. There can be no
assurance that fluctuations in the price of the common shares of the Company, which may result in losses for investors,
will not occur.
Grants and other incentive programs
The reduction, elimination, or expiration of government subsidies, economic incentives, tax incentives, R&D and business
development incentives, or other public policies could negatively impact the Company’s financial performance.
Non-IFRS Measures
In this Management’s Report, certain non-IFRS measures are used. The Company’s management believes that these non-
IFRS measures provide useful information to investors regarding the Company’s financial condition and results of
operations as they provide additional key metrics of its performance. These non-IFRS measures are not recognized under
IFRS Accounting Standards, do not have any standardized meaning prescribed under IFRS Accounting Standards and may
differ from similarly named measures as reported by other issuers, and accordingly may not be comparable. These
Management’s Discussion and Analysis ▪ 22
33
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
measures should not be viewed as a substitute for the related financial information prepared in accordance with IFRS
Accounting Standards.
Backlog represents the expected orders the Company has received, but has not yet executed, and that are expected to
translate into sales within the next twelve months, expressed in dollars and estimated in number of days not to exceed
365 days. Bookings represent orders received during the period considered, expressed in number of days, and calculated
by adding revenues to the increase or decrease in backlog for the period considered, divided by annualized year
revenues. 5N+ uses backlog to provide an indication of expected future revenues in days, and bookings to determine its
ability to sustain and increase its revenues.
EBITDA means net earnings (loss) before interest expenses, income tax expense (recovery), depreciation and
amortization. 5N+ uses EBITDA because it believes it is a meaningful measure of the operating performance of its ongoing
business, without the effects of certain expenses. The definition of this non-IFRS measure used by the Company may
differ from that used by other companies.
EBITDA is reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Net earnings (loss)
Interest on long-term debt, imputed interest and other interest expense
Income tax (recovery) expense
Depreciation and amortization
EBITDA
EBITDA margin is defined as EBITDA divided by revenues.
Q4 2023
$
2,284
2,129
(734)
4,057
7,736
Q4 2022
$
(8,146)
716
(292)
4,051
(3,671)
FY 2023
$
15,399
8,834
3,275
16,110
43,618
FY 2022
$
(22,999)
5,192
4,711
17,732
4,636
Adjusted EBITDA means operating earnings (loss) as defined before the effect of impairment of inventories, share-based
compensation expense (recovery), litigation and restructuring costs (income), impairment of non-current assets, loss on
disposal of property, plant and equipment, loss on divestiture of subsidiary, loss on disposal of assets held for sale, and
depreciation and amortization. 5N+ uses Adjusted EBITDA because it believes it is a meaningful measure of the operating
performance of its ongoing business without the effects of certain expenses. The definition of this non-IFRS measure
used by the Company may differ from that used by other companies.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
Adjusted EBITDA and Adjusted EBITDA margin are reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Revenues
Operating expenses
Operating earnings (loss)
Share-based compensation expense (recovery)
Litigation and restructuring costs (income)
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Depreciation and amortization
Adjusted EBITDA
Adjusted EBITDA margin percentage
Q4 2023
$
65,063
(61,023)
4,040
414
458
64
-
-
-
4,057
9,033
13.9%
Q4 2022
$
61,042
(69,261)
(8,219)
(171)
3,210
-
-
7,834
-
4,051
6,705
11.0%
FY 2023
$
242,371
(214,999)
27,372
1,432
(8,314)
672
1,051
-
-
16,110
38,323
15.8%
FY 2022
$
264,223
(277,277)
(13,054)
999
3,823
12,478
-
7,834
216
17,732
30,028
11.4%
Adjusted operating expenses means operating expenses before impairment of inventories, share-based compensation
expense (recovery), litigation and restructuring costs (income), impairment of non-current assets, loss on disposal of
property, plant and equipment, loss on divestiture of subsidiary, loss on disposal of assets held for sale, and depreciation
and amortization. 5N+ uses Adjusted operating expenses to calculate Adjusted EBITDA. 5N+ believes it is a meaningful
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
measure of the operating performance of its ongoing business. The definition of this non-IFRS measure used by the
Company may differ from that used by other companies.
Adjusted operating expenses are reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Q4 2022
FY 2023
FY 2022
Operating expenses
Share-based compensation (expense) recovery
Litigation and restructuring (costs) income
Impairment of non-current assets
Loss of disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Depreciation and amortization
Adjusted operating expenses
Q4 2023
$
61,023
(414)
(458)
(64)
-
-
-
(4,057)
56,030
$
69,261
171
(3,210)
-
-
-
(7,834)
(4,051)
54,337
$
214,999
(1,432)
8,314
(672)
(1,051)
-
-
(16,110)
204,048
$
277,277
(999)
(3,823)
(12,478)
-
(7,834)
(216)
(17,732)
234,195
Adjusted net earnings (loss) means the net earnings (loss) before the effect of impairment of inventory, share-based
compensation expense (recovery), litigation and restructuring costs (income), impairment of non-current assets and loss
on disposal of property, plant and equipment, loss on divestiture of subsidiary, loss on disposal of assets held for sale,
net of the related income tax expense (recovery). 5N+ uses adjusted net earnings (loss) because it believes it is a
meaningful measure of the operating performance of its ongoing business without the effects of unusual expenses or
income. The definition of this non-IFRS measure used by the Company may differ from that used by other companies.
Basic adjusted earnings (loss) per share means adjusted net earnings (loss) divided by the weighted average number of
outstanding shares. 5N+ uses basic adjusted earnings (loss) per share because it believes it is a meaningful measure of
the operating performance of its ongoing business without the effects of unusual expenses or income. The definition of
this non-IFRS measure used by the Company may differ from that used by other companies.
Adjusted net earnings (loss) and Basic adjusted earnings (loss) per share are reconciled to the most comparable IFRS
(in thousands of U.S. dollars, except per share amounts and number of
Q4 2023
Q4 2022
FY 2023
FY 2022
measures:
shares)
Net earnings (loss)
Basic earnings (loss) per share
Reconciling items:
Share-based compensation expense (recovery)
Litigation and restructuring costs (income)
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Income tax recovery on taxable items above
Adjusted net earnings (loss)
Basic weighted average number of shares
Basic adjusted earnings (loss) per share
$
2,284
$0.03
414
458
64
-
-
-
(226)
2,994
$
(8,146)
($0.09)
(171)
3,210
-
-
-
7,834
(595)
2,132
$
15,399
$0.17
1,432
(8,314)
672
1,051
-
-
(854)
9,386
$
(22,999)
($0.26)
999
3,823
12,478
-
7,834
216
(2,618)
(267)
88,704,724
88,330,236
88,533,263
88,330,236
$0.03
$0.02
$0.10
$-
Adjusted gross margin is a measure used to monitor the sales contribution after paying cost of sales, excluding
depreciation and inventory impairment charges. 5N+ also expressed this measure in percentage of revenues by dividing
the adjusted gross margin value by the total revenue.
34
Management’s Discussion and Analysis ▪ 23
Management’s Discussion and Analysis ▪ 24
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Accounting Standards.
measures should not be viewed as a substitute for the related financial information prepared in accordance with IFRS
Backlog represents the expected orders the Company has received, but has not yet executed, and that are expected to
translate into sales within the next twelve months, expressed in dollars and estimated in number of days not to exceed
365 days. Bookings represent orders received during the period considered, expressed in number of days, and calculated
by adding revenues to the increase or decrease in backlog for the period considered, divided by annualized year
revenues. 5N+ uses backlog to provide an indication of expected future revenues in days, and bookings to determine its
ability to sustain and increase its revenues.
EBITDA means net earnings (loss) before interest expenses, income tax expense (recovery), depreciation and
amortization. 5N+ uses EBITDA because it believes it is a meaningful measure of the operating performance of its ongoing
business, without the effects of certain expenses. The definition of this non-IFRS measure used by the Company may
differ from that used by other companies.
EBITDA is reconciled to the most comparable IFRS measure:
Interest on long-term debt, imputed interest and other interest expense
(in thousands of U.S. dollars)
Net earnings (loss)
Income tax (recovery) expense
Depreciation and amortization
EBITDA
Q4 2023
Q4 2022
FY 2023
FY 2022
$
2,284
2,129
(734)
4,057
7,736
$
(8,146)
716
(292)
4,051
(3,671)
$
15,399
8,834
3,275
16,110
43,618
$
(22,999)
5,192
4,711
17,732
4,636
EBITDA margin is defined as EBITDA divided by revenues.
Adjusted EBITDA means operating earnings (loss) as defined before the effect of impairment of inventories, share-based
compensation expense (recovery), litigation and restructuring costs (income), impairment of non-current assets, loss on
disposal of property, plant and equipment, loss on divestiture of subsidiary, loss on disposal of assets held for sale, and
depreciation and amortization. 5N+ uses Adjusted EBITDA because it believes it is a meaningful measure of the operating
performance of its ongoing business without the effects of certain expenses. The definition of this non-IFRS measure
used by the Company may differ from that used by other companies.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenues.
Adjusted EBITDA and Adjusted EBITDA margin are reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Q4 2023
Q4 2022
FY 2023
FY 2022
Revenues
Operating expenses
Operating earnings (loss)
Share-based compensation expense (recovery)
Litigation and restructuring costs (income)
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Depreciation and amortization
Adjusted EBITDA
Adjusted EBITDA margin percentage
$
65,063
(61,023)
4,040
414
458
64
-
-
-
4,057
9,033
13.9%
$
61,042
(69,261)
(8,219)
(171)
3,210
-
-
-
7,834
4,051
6,705
11.0%
$
242,371
(214,999)
27,372
1,432
(8,314)
672
1,051
-
-
16,110
38,323
15.8%
$
264,223
(277,277)
(13,054)
999
3,823
12,478
-
7,834
216
17,732
30,028
11.4%
Adjusted operating expenses means operating expenses before impairment of inventories, share-based compensation
expense (recovery), litigation and restructuring costs (income), impairment of non-current assets, loss on disposal of
property, plant and equipment, loss on divestiture of subsidiary, loss on disposal of assets held for sale, and depreciation
and amortization. 5N+ uses Adjusted operating expenses to calculate Adjusted EBITDA. 5N+ believes it is a meaningful
Management’s Discussion and Analysis ▪ 23
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
measure of the operating performance of its ongoing business. The definition of this non-IFRS measure used by the
Company may differ from that used by other companies.
Management's Discussion and Analysis
Adjusted operating expenses are reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Operating expenses
Share-based compensation (expense) recovery
Litigation and restructuring (costs) income
Impairment of non-current assets
Loss of disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Depreciation and amortization
Adjusted operating expenses
Q4 2023
$
61,023
(414)
(458)
(64)
-
-
-
(4,057)
56,030
Q4 2022
$
69,261
171
(3,210)
-
-
(7,834)
-
(4,051)
54,337
FY 2023
$
214,999
(1,432)
8,314
(672)
(1,051)
-
-
(16,110)
204,048
FY 2022
$
277,277
(999)
(3,823)
(12,478)
-
(7,834)
(216)
(17,732)
234,195
Adjusted net earnings (loss) means the net earnings (loss) before the effect of impairment of inventory, share-based
compensation expense (recovery), litigation and restructuring costs (income), impairment of non-current assets and loss
on disposal of property, plant and equipment, loss on divestiture of subsidiary, loss on disposal of assets held for sale,
net of the related income tax expense (recovery). 5N+ uses adjusted net earnings (loss) because it believes it is a
meaningful measure of the operating performance of its ongoing business without the effects of unusual expenses or
income. The definition of this non-IFRS measure used by the Company may differ from that used by other companies.
Basic adjusted earnings (loss) per share means adjusted net earnings (loss) divided by the weighted average number of
outstanding shares. 5N+ uses basic adjusted earnings (loss) per share because it believes it is a meaningful measure of
the operating performance of its ongoing business without the effects of unusual expenses or income. The definition of
this non-IFRS measure used by the Company may differ from that used by other companies.
Adjusted net earnings (loss) and Basic adjusted earnings (loss) per share are reconciled to the most comparable IFRS
measures:
(in thousands of U.S. dollars, except per share amounts and number of
shares)
Net earnings (loss)
Basic earnings (loss) per share
Reconciling items:
Share-based compensation expense (recovery)
Litigation and restructuring costs (income)
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Loss on divestiture of subsidiary
Loss on disposal of assets held for sale
Income tax recovery on taxable items above
Adjusted net earnings (loss)
Basic weighted average number of shares
Basic adjusted earnings (loss) per share
Q4 2023
Q4 2022
FY 2023
FY 2022
$
2,284
$0.03
$
(8,146)
($0.09)
$
15,399
$0.17
$
(22,999)
($0.26)
414
458
64
-
-
-
(226)
2,994
88,704,724
$0.03
(171)
3,210
-
-
7,834
-
(595)
2,132
88,330,236
$0.02
1,432
(8,314)
672
1,051
-
-
(854)
9,386
88,533,263
$0.10
999
3,823
12,478
-
7,834
216
(2,618)
(267)
88,330,236
$-
Adjusted gross margin is a measure used to monitor the sales contribution after paying cost of sales, excluding
depreciation and inventory impairment charges. 5N+ also expressed this measure in percentage of revenues by dividing
the adjusted gross margin value by the total revenue.
Management’s Discussion and Analysis ▪ 24
35
2023 ANNUAL REPORT 5N+
Management’s Discussion and Analysis
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Adjusted gross margin is reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Total revenue
Cost of sales
Gross margin
Depreciation included in cost of sales
Adjusted gross margin
Adjusted gross margin percentage
Q4 2023
$
65,063
(49,677)
15,386
3,189
18,575
28.5%
Q4 2022
$
61,042
(47,909)
13,133
3,155
16,288
26.7%
FY 2023
$
242,371
(184,833)
57,538
12,656
70,194
29.0%
FY 2022
$
264,223
(215,715)
48,508
14,208
62,716
23.7%
Net debt is calculated as total debt less cash and cash equivalents. Any introduced IFRS 16 reporting measures in
reference to lease liabilities are excluded from the calculation. 5N+ uses this measure as an indicator of its overall
financial position.
The net debt to EBITDA ratio is defined as net debt divided by EBITDA.
Total debt and Net debt are reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Bank indebtedness
Long-term debt including current portion
Lease liabilities including current portion
Subtotal Debt
Lease liabilities including current portion
Total Debt
Cash and cash equivalents
Net Debt
As at December 31, 2023
$
-
108,500
30,139
As at December 31, 2022
$
-
121,000
30,402
138,639
(30,139)
108,500
(34,706)
73,794
151,402
(30,402)
121,000
(42,691)
78,309
Working capital is a measure of liquid assets that is calculated by taking current assets and subtracting current liabilities.
Given that the Company is currently indebted, it uses it as an indicator of its financial efficiency and aims to maintain it
at the lowest possible level.
Working capital ratio is calculated by dividing current assets by current liabilities.
Working capital is reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Inventories
Other current assets excluding inventories
Current assets
Current liabilities
Working capital
Working capital current ratio
As at December 31, 2023
$
105,850
76,113
181,963
(81,807)
100,156
2.22
As at December 31, 2022
$
86,254
100,908
187,162
(62,846)
124,316
2.98
5N+’s common shares trade on the Toronto Stock Exchange (TSX) under the ticker symbol VNP. Additional information
relating to the Company, including the Company’s annual information form, is available under the Company’s profile on
(in thousands of U.S. dollars, except per
Sept 30,
June 30,
March 31,
Dec 31,
Sept 30,
June 30,
March 31,
2023
$
62,946
9,582
9,649
1,518
$0.02
$0.02
1,742
$0.02
2023
$
59,075
17,530
10,844
10,143
$0.11
$0.11
3,187
$0.04
2023
$
55,287
8,770
8,797
1,454
$0.02
$0.02
1,463
$0.02
2022
$
61,042
(3,671)
6,705
(8,146)
($0.09)
($0.09)
2,132
$0.02
2022
$
66,372
1,751
9,114
(6,968)
($0.08)
($0.08)
520
$-
2022
$
72,388
6,739
8,583
(2,130)
($0.02)
($0.02)
(997)
($0.01)
2022
$
64,421
(183)
5,626
(5,755)
($0.07)
($0.07)
(1,922)
($0.02)
5,883
292 days
5,064
15,227
5,877
4,447
2,473
3,778
2,800
284 days
289 days
306 days
253 days
192 days
140 days
196 days
Net earnings (loss) are completely attributable to equity holders of 5N+.
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Additional Information
SEDAR+ at www.sedarplus.com.
Selected Quarterly Financial Information
share amounts)
Revenue
EBITDA
Adjusted EBITDA
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Adjusted net earnings (loss)
Basic adjusted earnings (loss) per share
Cash from operations before net change
in non-cash working capital items
Backlog
Dec 31,
2023
$
65,063
7,736
9,033
2,284
$0.03
$0.03
2,994
$0.03
Selected Yearly Financial Information
As at and for the years ended December 31
(in thousands of U.S. dollars except per share amounts)
Revenue
EBITDA
Adjusted EBITDA
Net (loss) earnings
Basic (loss) earnings per share
Diluted (loss) earnings per share
Adjusted net (loss) earnings
Basic adjusted net earnings per share
Backlog
Balance Sheet
Total assets
Total non-current liabilities
Net debt
Shareholders’ equity
2023
$
242,371
43,618
38,323
15,399
$0.17
$0.17
9,386
$0.11
32,051
292 days
350,202
139,803
73,794
128,592
2022
$
264,223
4,636
30,028
(22,999)
($0.26)
($0.26)
(267)
$-
13,498
253 days
347,985
172,363
78,309
112,776
2021
$
209,990
24,988
28,239
3,110
$0.04
$0.04
5,354
$0.06
16,553
221 days
373,590
172,284
80,060
136,247
Cash from operations before net change in non-cash working capital items
Net earnings (loss) are completely attributable to equity holders of 5N+.
36
Management’s Discussion and Analysis ▪ 25
Management’s Discussion and Analysis ▪ 26
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Adjusted gross margin is reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
Q4 2023
Q4 2022
FY 2023
FY 2022
Total revenue
Cost of sales
Gross margin
Depreciation included in cost of sales
Adjusted gross margin
Adjusted gross margin percentage
$
65,063
(49,677)
15,386
3,189
18,575
28.5%
$
61,042
(47,909)
13,133
3,155
16,288
26.7%
$
242,371
(184,833)
57,538
12,656
70,194
29.0%
$
264,223
(215,715)
48,508
14,208
62,716
23.7%
Net debt is calculated as total debt less cash and cash equivalents. Any introduced IFRS 16 reporting measures in
reference to lease liabilities are excluded from the calculation. 5N+ uses this measure as an indicator of its overall
financial position.
The net debt to EBITDA ratio is defined as net debt divided by EBITDA.
Total debt and Net debt are reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
As at December 31, 2023
As at December 31, 2022
Bank indebtedness
Long-term debt including current portion
Lease liabilities including current portion
Subtotal Debt
Lease liabilities including current portion
Cash and cash equivalents
Total Debt
Net Debt
Other current assets excluding inventories
Inventories
Current assets
Current liabilities
Working capital
Working capital current ratio
Working capital is a measure of liquid assets that is calculated by taking current assets and subtracting current liabilities.
Given that the Company is currently indebted, it uses it as an indicator of its financial efficiency and aims to maintain it
at the lowest possible level.
Working capital ratio is calculated by dividing current assets by current liabilities.
Working capital is reconciled to the most comparable IFRS measure:
(in thousands of U.S. dollars)
As at December 31, 2023
As at December 31, 2022
$
-
108,500
30,139
138,639
(30,139)
108,500
(34,706)
73,794
$
105,850
76,113
181,963
(81,807)
100,156
2.22
$
-
121,000
30,402
151,402
(30,402)
121,000
(42,691)
78,309
$
86,254
100,908
187,162
(62,846)
124,316
2.98
5N PLUS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Additional Information
5N+’s common shares trade on the Toronto Stock Exchange (TSX) under the ticker symbol VNP. Additional information
relating to the Company, including the Company’s annual information form, is available under the Company’s profile on
SEDAR+ at www.sedarplus.com.
Management's Discussion and Analysis
Selected Quarterly Financial Information
(in thousands of U.S. dollars, except per
share amounts)
Revenue
EBITDA
Adjusted EBITDA
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Adjusted net earnings (loss)
Basic adjusted earnings (loss) per share
Cash from operations before net change
in non-cash working capital items
Backlog
Dec 31,
2023
$
65,063
7,736
9,033
2,284
$0.03
$0.03
2,994
$0.03
Sept 30,
2023
$
62,946
9,582
9,649
1,518
$0.02
$0.02
1,742
$0.02
June 30,
2023
$
59,075
17,530
10,844
10,143
$0.11
$0.11
3,187
$0.04
March 31,
2023
$
55,287
8,770
8,797
1,454
$0.02
$0.02
1,463
$0.02
Dec 31,
2022
$
61,042
(3,671)
6,705
(8,146)
($0.09)
($0.09)
2,132
$0.02
Sept 30,
2022
$
66,372
1,751
9,114
(6,968)
($0.08)
($0.08)
520
$-
June 30,
2022
$
72,388
6,739
8,583
(2,130)
($0.02)
($0.02)
(997)
($0.01)
March 31,
2022
$
64,421
(183)
5,626
(5,755)
($0.07)
($0.07)
(1,922)
($0.02)
5,883
292 days
5,064
284 days
15,227
289 days
5,877
306 days
4,447
253 days
2,473
192 days
3,778
140 days
2,800
196 days
Net earnings (loss) are completely attributable to equity holders of 5N+.
Selected Yearly Financial Information
As at and for the years ended December 31
(in thousands of U.S. dollars except per share amounts)
Revenue
EBITDA
Adjusted EBITDA
Net (loss) earnings
Basic (loss) earnings per share
Diluted (loss) earnings per share
Adjusted net (loss) earnings
Basic adjusted net earnings per share
Cash from operations before net change in non-cash working capital items
Backlog
Balance Sheet
Total assets
Total non-current liabilities
Net debt
Shareholders’ equity
Net earnings (loss) are completely attributable to equity holders of 5N+.
2023
$
242,371
43,618
38,323
15,399
$0.17
$0.17
9,386
$0.11
32,051
292 days
350,202
139,803
73,794
128,592
2022
$
264,223
4,636
30,028
(22,999)
($0.26)
($0.26)
(267)
$-
13,498
253 days
347,985
172,363
78,309
112,776
2021
$
209,990
24,988
28,239
3,110
$0.04
$0.04
5,354
$0.06
16,553
221 days
373,590
172,284
80,060
136,247
Management’s Discussion and Analysis ▪ 25
Management’s Discussion and Analysis ▪ 26
37
2023 ANNUAL REPORT 5N+
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements and related notes have been prepared by management in conformity with
generally accepted accounting principles in Canada which incorporate International Financial Reporting Standards as
issued by the International Accounting Standards Board (IFRS Accounting Standards). Management is responsible for
the selection of accounting policies and making significant accounting judgements and estimates.
Management is also responsible for all other information included in the management’s discussion and analysis and
for ensuring that this information is consistent with the information contained in the consolidated financial
statements.
Management is responsible for establishing and maintaining adequate internal control over financial reporting which
includes those policies and procedures that provide reasonable assurance over the safeguarding of assets and over
the completeness, fairness and accuracy of the consolidated financial statements.
The Audit and Risk Management Committee, which is comprised entirely of independent directors, reviews the quality
and integrity of the Company’s financial reporting and provides its recommendations, in respect of the approval of
the financial statements, to the Board of Directors; oversees management’s responsibilities as to the adequacy of the
supporting systems of internal controls; provides oversight of the independence, qualifications, and appointment of
the external auditor; and reviews audit, audit-related, and non-audit fees and expenses. The Board of Directors
approves the Company’s consolidated financial statements and management’s discussion and analysis disclosures
prior to their release. The Audit and Risk Management Committee meets with management, the internal auditor and
external auditors at least four times each year to review and discuss financial reporting, disclosures, auditing and
other matters.
The external auditors, PricewaterhouseCoopers LLP, conduct an independent audit of the consolidated financial
statements in accordance with Canadian generally accepted auditing standards and express their opinion thereon.
Those standards require that the audit is planned and performed to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The external auditors have unlimited access to
the Audit and Risk Management Committee and meet with the Committee on a regular basis.
(signed) Gervais Jacques__________________
Gervais Jacques
President and Chief Executive Officer
(signed) Richard Perron____________________
Richard Perron
Chief Financial Officer
Montreal, Canada
February 27, 2024
38
Consolidated Financial Statements
5N+ 2023 ANNUAL REPORT
Independent auditor’s report
Independent auditor’s report
To the Shareholders of 5N Plus Inc.
To the Shareholders of 5N Plus Inc.
Our opinion
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the financial position of 5N Plus Inc. and its subsidiaries (together, the Company) as at
respects, the financial position of 5N Plus Inc. and its subsidiaries (together, the Company) as at
December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended
December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended
in accordance with International Financial Reporting Standards as issued by the International Accounting
in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS Accounting Standards).
Standards Board (IFRS Accounting Standards).
What we have audited
What we have audited
The Company’s consolidated financial statements comprise:
The Company’s consolidated financial statements comprise:
the consolidated statements of financial position as at December 31, 2023 and 2022;
the consolidated statements of financial position as at December 31, 2023 and 2022;
the consolidated statements of earnings (loss) for the years then ended;
the consolidated statements of earnings (loss) for the years then ended;
the consolidated statements of comprehensive income (loss) for the years then ended;
the consolidated statements of comprehensive income (loss) for the years then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, comprising material accounting policy
the notes to the consolidated financial statements, comprising material accounting policy
information and other explanatory information.
information and other explanatory information.
Basis for opinion
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the consolidated financial statements section of our report.
of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
our opinion.
Independence
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
in accordance with these requirements.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502, ca_montreal_main_fax@pwc.com
T: +1 514 205 5000, F: +1 514 876 1502, ca_montreal_main_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
39
2023 ANNUAL REPORT 5N+
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2023. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of inventories
Refer to note 2 – Summary of material accounting
policies and note 6 – Inventories to the
consolidated financial statements.
The carrying value of inventories on the Company’s
consolidated financial statements was $105.9
million as at December 31, 2023. Inventories are
carried at the lower of cost and net realizable value.
In estimating net realizable value, management
takes into account the most reliable evidence
available at the time the estimates are made. The
Company’s core business is subject to changes in
foreign policies and internationally accepted metal
prices, which may cause future selling prices to
change rapidly. Management applied judgment in
estimating the net realizable value of inventories,
which involved the use of significant assumptions,
including the consideration of prices of similar
products in the market at the time the estimates are
made and expected future selling prices.
We considered this a key audit matter due to the
magnitude of the inventory balance, the various
types of inventory items and the judgment made by
management in determining the net realizable value
of inventories, which in turn led to increased audit
effort in performing audit procedures.
Our approach to addressing the matter included the
following procedures, among others:
Tested how management estimated the net
realizable value of inventories, which included
the following:
Tested the data used by management in
determining the net realizable value.
Evaluated the appropriateness of the
method of estimating net realizable value.
Evaluated the reasonableness of significant
assumptions used by management in the
calculation of net realizable value of
inventories, by comparing them to:
prices of similar products in the
market at the time the estimates are
made; and
expected future selling prices.
o
o
For a sample of inventory items, compared the
prior year estimates of inventory prices to their
actual selling prices during the year.
40
5N+ 2023 ANNUAL REPORT Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
41
2023 ANNUAL REPORT 5N+ Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
42
5N+ 2023 ANNUAL REPORT We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We communicate with those charged with governance regarding, among other matters, the planned scope
We also provide those charged with governance with a statement that we have complied with relevant
and timing of the audit and significant audit findings, including any significant deficiencies in internal
ethical requirements regarding independence, and to communicate with them all relationships and
control that we identify during our audit.
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
From the matters communicated with those charged with governance, we determine those matters that
other matters that may reasonably be thought to bear on our independence, and where applicable,
were of most significance in the audit of the consolidated financial statements of the current period and
related safeguards.
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
From the matters communicated with those charged with governance, we determine those matters that
determine that a matter should not be communicated in our report because the adverse consequences
were of most significance in the audit of the consolidated financial statements of the current period and
of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
The engagement partner on the audit resulting in this independent auditor’s report is Marc-Stéphane
determine that a matter should not be communicated in our report because the adverse consequences
Pennee.
of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
/s/PricewaterhouseCoopers LLP1
The engagement partner on the audit resulting in this independent auditor’s report is Marc-Stéphane
Pennee.
Montréal, Quebec
/s/PricewaterhouseCoopers LLP1
February 27, 2024
Montréal, Quebec
February 27, 2024
1 CPA auditor, public accountancy permit No. A123642
1 CPA auditor, public accountancy permit No. A123642
43
2023 ANNUAL REPORT 5N+
5N PLUS INC.
Consolidated Statements of Financial Position
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of United States dollars)
(in thousands of United States dollars)
Assets
Current
Cash and cash equivalents
Accounts receivable
Inventories
Income tax receivable
Derivative financial assets
Other current assets
Total current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Goodwill
Deferred tax assets
Other assets
Total non-current assets
Total assets
Liabilities
Current
Trade and accrued liabilities
Income tax payable
Current portion of deferred revenue
Current portion of lease liabilities
Current portion of long-term debt
Total current liabilities
Long-term debt
Deferred tax liabilities
Employee benefit plan obligations
Lease liabilities
Deferred revenue
Other liabilities
Total non-current liabilities
Total liabilities
Equity
Total liabilities and equity
Commitments and contingencies (Note 25)
Subsequent event (Note 30)
The accompanying notes are an integral part of these consolidated financial statements.
44
5N PLUS INC.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
Years ended December 31
(in thousands of United States dollars, except per share information)
Revenue
Cost of sales
Selling, general and administrative expenses
Other expenses (income), net
Operating earnings (loss)
Financial expenses
Interest on long-term debt
Imputed interest and other interest expense (income)
Foreign exchange and derivative (gain) loss
Earnings (loss) before income taxes
Income tax expense (recovery)
Current
Deferred
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Net earnings (loss) are completely attributable to equity holders of 5N Plus Inc.
The accompanying notes are an integral part of these consolidated financial statements.
Notes
29
29
29
14
18
18
23
23
2023
$
242,371
184,833
29,410
756
214,999
27,372
8,262
572
(136)
8,698
18,674
6,674
(3,399)
3,275
15,399
0.17
0.17
2022
$
264,223
215,715
28,565
32,997
277,277
(13,054)
5,466
(274)
42
5,234
(18,288)
6,865
(2,154)
4,711
(22,999)
(0.26)
(0.26)
Notes
December 31
2023
$
December 31
2022
$
5
6
18
19
7
8
9
10
11
18
12
13
18
16
9
14
14
18
15
9
16
17
34,706
33,437
105,850
1,672
591
5,707
181,963
84,600
29,290
29,304
11,825
8,261
4,959
168,239
350,202
37,024
4,535
13,437
1,811
25,000
81,807
83,500
5,284
13,393
28,328
5,629
3,669
139,803
221,610
128,592
350,202
42,691
32,872
86,254
5,488
-
19,857
187,162
77,951
30,082
31,563
11,825
6,002
3,400
160,823
347,985
40,200
8,780
11,730
2,136
-
62,846
121,000
6,959
11,643
28,266
2,354
2,141
172,363
235,209
112,776
347,985
Consolidated Financial Statements ▪ 1
Consolidated Financial Statements ▪ 2
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of United States dollars)
5N PLUS INC.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
Years ended December 31
(in thousands of United States dollars, except per share information)
Consolidated Statements of Earnings (loss)
Years ended December 31
(in thousands of United States dollars)
Revenue
Cost of sales
Selling, general and administrative expenses
Other expenses (income), net
Operating earnings (loss)
Financial expenses
Interest on long-term debt
Imputed interest and other interest expense (income)
Foreign exchange and derivative (gain) loss
Earnings (loss) before income taxes
Income tax expense (recovery)
Current
Deferred
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Net earnings (loss) are completely attributable to equity holders of 5N Plus Inc.
The accompanying notes are an integral part of these consolidated financial statements.
Notes
29
29
29
14
18
18
23
23
2023
$
242,371
184,833
29,410
756
214,999
27,372
8,262
572
(136)
8,698
18,674
6,674
(3,399)
3,275
15,399
0.17
0.17
2022
$
264,223
215,715
28,565
32,997
277,277
(13,054)
5,466
(274)
42
5,234
(18,288)
6,865
(2,154)
4,711
(22,999)
(0.26)
(0.26)
Assets
Current
Cash and cash equivalents
Accounts receivable
Inventories
Income tax receivable
Derivative financial assets
Other current assets
Total current assets
Right-of-use assets
Intangible assets
Goodwill
Deferred tax assets
Other assets
Total non-current assets
Total assets
Property, plant and equipment
Liabilities
Current
Trade and accrued liabilities
Income tax payable
Current portion of deferred revenue
Current portion of lease liabilities
Current portion of long-term debt
Total current liabilities
Long-term debt
Deferred tax liabilities
Employee benefit plan obligations
Lease liabilities
Deferred revenue
Other liabilities
Total non-current liabilities
Total liabilities
Equity
Total liabilities and equity
Commitments and contingencies (Note 25)
Subsequent event (Note 30)
The accompanying notes are an integral part of these consolidated financial statements.
Notes
December 31
December 31
5
6
18
19
7
8
9
10
11
18
12
13
18
16
9
14
14
18
15
9
16
17
2023
$
34,706
33,437
105,850
1,672
591
5,707
181,963
84,600
29,290
29,304
11,825
8,261
4,959
168,239
350,202
37,024
4,535
13,437
1,811
25,000
81,807
83,500
5,284
13,393
28,328
5,629
3,669
139,803
221,610
128,592
350,202
2022
$
42,691
32,872
86,254
5,488
-
19,857
187,162
77,951
30,082
31,563
11,825
6,002
3,400
160,823
347,985
40,200
8,780
11,730
2,136
-
62,846
121,000
6,959
11,643
28,266
2,354
2,141
172,363
235,209
112,776
347,985
Consolidated Financial Statements ▪ 1
Consolidated Financial Statements ▪ 2
45
2023 ANNUAL REPORT 5N+
5N PLUS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Consolidated Statements of Comprehensive Income (Loss)
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars)
Net earnings (loss)
Other comprehensive (loss) income
Items that may be reclassified subsequently to net earnings (loss)
Currency translation adjustment
Notes
Items that will not be reclassified subsequently to net earnings (loss)
Remeasurement of employee benefit plan obligations
Income taxes
15
Other comprehensive loss
Comprehensive income (loss)
Comprehensive income (loss) is completely attributable to equity holders of 5N Plus Inc.
The accompanying notes are an integral part of these consolidated financial statements.
2023
$
15,399
590
590
(1,572)
492
(1,080)
(490)
2022
$
(22,999)
(3,657)
(3,657)
4,159
(1,300)
2,859
(798)
14,909
(23,797)
46
Consolidated Financial Statements ▪ 3
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years ended December 31
(in thousands of United States dollars)
Net earnings (loss)
Other comprehensive (loss) income
Items that may be reclassified subsequently to net earnings (loss)
Currency translation adjustment
Notes
Items that will not be reclassified subsequently to net earnings (loss)
Remeasurement of employee benefit plan obligations
15
Income taxes
Other comprehensive loss
Comprehensive income (loss)
Comprehensive income (loss) is completely attributable to equity holders of 5N Plus Inc.
The accompanying notes are an integral part of these consolidated financial statements.
2023
$
15,399
590
590
(1,572)
492
(1,080)
(490)
2022
$
(22,999)
(3,657)
(3,657)
4,159
(1,300)
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(798)
14,909
(23,797)
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47
2023 ANNUAL REPORT 5N+
5N PLUS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Consolidated Statements of Cash Flows
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars)
Operating activities
Net earnings (loss)
Adjustments to reconcile net earnings (loss) to cash flows
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Amortization of other assets
Impairment of non-current assets
(Decrease) increase on loss allowance
Loss on divestiture of a subsidiary
Share-based compensation expense
Deferred income taxes
Imputed interest
Employee benefit plan obligations
Loss on disposal of assets held for sale
Loss (gain) on disposal of property, plant and equipment
Unrealized gain on non-hedge financial instruments
Unrealized foreign exchange loss (gain) on assets and liabilities
Cash from operations before the following:
Net change in non-cash working capital balances
Cash from operating activities
Investing activities
Divestiture of a subsidiary, net of cash divested
Cash outflows to cash held in escrow
Additions to property, plant and equipment
Additions of intangible assets
Acquisition of investment in equity instruments
Proceeds on settlement of indexed deposit agreement
Proceeds on disposal of assets held for sale
Proceeds on disposal of property, plant and equipment
Cash used in investing activities
Financing activities
Repayment of long-term debt
Proceeds from issuance of long-term debt
Deferred costs related to long-term debt
Issuance of common shares
Principal elements of lease payments
Increase in other liabilities
Cash (used in) from financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental information(1)
Income tax paid
Interest paid
Notes
8
9
10
12
4, 8, 10, 29
5, 27
4
24
18
9
15
29
29
21
4
4
8, 21
10
12
7
29
8
14
14
12
21
17
2023
$
2022
$
15,399
(22,999)
10,297
2,538
3,275
258
672
(114)
-
2,768
(3,399)
690
(246)
-
973
(1,694)
634
32,051
(14,800)
17,251
-
-
(17,341)
(902)
(1,000)
6,506
-
375
(12,362)
(12,500)
-
-
633
(2,858)
1,723
(13,002)
128
(7,985)
42,691
34,706
11,717
2,702
3,313
260
12,478
3
7,834
1,893
(2,154)
605
(403)
216
(13)
(1,003)
(951)
13,498
10,243
23,741
(2,652)
(2,123)
(16,062)
(993)
-
-
2,816
20
(18,994)
(5,000)
10,000
(732)
-
(2,999)
1,140
2,409
(405)
6,751
35,940
42,691
6,945
7,332
3,745
5,360
(1) Amounts paid for income tax and interest were reflected as cash flows from operating activities in the consolidated statements of cash flows.
The accompanying notes are an integral part of these consolidated financial statements.
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
1. Nature of Activities
5N Plus Inc. (“5N+” or the “Company”) is a Canadian-based international company. 5N+ is a leading global producer of
specialty semiconductors and performance materials. The Company’s ultra-pure materials often form the core element of
its customer products. These customers rely on 5N+’s products to enable performance and sustainability in their own
products. 5N+ deploys a range of proprietary and proven technologies to develop and manufacture its products. The
Company’s products enable various applications in a number of key industries including renewable energy, security, space,
pharmaceutical, medical imaging, and industrial. The Company is headquartered at 4385 Garand Street, Montreal, Quebec
(Canada) H4R 2B4. The Company operates R&D, manufacturing and commercial centers in strategically located facilities
around the world including Europe, North America and Asia. The Company’s mission is to be critical to its customers,
valued by its employees and trusted by its shareholders. The Company’s core values focus on integrity, commitment and
customer development along with emphasis on sustainable development, continuous improvement, health and safety.
The Company’s shares are listed on the Toronto Stock Exchange (“TSX”). 5N+ and its subsidiaries represent the “Company”
mentioned throughout these consolidated financial statements. The Company has two reportable business segments,
namely Specialty Semiconductors and Performance Materials.
These consolidated financial statements were approved by the Board of Directors on February 27, 2024.
2. Summary of Material Accounting Policies
The material accounting policy information regarding the preparation of these consolidated financial statements is set out
below. These policies have been consistently applied to all periods presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board (“IFRS Accounting Standards”). The consolidated financial
statements have been prepared under the historical cost convention, except for certain financial assets and liabilities,
which have been measured at fair value as described below.
The preparation of consolidated financial statements in conformity with IFRS Accounting Standards requires the use of
certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the
Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the consolidated financial statements, are also further disclosed in this note,
in the “Significant management estimation and judgment in applying accounting policies” section.
Subsidiaries
power over the entity.
Subsidiaries are all entities over which the Company has control. Control exists when the Company is exposed to, or has
the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through the
48
Consolidated Financial Statements ▪ 5
Consolidated Financial Statements ▪ 6
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31
(in thousands of United States dollars)
Operating activities
Net earnings (loss)
Adjustments to reconcile net earnings (loss) to cash flows
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Amortization of other assets
Impairment of non-current assets
(Decrease) increase on loss allowance
Loss on divestiture of a subsidiary
Share-based compensation expense
Deferred income taxes
Imputed interest
Employee benefit plan obligations
Loss on disposal of assets held for sale
Loss (gain) on disposal of property, plant and equipment
Unrealized gain on non-hedge financial instruments
Unrealized foreign exchange loss (gain) on assets and liabilities
Cash from operations before the following:
Net change in non-cash working capital balances
Cash from operating activities
Investing activities
Divestiture of a subsidiary, net of cash divested
Cash outflows to cash held in escrow
Additions to property, plant and equipment
Additions of intangible assets
Acquisition of investment in equity instruments
Proceeds on settlement of indexed deposit agreement
Proceeds on disposal of assets held for sale
Proceeds on disposal of property, plant and equipment
Cash used in investing activities
Financing activities
Repayment of long-term debt
Proceeds from issuance of long-term debt
Deferred costs related to long-term debt
Issuance of common shares
Principal elements of lease payments
Increase in other liabilities
Cash (used in) from financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental information(1)
Income tax paid
Interest paid
Notes
2023
$
2022
$
15,399
(22,999)
4, 8, 10, 29
5, 27
8
9
10
12
4
24
18
9
15
29
29
21
4
4
10
12
7
29
8
14
14
12
21
17
8, 21
10,297
2,538
3,275
258
672
(114)
-
2,768
(3,399)
690
(246)
-
973
(1,694)
634
32,051
(14,800)
17,251
(17,341)
(902)
(1,000)
6,506
-
375
(12,362)
(12,500)
-
-
-
-
633
(2,858)
1,723
(13,002)
128
(7,985)
42,691
34,706
11,717
2,702
3,313
260
12,478
3
7,834
1,893
(2,154)
605
(403)
216
(13)
(1,003)
(951)
13,498
10,243
23,741
(2,652)
(2,123)
(16,062)
(993)
-
-
2,816
20
(18,994)
(5,000)
10,000
(732)
-
(2,999)
1,140
2,409
(405)
6,751
35,940
42,691
6,945
7,332
3,745
5,360
Consolidated Financial Statements ▪ 5
(1) Amounts paid for income tax and interest were reflected as cash flows from operating activities in the consolidated statements of cash flows.
The accompanying notes are an integral part of these consolidated financial statements.
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
1. Nature of Activities
5N Plus Inc. (“5N+” or the “Company”) is a Canadian-based international company. 5N+ is a leading global producer of
specialty semiconductors and performance materials. The Company’s ultra-pure materials often form the core element of
its customer products. These customers rely on 5N+’s products to enable performance and sustainability in their own
products. 5N+ deploys a range of proprietary and proven technologies to develop and manufacture its products. The
Company’s products enable various applications in a number of key industries including renewable energy, security, space,
pharmaceutical, medical imaging, and industrial. The Company is headquartered at 4385 Garand Street, Montreal, Quebec
(Canada) H4R 2B4. The Company operates R&D, manufacturing and commercial centers in strategically located facilities
around the world including Europe, North America and Asia. The Company’s mission is to be critical to its customers,
valued by its employees and trusted by its shareholders. The Company’s core values focus on integrity, commitment and
customer development along with emphasis on sustainable development, continuous improvement, health and safety.
The Company’s shares are listed on the Toronto Stock Exchange (“TSX”). 5N+ and its subsidiaries represent the “Company”
mentioned throughout these consolidated financial statements. The Company has two reportable business segments,
namely Specialty Semiconductors and Performance Materials.
These consolidated financial statements were approved by the Board of Directors on February 27, 2024.
2. Summary of Material Accounting Policies
The material accounting policy information regarding the preparation of these consolidated financial statements is set out
below. These policies have been consistently applied to all periods presented, unless otherwise stated.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board (“IFRS Accounting Standards”). The consolidated financial
statements have been prepared under the historical cost convention, except for certain financial assets and liabilities,
which have been measured at fair value as described below.
The preparation of consolidated financial statements in conformity with IFRS Accounting Standards requires the use of
certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the
Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the consolidated financial statements, are also further disclosed in this note,
in the “Significant management estimation and judgment in applying accounting policies” section.
Subsidiaries
Subsidiaries are all entities over which the Company has control. Control exists when the Company is exposed to, or has
the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through the
power over the entity.
Consolidated Financial Statements ▪ 6
49
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The following table includes the principal entities which significantly impact the results or assets of the Company:
5N Plus Inc.
5N PV GmbH
AZUR SPACE Solar Power GmbH (“Azur”)
5N Plus Lübeck GmbH
5N Plus Belgium SA(1)
5N Plus Asia Limited
5N Plus Wisconsin Inc.
Country of incorporation
Canada
Germany
Germany
Germany
Belgium
Hong Kong
United States
% Equity interest
2023
100%
100%
100%
100%
-
100%
100%
2022
100%
100%
100%
100%
-
100%
100%
(1) On December 19, 2022, the Company divested its investment in 5N Plus Belgium SA. The revenues and expenses of this investment from January 1, 2022 until
the date of disposition have been included within the Company’s consolidated statement of earnings (loss). See note 4 for additional information.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Company.
Foreign currency translation
a) Functional and presentation currency
The Company’s functional and presentation currency is the US dollar. Functional currency is determined for each of
the Company’s entities, and items included in the financial statements of each entity are measured using that
functional currency.
b) Transactions and balances
Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rate at the
reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign
currencies are translated into the functional currency using the exchange rate prevailing at the date of the respective
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in
the consolidated statement of earnings (loss).
Foreign exchange gains and losses are presented in the consolidated statement of earnings (loss) within “foreign
exchange and derivative (gain) loss”.
c) Foreign operations
Assets and liabilities of subsidiaries that have a functional currency other than US dollar are translated from their
functional currency to US dollars at exchange rates in effect at the reporting date. The resulting translation
adjustments are included in the currency translation adjustment in other comprehensive loss. Revenue and expenses
are translated at the average exchange rates for the period.
Segment reporting
The Company has the following two reportable segments: Specialty Semiconductors and Performance Materials.
Corresponding operations and activities are managed accordingly by the Company’s key decision makers.
Segmented operating, financial information and labelled key performance indicators are available and used to manage
these business segments, review performance and allocate resources.
Operating in North America and Europe, the Specialty Semiconductors segment manufactures and sells products used in
several applications such as renewable energy, space satellites and imaging. Typical end markets include photovoltaics
(terrestrial and spatial solar energy), medical imaging, infrared imaging, optoelectronics and advanced electronics. These
products are sold either in semiconductor compounds, semiconductor wafers, ultra high purity metals, epitaxial
semiconductor substrates and solar cells. Revenues and earnings associated with recycling services and activities provided
to Specialty Semiconductors customers are captured in this segment.
The Performance Materials segment operates in North America, Europe and Asia and manufactures and sells products
that are used in several applications in pharmaceutical and healthcare and industrial. Main products are sold as active
pharmaceutical ingredients, animal feed additives, specialized chemicals, commercial grade metals, alloys, and engineered
powders. All commercial grade metal and engineered powder sales have been regrouped under Performance Materials.
Revenues and earnings associated with recycling services and activities provided to Performance Materials customers are
captured in this segment.
Corporate expenses associated with the head office and unallocated selling, general and administrative expenses, together
with financing expenses have been regrouped under the heading “Corporate and unallocated”.
Each operating segment is managed separately as each of these service lines requires different technologies, resources
and marketing approaches. The financial information of the recycling and trading of complex material is allocated to the
two main segments. All intersegment transactions between the Specialty Semiconductors and the Performance Materials
segments have been eliminated on consolidation.
Revenue recognition
Revenue comprises the sale of manufactured products and the rendering of services and is measured at the amounts
specified in the customer’s arrangement.
Sales of manufactured products are recognized when products are delivered to the customer, which is also the moment
when control of the products is transferred, and when there is no unfulfilled obligation that could affect the customer’s
acceptance of the products. Delivery occurs when the products have been shipped to the specified location, the risks of
loss have been transferred to the customer and the customer has accepted the products in accordance with the sales
contract. Revenue from custom refining activities, often referred to as tolling, is recognized when services are rendered,
at a point in time.
Accounts receivable are recognized when the products are delivered or services are rendered, as this is the point in time
that the consideration is unconditional because only the passage of time is required before the payment is due. The
Company does not expect to have any contracts where the period between the transfer of the promised products or
services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust
any of the transaction prices for the time value of money.
Deferred revenue is recognized by the company as a non-current liability in relation to long-term revenue contracts with
customers which involve performance obligations which are satisfied over time rather than at a point in time. The amount
of which is expected to be realized within one year is recorded within the heading “Current portion of deferred revenue”.
Cash payments received or advances due pursuant to contractual arrangements related to the sale of goods are also
recorded as deferred revenue until all of the foregoing conditions of revenue recognition have been met. The Company
does not expect to have any contractual arrangements whereby the cash payment or advance is received more than one
year before the underlying goods are delivered and therefore these advances are also presented within the heading
“Current portion of deferred revenue”.
50
Consolidated Financial Statements ▪ 7
Consolidated Financial Statements ▪ 8
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The following table includes the principal entities which significantly impact the results or assets of the Company:
Country of incorporation
% Equity interest
Canada
Germany
Germany
Germany
Belgium
Hong Kong
United States
2023
100%
100%
100%
100%
-
100%
100%
2022
100%
100%
100%
100%
-
100%
100%
AZUR SPACE Solar Power GmbH (“Azur”)
5N Plus Inc.
5N PV GmbH
5N Plus Lübeck GmbH
5N Plus Belgium SA(1)
5N Plus Asia Limited
5N Plus Wisconsin Inc.
by the Company.
Foreign currency translation
a) Functional and presentation currency
functional currency.
b) Transactions and balances
(1) On December 19, 2022, the Company divested its investment in 5N Plus Belgium SA. The revenues and expenses of this investment from January 1, 2022 until
the date of disposition have been included within the Company’s consolidated statement of earnings (loss). See note 4 for additional information.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
The Company’s functional and presentation currency is the US dollar. Functional currency is determined for each of
the Company’s entities, and items included in the financial statements of each entity are measured using that
Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rate at the
reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign
currencies are translated into the functional currency using the exchange rate prevailing at the date of the respective
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in
the consolidated statement of earnings (loss).
Foreign exchange gains and losses are presented in the consolidated statement of earnings (loss) within “foreign
exchange and derivative (gain) loss”.
c) Foreign operations
Assets and liabilities of subsidiaries that have a functional currency other than US dollar are translated from their
functional currency to US dollars at exchange rates in effect at the reporting date. The resulting translation
adjustments are included in the currency translation adjustment in other comprehensive loss. Revenue and expenses
are translated at the average exchange rates for the period.
Segment reporting
The Company has the following two reportable segments: Specialty Semiconductors and Performance Materials.
Corresponding operations and activities are managed accordingly by the Company’s key decision makers.
Segmented operating, financial information and labelled key performance indicators are available and used to manage
these business segments, review performance and allocate resources.
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
Operating in North America and Europe, the Specialty Semiconductors segment manufactures and sells products used in
several applications such as renewable energy, space satellites and imaging. Typical end markets include photovoltaics
(terrestrial and spatial solar energy), medical imaging, infrared imaging, optoelectronics and advanced electronics. These
products are sold either in semiconductor compounds, semiconductor wafers, ultra high purity metals, epitaxial
semiconductor substrates and solar cells. Revenues and earnings associated with recycling services and activities provided
to Specialty Semiconductors customers are captured in this segment.
The Performance Materials segment operates in North America, Europe and Asia and manufactures and sells products
that are used in several applications in pharmaceutical and healthcare and industrial. Main products are sold as active
pharmaceutical ingredients, animal feed additives, specialized chemicals, commercial grade metals, alloys, and engineered
powders. All commercial grade metal and engineered powder sales have been regrouped under Performance Materials.
Revenues and earnings associated with recycling services and activities provided to Performance Materials customers are
captured in this segment.
Corporate expenses associated with the head office and unallocated selling, general and administrative expenses, together
with financing expenses have been regrouped under the heading “Corporate and unallocated”.
Each operating segment is managed separately as each of these service lines requires different technologies, resources
and marketing approaches. The financial information of the recycling and trading of complex material is allocated to the
two main segments. All intersegment transactions between the Specialty Semiconductors and the Performance Materials
segments have been eliminated on consolidation.
Revenue recognition
Revenue comprises the sale of manufactured products and the rendering of services and is measured at the amounts
specified in the customer’s arrangement.
Sales of manufactured products are recognized when products are delivered to the customer, which is also the moment
when control of the products is transferred, and when there is no unfulfilled obligation that could affect the customer’s
acceptance of the products. Delivery occurs when the products have been shipped to the specified location, the risks of
loss have been transferred to the customer and the customer has accepted the products in accordance with the sales
contract. Revenue from custom refining activities, often referred to as tolling, is recognized when services are rendered,
at a point in time.
Accounts receivable are recognized when the products are delivered or services are rendered, as this is the point in time
that the consideration is unconditional because only the passage of time is required before the payment is due. The
Company does not expect to have any contracts where the period between the transfer of the promised products or
services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust
any of the transaction prices for the time value of money.
Deferred revenue is recognized by the company as a non-current liability in relation to long-term revenue contracts with
customers which involve performance obligations which are satisfied over time rather than at a point in time. The amount
of which is expected to be realized within one year is recorded within the heading “Current portion of deferred revenue”.
Cash payments received or advances due pursuant to contractual arrangements related to the sale of goods are also
recorded as deferred revenue until all of the foregoing conditions of revenue recognition have been met. The Company
does not expect to have any contractual arrangements whereby the cash payment or advance is received more than one
year before the underlying goods are delivered and therefore these advances are also presented within the heading
“Current portion of deferred revenue”.
Consolidated Financial Statements ▪ 7
Consolidated Financial Statements ▪ 8
51
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will
be received and the Company will comply with all attached conditions.
Grants that compensate the Company for a specific expense incurred are recognized in the consolidated statement of
earnings (loss) against the expenses.
Grants that are related to assets are recognized by deducting the grant from the carrying amount of the specific asset. The
grant is recognized in the consolidated statement of earnings (loss) over the life of a depreciable asset as a reduced
depreciation expense.
Property, plant and equipment
Property, plant and equipment are recorded at cost, net of accumulated depreciation, accumulated impairment losses
and subsequent reversals, if applicable. Property, plant and equipment are depreciated using the straight-line method
over their estimated useful lives, taking into account any residual values. Useful lives are as follows:
Land
Building
Production equipment
Furniture
Office equipment
Rolling stock
Leasehold improvements
Period
Not depreciated
25 years
Up to 15 years
3 to 10 years
3 to 10 years
3 to 10 years
Over the term of the lease
Construction in progress is not depreciated until the assets are put into use. Costs are only capitalized if they are directly
attributable to the construction or development of the assets.
Residual values, method of depreciation and useful life of the assets are reviewed annually and adjusted if appropriate.
Leases
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available
for use by the Company. Assets and liabilities arising from a lease are initially measured on a present value basis.
Right-of-use assets
Right-of-use assets are measured at cost. The right-of-use asset is depreciated over the shorter of the asset's useful life
and the lease term on a straight-line basis.
Lease liabilities
Lease liabilities are measured at the net present value of future lease payments.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the
lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
(loss).
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an
expense in the consolidated statement of earnings (loss). Short-term leases are leases with a lease term of 12 months or
less. Low-value assets comprise IT-equipment and small items of office furniture.
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Extension options are included in a number of property and equipment leases across the Company. These terms are used
to maximise operational flexibility in terms of managing contracts. The majority of extension options held are exercisable
only by the Company and not by the respective lessor.
Intangible assets
losses and reversals, if applicable.
Intangible assets acquired separately are recorded at cost, net of accumulated amortization, accumulated impairment
Intangible assets are amortized on a straight-line basis over their useful lives according to the following annual terms:
Customer relationships
Technology
Trade name
Software
Backlog
Goodwill
Development costs
Period
15 years
10 years
5 years
3 years
Not exceeding 15 years
Not exceeding 10 years
Goodwill represents the excess of the consideration transferred over the fair value of the identifiable net assets acquired in
a business combination and is initially measured at the acquisition date. Goodwill is subsequently carried at cost less any
accumulated impairment losses.
At the date of acquisition, goodwill is assigned to the cash-generating unit (CGU) or group of CGUs that is expected to
benefit from the synergies of the business combination. For the purposes of impairment testing, goodwill is allocated to
the Company’s operating segments, which is the level at which the chief operating decision maker monitors goodwill.
The CGU is tested for impairment annually, or more frequently when there is indication that the CGU may be impaired. If
the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the
goodwill allocated to the CGU and then, to reduce the carrying amounts of the other assets in the CGU on a pro-rata basis.
Any impairment loss is recognized in the consolidated statement of earnings (loss). An impairment loss recognized for
goodwill is not reversed in subsequent periods.
Impairment of non-financial assets
The carrying amounts of the Company’s non-financial assets that have an indefinite useful life and assets that are not yet
available for use, are not subject to amortization and are tested annually for impairment or whenever indicators of
impairment exist. Assets that are subject to amortization are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognized if the carrying amount of an asset or a cash-generating unit (CGU) exceeds its recoverable
amount. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less cost of disposal.
The recoverable amount is determined for an individual asset; unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets. In such case, the CGU to which the asset belongs is
used to determine the recoverable amount. Impairment losses are recognized in the consolidated statement of earnings
The Company evaluates impairment losses for potential reversals at each reporting date. An impairment loss is reversed
if there is any indication that the loss has decreased or no longer exists due to changes in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not
52
Consolidated Financial Statements ▪ 9
Consolidated Financial Statements ▪ 10
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will
be received and the Company will comply with all attached conditions.
Grants that compensate the Company for a specific expense incurred are recognized in the consolidated statement of
earnings (loss) against the expenses.
Grants that are related to assets are recognized by deducting the grant from the carrying amount of the specific asset. The
grant is recognized in the consolidated statement of earnings (loss) over the life of a depreciable asset as a reduced
depreciation expense.
Property, plant and equipment
Property, plant and equipment are recorded at cost, net of accumulated depreciation, accumulated impairment losses
and subsequent reversals, if applicable. Property, plant and equipment are depreciated using the straight-line method
over their estimated useful lives, taking into account any residual values. Useful lives are as follows:
Period
Not depreciated
25 years
Up to 15 years
3 to 10 years
3 to 10 years
3 to 10 years
Over the term of the lease
Land
Building
Production equipment
Furniture
Office equipment
Rolling stock
Leasehold improvements
Leases
Construction in progress is not depreciated until the assets are put into use. Costs are only capitalized if they are directly
attributable to the construction or development of the assets.
Residual values, method of depreciation and useful life of the assets are reviewed annually and adjusted if appropriate.
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available
for use by the Company. Assets and liabilities arising from a lease are initially measured on a present value basis.
Right-of-use assets are measured at cost. The right-of-use asset is depreciated over the shorter of the asset's useful life
Right-of-use assets
and the lease term on a straight-line basis.
Lease liabilities
Lease liabilities are measured at the net present value of future lease payments.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the
lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an
expense in the consolidated statement of earnings (loss). Short-term leases are leases with a lease term of 12 months or
less. Low-value assets comprise IT-equipment and small items of office furniture.
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
Extension options are included in a number of property and equipment leases across the Company. These terms are used
to maximise operational flexibility in terms of managing contracts. The majority of extension options held are exercisable
only by the Company and not by the respective lessor.
Intangible assets
Intangible assets acquired separately are recorded at cost, net of accumulated amortization, accumulated impairment
losses and reversals, if applicable.
Intangible assets are amortized on a straight-line basis over their useful lives according to the following annual terms:
Customer relationships
Technology
Trade name
Software
Development costs
Backlog
Goodwill
Period
15 years
Not exceeding 15 years
10 years
5 years
Not exceeding 10 years
3 years
Goodwill represents the excess of the consideration transferred over the fair value of the identifiable net assets acquired in
a business combination and is initially measured at the acquisition date. Goodwill is subsequently carried at cost less any
accumulated impairment losses.
At the date of acquisition, goodwill is assigned to the cash-generating unit (CGU) or group of CGUs that is expected to
benefit from the synergies of the business combination. For the purposes of impairment testing, goodwill is allocated to
the Company’s operating segments, which is the level at which the chief operating decision maker monitors goodwill.
The CGU is tested for impairment annually, or more frequently when there is indication that the CGU may be impaired. If
the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the
goodwill allocated to the CGU and then, to reduce the carrying amounts of the other assets in the CGU on a pro-rata basis.
Any impairment loss is recognized in the consolidated statement of earnings (loss). An impairment loss recognized for
goodwill is not reversed in subsequent periods.
Impairment of non-financial assets
The carrying amounts of the Company’s non-financial assets that have an indefinite useful life and assets that are not yet
available for use, are not subject to amortization and are tested annually for impairment or whenever indicators of
impairment exist. Assets that are subject to amortization are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognized if the carrying amount of an asset or a cash-generating unit (CGU) exceeds its recoverable
amount. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less cost of disposal.
The recoverable amount is determined for an individual asset; unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets. In such case, the CGU to which the asset belongs is
used to determine the recoverable amount. Impairment losses are recognized in the consolidated statement of earnings
(loss).
The Company evaluates impairment losses for potential reversals at each reporting date. An impairment loss is reversed
if there is any indication that the loss has decreased or no longer exists due to changes in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not
Consolidated Financial Statements ▪ 9
Consolidated Financial Statements ▪ 10
53
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss
had been recognized. Such reversal is recognized in the consolidated statement of earnings (loss).
Financial instrument classification
Category
Financial instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the
instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have
been transferred and the Company has transferred substantially all risks and rewards of ownership.
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position
when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis,
or realize the asset and settle the liability simultaneously.
Measurement
At initial recognition, the Company measures a financial asset or financial liability at its fair value plus or minus, in the case
of a financial asset or financial liability not at fair value through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs of financial assets or
financial liabilities carried at FVPL are expensed in the consolidated statement of earnings (loss).
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows
are solely payment of principal and interest.
Measurement in subsequent periods depends on the classification of the financial instrument. The Company has classified
its financial instruments in the following categories depending on the purpose for which the instruments were acquired
and their characteristics.
Financial assets
Debt instruments
For the subsequent measurement, there are two measurement categories into which the Company classifies its debt
instruments:
-
-
Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortized cost. Interest income from these financial
assets is included in finance income using the effective interest rate method. Any gain or loss arising on
derecognition is recognized directly in the consolidated statement of earnings (loss) and presented in other gains
(losses), together with foreign exchange gains and losses. Impairment losses are presented as separate line item
in the consolidated statement of earnings (loss).
Fair value through profit or loss (FVPL): Assets that do not meet the criteria for amortized cost or fair value
through other comprehensive loss (FVOCI) are measured at FVPL. A gain or loss on a debt investment that is
subsequently measured at FVPL is recognized in the consolidated statement of earnings (loss) and presented net
within other expenses (income), net in the period in which it arises.
Investment in equity instruments
For the subsequent measurement, investments in equity instruments which the Company did not make an irrevocable
election to present in FVOCI are measured at FVPL. A gain or loss on an investment in equity instruments that is subsequently
measured at FVPL is recognized in the consolidated statement of earnings (loss) and presented net within “Other expenses
(income), net” in the period in which it arises.
Financial liabilities
Financial liabilities are subsequently measured at amortized cost using the effective interest method, except for financial
liabilities at FVPL. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
Financial assets and liabilities at fair value through profit and loss
Financial assets and liabilities at amortized cost
Financial instrument
Total return swap (Note 7)
Indexed deposit agreement (Note 7)
Investment in equity instrument (Note 12)
Restricted investment (Note 12)
Cash and cash equivalents
Accounts receivable
Cash held in escrow (Note 7)
Trade and accrued liabilities
Long-term debt
At each reporting date, the Company assesses, on a forward-looking basis, the expected credit losses associated with its
debt instruments carried at amortized cost. The impairment methodology applied depends on whether there has been a
Impairment
significant increase in credit risk.
For trade receivables, the Company applies the simplified approach permitted by IFRS 9, which requires expected lifetime
losses to be recognized from initial recognition of the receivables (Note 27). The Company assumes that there is no
significant increase in credit risk for instruments that have a low credit risk.
Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument and, if so, the nature of the item being hedged.
For the year ended December 31, 2023 and 2022, the Company has no derivative financial instruments designated as a
Embedded derivatives are recorded at fair value separately from the host contract when their economic characteristics
and risks are not clearly and closely related to those of the host contract. Subsequent changes in fair value are recorded
in financial expenses in the consolidated statement of earnings (loss). For the year ended December 31, 2023 and 2022,
hedging instrument.
Embedded financial liabilities derivatives
the Company has no embedded derivative.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand.
Cash held in escrow
Cash held in escrow represents cash which is restricted pursuant to a contractual arrangement and is held in a separate
bank account. Cash held in escrow is presented within “Other current assets”.
54
Consolidated Financial Statements ▪ 11
Consolidated Financial Statements ▪ 12
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss
Financial instrument classification
had been recognized. Such reversal is recognized in the consolidated statement of earnings (loss).
Category
Financial assets and liabilities at fair value through profit and loss
Financial assets and liabilities at amortized cost
Financial instrument
Total return swap (Note 7)
Indexed deposit agreement (Note 7)
Investment in equity instrument (Note 12)
Restricted investment (Note 12)
Cash and cash equivalents
Accounts receivable
Cash held in escrow (Note 7)
Trade and accrued liabilities
Long-term debt
Impairment
At each reporting date, the Company assesses, on a forward-looking basis, the expected credit losses associated with its
debt instruments carried at amortized cost. The impairment methodology applied depends on whether there has been a
significant increase in credit risk.
For trade receivables, the Company applies the simplified approach permitted by IFRS 9, which requires expected lifetime
losses to be recognized from initial recognition of the receivables (Note 27). The Company assumes that there is no
significant increase in credit risk for instruments that have a low credit risk.
Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument and, if so, the nature of the item being hedged.
For the year ended December 31, 2023 and 2022, the Company has no derivative financial instruments designated as a
hedging instrument.
Embedded financial liabilities derivatives
Embedded derivatives are recorded at fair value separately from the host contract when their economic characteristics
and risks are not clearly and closely related to those of the host contract. Subsequent changes in fair value are recorded
in financial expenses in the consolidated statement of earnings (loss). For the year ended December 31, 2023 and 2022,
the Company has no embedded derivative.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand.
Cash held in escrow
Cash held in escrow represents cash which is restricted pursuant to a contractual arrangement and is held in a separate
bank account. Cash held in escrow is presented within “Other current assets”.
Consolidated Financial Statements ▪ 11
Consolidated Financial Statements ▪ 12
55
Financial instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the
instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have
been transferred and the Company has transferred substantially all risks and rewards of ownership.
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position
when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis,
or realize the asset and settle the liability simultaneously.
Measurement
At initial recognition, the Company measures a financial asset or financial liability at its fair value plus or minus, in the case
of a financial asset or financial liability not at fair value through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs of financial assets or
financial liabilities carried at FVPL are expensed in the consolidated statement of earnings (loss).
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows
are solely payment of principal and interest.
Measurement in subsequent periods depends on the classification of the financial instrument. The Company has classified
its financial instruments in the following categories depending on the purpose for which the instruments were acquired
and their characteristics.
Financial assets
Debt instruments
instruments:
For the subsequent measurement, there are two measurement categories into which the Company classifies its debt
-
Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortized cost. Interest income from these financial
assets is included in finance income using the effective interest rate method. Any gain or loss arising on
derecognition is recognized directly in the consolidated statement of earnings (loss) and presented in other gains
(losses), together with foreign exchange gains and losses. Impairment losses are presented as separate line item
in the consolidated statement of earnings (loss).
-
Fair value through profit or loss (FVPL): Assets that do not meet the criteria for amortized cost or fair value
through other comprehensive loss (FVOCI) are measured at FVPL. A gain or loss on a debt investment that is
subsequently measured at FVPL is recognized in the consolidated statement of earnings (loss) and presented net
within other expenses (income), net in the period in which it arises.
Investment in equity instruments
For the subsequent measurement, investments in equity instruments which the Company did not make an irrevocable
election to present in FVOCI are measured at FVPL. A gain or loss on an investment in equity instruments that is subsequently
measured at FVPL is recognized in the consolidated statement of earnings (loss) and presented net within “Other expenses
(income), net” in the period in which it arises.
Financial liabilities
Financial liabilities are subsequently measured at amortized cost using the effective interest method, except for financial
liabilities at FVPL. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
Inventories
Inventories are carried at the lower of cost and net realizable value. Cost includes all expenditures directly attributable to
the manufacturing process as well as suitable portions of related production overheads based on normal operating
capacity. Costs of ordinarily interchangeable items are assigned using weighted average cost. Net realizable value is the
estimated selling price in the ordinary course of business less costs of completion and any applicable selling expenses.
When the circumstances that previously caused inventories to be written down below cost no longer exist or when there
is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the
impairment is reversed (i.e. the reversal is limited to the amount of the original impairment) so that the new carrying
amount is the lower of the cost and the revised net realizable value.
From time to time, when substantially all required raw materials are in inventory, the Company may choose to enter into
long-term fixed-price sales contracts. The quantity of raw materials required to fulfill these contracts is specifically
assigned, and the average cost of these raw materials is accounted for separately throughout the duration of the contract.
Income taxes
The tax expense for the year which comprises current and deferred tax is recognized in the consolidated statement of
earnings (loss), except to the extent that it relates to items recognized in other comprehensive loss or directly in equity.
In which case, the tax expense is also recognized in other comprehensive loss or directly in equity, respectively.
a) Current tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date
of the consolidated statement of financial position in the countries where the Company and its subsidiaries operate
and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
b) Deferred tax
Share-based payments
Deferred income tax is recognized using the liability method on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that are enacted or substantively enacted at the date of the consolidated statement of
financial position and are expected to apply when the related deferred income tax asset is realized or the deferred
income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be used.
Deferred income tax is presented to provide impact of temporary differences arising on investments in subsidiaries,
except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by
the Company and it is probable that the temporary difference will not be reversed in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities, and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority, on either the same taxable entity or different taxable entities where there is
an intention to settle the balances on a net basis.
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Research and development expenses
Research expenses are charged to the consolidated statement of earnings (loss) in the period they are incurred and are
included under “Other expenses (income), net”. Development expenses which are directly attributable expenses, either
internal or external, are charged to the consolidated statement of earnings (loss), except if the Company can demonstrate
all of the following (in that case capitalised as an intangible assets – development costs):
The technical feasibility of completing the intangible asset so that it will be available for use or sale;
Its intention to complete the intangible asset and use or sell it;
Its ability to use or sell the intangible asset;
- How the intangible asset will generate probable future economic benefits. Among other things, the Company can
demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it
is to be used internally, the usefulness of the intangible asset;
The availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset; and
Its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Employee future benefits
are as follows:
The Company contributes to two defined benefit pension plans. The significant policies related to employee future benefits
The cost of pension and other post-retirement benefits earned by employees is actuarially determined using the
projected benefit method prorated on service, market interest rates and management’s best estimate of
expected plan investment performance, retirement age of employees and expected health care costs;
Fair value is used to value the plan assets for the purpose of calculating the expected return on plan assets; and
Actuarial gains and losses arising from experience adjustment and change in actuarial assumptions are charged
or credited to equity in other comprehensive loss in the period in which they arise.
-
-
-
-
-
-
-
-
The fair value of the equity-settled share-based payment plan is determined using the Black-Scholes model on the grant
date. Measurement inputs include the share price on the measurement date, the exercise price of the instrument,
expected volatility, weighted average expected life of the instrument, expected dividends, expected forfeiture rate, and
the risk-free interest rate. The impact of service and non-market vesting conditions is not taken into account in
determining fair value. The compensation expense of the equity-settled awards is recognized in the consolidated
statement of earnings (loss) over the graded vesting period, where the fair value of each tranche is recognized over its
respective vesting period.
For cash-settled share-based payment plans, the compensation expense is determined based on the fair value of the
liability incurred at each reporting date until the award is settled. The fair value of compensation expense is calculated by
multiplying the number of units expected to vest with the fair value of one unit as of grant date based on the market price
of the Company’s common shares. Until the liability is settled, the Company re-measures the fair value of the liability at
the end of each reporting period and at the date of settlement, with any changes in fair value recognized in the
consolidated statement of earnings (loss).
Earnings per share
Diluted earnings (loss) per share assume the conversion, exercise or contingent issuance of securities only when such
conversion, exercise or issuance would have a dilutive effect on the income per share. The treasury stock method is used
to determine the dilutive effect of share options.
56
Consolidated Financial Statements ▪ 13
Consolidated Financial Statements ▪ 14
5N+ 2023 ANNUAL REPORT
-
-
The technical feasibility of completing the intangible asset so that it will be available for use or sale;
Its intention to complete the intangible asset and use or sell it;
Its ability to use or sell the intangible asset;
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
Inventories
Research and development expenses
Research expenses are charged to the consolidated statement of earnings (loss) in the period they are incurred and are
included under “Other expenses (income), net”. Development expenses which are directly attributable expenses, either
internal or external, are charged to the consolidated statement of earnings (loss), except if the Company can demonstrate
all of the following (in that case capitalised as an intangible assets – development costs):
-
-
-
- How the intangible asset will generate probable future economic benefits. Among other things, the Company can
demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it
is to be used internally, the usefulness of the intangible asset;
The availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset; and
Its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Inventories are carried at the lower of cost and net realizable value. Cost includes all expenditures directly attributable to
the manufacturing process as well as suitable portions of related production overheads based on normal operating
capacity. Costs of ordinarily interchangeable items are assigned using weighted average cost. Net realizable value is the
estimated selling price in the ordinary course of business less costs of completion and any applicable selling expenses.
When the circumstances that previously caused inventories to be written down below cost no longer exist or when there
is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the
impairment is reversed (i.e. the reversal is limited to the amount of the original impairment) so that the new carrying
amount is the lower of the cost and the revised net realizable value.
From time to time, when substantially all required raw materials are in inventory, the Company may choose to enter into
long-term fixed-price sales contracts. The quantity of raw materials required to fulfill these contracts is specifically
assigned, and the average cost of these raw materials is accounted for separately throughout the duration of the contract.
The tax expense for the year which comprises current and deferred tax is recognized in the consolidated statement of
earnings (loss), except to the extent that it relates to items recognized in other comprehensive loss or directly in equity.
In which case, the tax expense is also recognized in other comprehensive loss or directly in equity, respectively.
Income taxes
a) Current tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date
of the consolidated statement of financial position in the countries where the Company and its subsidiaries operate
and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized using the liability method on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that are enacted or substantively enacted at the date of the consolidated statement of
financial position and are expected to apply when the related deferred income tax asset is realized or the deferred
income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be used.
Deferred income tax is presented to provide impact of temporary differences arising on investments in subsidiaries,
except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by
the Company and it is probable that the temporary difference will not be reversed in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities, and when the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority, on either the same taxable entity or different taxable entities where there is
an intention to settle the balances on a net basis.
b) Deferred tax
Share-based payments
Employee future benefits
The Company contributes to two defined benefit pension plans. The significant policies related to employee future benefits
are as follows:
-
-
-
The cost of pension and other post-retirement benefits earned by employees is actuarially determined using the
projected benefit method prorated on service, market interest rates and management’s best estimate of
expected plan investment performance, retirement age of employees and expected health care costs;
Fair value is used to value the plan assets for the purpose of calculating the expected return on plan assets; and
Actuarial gains and losses arising from experience adjustment and change in actuarial assumptions are charged
or credited to equity in other comprehensive loss in the period in which they arise.
The fair value of the equity-settled share-based payment plan is determined using the Black-Scholes model on the grant
date. Measurement inputs include the share price on the measurement date, the exercise price of the instrument,
expected volatility, weighted average expected life of the instrument, expected dividends, expected forfeiture rate, and
the risk-free interest rate. The impact of service and non-market vesting conditions is not taken into account in
determining fair value. The compensation expense of the equity-settled awards is recognized in the consolidated
statement of earnings (loss) over the graded vesting period, where the fair value of each tranche is recognized over its
respective vesting period.
For cash-settled share-based payment plans, the compensation expense is determined based on the fair value of the
liability incurred at each reporting date until the award is settled. The fair value of compensation expense is calculated by
multiplying the number of units expected to vest with the fair value of one unit as of grant date based on the market price
of the Company’s common shares. Until the liability is settled, the Company re-measures the fair value of the liability at
the end of each reporting period and at the date of settlement, with any changes in fair value recognized in the
consolidated statement of earnings (loss).
Earnings per share
Diluted earnings (loss) per share assume the conversion, exercise or contingent issuance of securities only when such
conversion, exercise or issuance would have a dilutive effect on the income per share. The treasury stock method is used
to determine the dilutive effect of share options.
Consolidated Financial Statements ▪ 13
Consolidated Financial Statements ▪ 14
57
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Significant management estimation and judgment in applying accounting policies
3. Adoption of New Accounting Standards and Future Changes in Accounting Policies
The following are significant management judgments used in applying the accounting policies of the Company that have
the most significant effect on the consolidated financial statements.
Adoption of new accounting standards
Estimation uncertainty
When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and
assumptions about recognition and measurement of assets, liabilities, revenues and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected.
Information about the significant judgments, estimates and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, revenues and expenses are discussed below.
Impairment of non-financial assets
An impairment loss is recognized for the amount by which an asset’s or CGU’s carrying amount exceeds its recoverable
amount, which is the higher of fair value less cost of disposal and value in use.
To determine the recoverable amount, significant judgement is required as management must estimate expected future
cash flows from the asset or CGU and it must determine a suitable interest rate in order to calculate the present value of
those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future
operating results using the estimated forecasted prices obtained from various market sources. These key assumptions
relate to future events and circumstances. The actual results will vary and may cause adjustments to the Company’s assets
in future periods. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment
to market risk and to asset-specific risk factors.
Inventories
Inventories are carried at the lower of cost and net realizable value, with cost determined using the average cost method.
In estimating net realizable values, management takes into account the most reliable evidence available at the time the
estimates are made. The Company’s core business is subject to changes in foreign policies and internationally accepted
metal prices which may cause future selling prices to change rapidly. The Company evaluates its inventories using a group
of similar items basis and considers expected future prices as well as events that have occurred between the consolidated
statement of financial position date and the date of the completion of the consolidated financial statements. Net realizable
value for inventory to satisfy a specific sales contract is measured at the contract price.
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period
in which such determination is made.
The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of the
Company’s deferred income tax assets is largely dependent on its achievement of projected future taxable income and
the continued applicability of ongoing tax planning strategies. The Company’s judgments regarding future profitability may
change due to future market conditions, changes in tax legislation and other factors that could adversely affect the ongoing
value of the deferred income tax assets. These changes, if any, may require a material adjustment of these deferred
income tax asset balances through an adjustment to the carrying value thereon in the future. This adjustment would
reduce the deferred income tax asset to the amount that is considered to be more likely than not to be realized and would
be recorded in the period such a determination was to be made (Note 18).
For the year ended December 31, 2023, the Company evaluated the new accounting standards issued and effective under
IFRS Accounting Standards and determined that they have no significant impact to its financial statements.
As at December 31, 2023, the Company evaluated the new accounting standards issued but not yet effective under IFRS
Accounting Standards and determined that none are applicable to the Company based on its current operations.
Future Changes in accounting policies
4. Divestiture of Subsidiary
On December 19, 2022, the Company divested its 100% interest in 5N Plus Belgium SA, previously included within its
Performance Materials segment, and recognized a loss on divestiture of $7,834. The decision to cease the production of
lower margin products used in catalytic and extractive applications was made following a strategic review of the
Company’s legacy operations. As part of the transaction, a provision of $2,594 was recorded under Litigation and
Restructuring to support the new owners to ensure site compliance with most recent environmental standards and for
other related costs, of which 2.0 million euros or $2,133 is held in escrow. Prior to the divestiture, the Company recorded
an impairment charge of $7,092 on Property, plant, and equipment (Note 8) following the intention to halt production at
its manufacturing facility in Tilly, Belgium.
These expenses are presented within the consolidated statement of earnings (loss) within Other expenses (income), net.
5. Accounts Receivable
Gross trade receivables
Loss allowance (Note 27)
Trade receivables
Sales taxes receivable
Other receivables
Total accounts receivable
disclosed in Note 27.
2023
$
25,155
(38)
25,117
4,963
3,357
33,437
2022
$
26,255
(152)
26,103
3,265
3,504
32,872
The Company’s exposure to credit risks and the calculation of the loss allowance related to accounts receivable are
Most of the accounts receivable are pledged as security for the revolving credit facility (Note 14).
58
Consolidated Financial Statements ▪ 15
Consolidated Financial Statements ▪ 16
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
Significant management estimation and judgment in applying accounting policies
3. Adoption of New Accounting Standards and Future Changes in Accounting Policies
The following are significant management judgments used in applying the accounting policies of the Company that have
the most significant effect on the consolidated financial statements.
Adoption of new accounting standards
Estimation uncertainty
When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and
assumptions about recognition and measurement of assets, liabilities, revenues and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected.
Information about the significant judgments, estimates and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, revenues and expenses are discussed below.
Impairment of non-financial assets
An impairment loss is recognized for the amount by which an asset’s or CGU’s carrying amount exceeds its recoverable
amount, which is the higher of fair value less cost of disposal and value in use.
To determine the recoverable amount, significant judgement is required as management must estimate expected future
cash flows from the asset or CGU and it must determine a suitable interest rate in order to calculate the present value of
those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future
operating results using the estimated forecasted prices obtained from various market sources. These key assumptions
relate to future events and circumstances. The actual results will vary and may cause adjustments to the Company’s assets
in future periods. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment
to market risk and to asset-specific risk factors.
Inventories
Inventories are carried at the lower of cost and net realizable value, with cost determined using the average cost method.
In estimating net realizable values, management takes into account the most reliable evidence available at the time the
estimates are made. The Company’s core business is subject to changes in foreign policies and internationally accepted
metal prices which may cause future selling prices to change rapidly. The Company evaluates its inventories using a group
of similar items basis and considers expected future prices as well as events that have occurred between the consolidated
statement of financial position date and the date of the completion of the consolidated financial statements. Net realizable
value for inventory to satisfy a specific sales contract is measured at the contract price.
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period
in which such determination is made.
The Company has deferred income tax assets that are subject to periodic recoverability assessments. Realization of the
Company’s deferred income tax assets is largely dependent on its achievement of projected future taxable income and
the continued applicability of ongoing tax planning strategies. The Company’s judgments regarding future profitability may
change due to future market conditions, changes in tax legislation and other factors that could adversely affect the ongoing
value of the deferred income tax assets. These changes, if any, may require a material adjustment of these deferred
income tax asset balances through an adjustment to the carrying value thereon in the future. This adjustment would
reduce the deferred income tax asset to the amount that is considered to be more likely than not to be realized and would
be recorded in the period such a determination was to be made (Note 18).
For the year ended December 31, 2023, the Company evaluated the new accounting standards issued and effective under
IFRS Accounting Standards and determined that they have no significant impact to its financial statements.
Future Changes in accounting policies
As at December 31, 2023, the Company evaluated the new accounting standards issued but not yet effective under IFRS
Accounting Standards and determined that none are applicable to the Company based on its current operations.
4. Divestiture of Subsidiary
On December 19, 2022, the Company divested its 100% interest in 5N Plus Belgium SA, previously included within its
Performance Materials segment, and recognized a loss on divestiture of $7,834. The decision to cease the production of
lower margin products used in catalytic and extractive applications was made following a strategic review of the
Company’s legacy operations. As part of the transaction, a provision of $2,594 was recorded under Litigation and
Restructuring to support the new owners to ensure site compliance with most recent environmental standards and for
other related costs, of which 2.0 million euros or $2,133 is held in escrow. Prior to the divestiture, the Company recorded
an impairment charge of $7,092 on Property, plant, and equipment (Note 8) following the intention to halt production at
its manufacturing facility in Tilly, Belgium.
These expenses are presented within the consolidated statement of earnings (loss) within Other expenses (income), net.
5. Accounts Receivable
Gross trade receivables
Loss allowance (Note 27)
Trade receivables
Sales taxes receivable
Other receivables
Total accounts receivable
2023
$
25,155
(38)
25,117
4,963
3,357
33,437
2022
$
26,255
(152)
26,103
3,265
3,504
32,872
The Company’s exposure to credit risks and the calculation of the loss allowance related to accounts receivable are
disclosed in Note 27.
Most of the accounts receivable are pledged as security for the revolving credit facility (Note 14).
Consolidated Financial Statements ▪ 15
Consolidated Financial Statements ▪ 16
59
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
6.
Inventories
Raw materials
Finished goods
Total inventories
2023
$
36,297
69,553
105,850
2022
$
28,436
57,818
86,254
For the year ended December 31, 2023, a total of $101,176 of inventories was included as an expense in cost of sales
(2022 – $118,643).
For the year ended December 31, 2023, a total of $38 previously written down was recognized as a reduction of expenses
in cost of sales concurrently with the related inventories being sold ($15 for the Specialty Semiconductors segment and
$23 for the Performance Materials segment). For the year ended December 31, 2022, a total of $1,464 previously written
down was recognized as a reduction of expenses in cost of sales concurrently with the related inventories being sold ($22
for the Specialty Semiconductors segment and $1,442 for the Performance Materials segment).
The majority of inventories are pledged as security for the revolving credit facility (Note 14).
7. Other current assets
Cash held in escrow (Note 4 and 29)
Indexed deposit agreement
Prepaids and others
Total other current assets
2023
$
2,212
-
3,495
5,707
2022
$
10,613
5,517
3,727
19,857
During 2023, the Company recovered cash held in escrow for an amount of 7,950 euros. This amount, previously recorded
since the acquisition as payable to the previous shareholder of AZUR, was recovered as per stipulations in the share
purchase agreement not related to AZUR’s performance post-acquisition.
In March 2023, the indexed deposit agreement entered with a major Canadian financial institution in June 2017, was
amended to a total return swap wherein share price fluctuations are settled via cash annually. As part of this amendment,
the Company received, $6,506 which represents the fair value of the indexed deposit agreement as at the amendment
date.
The Company entered into the total return swap, previously the indexed deposit agreement, to reduce its income exposure
to fluctuations in its share price relating to the DSU, PSU, RSU and SAR programs. Pursuant to the agreement, the Company
receives the economic benefit of the share price appreciation while providing payments to the financial institution for the
institution’s cost of funds and any share price depreciation. The net effect of the total return swap partly offset movements
in the Company’s share price impacting the cost of the DSU, PSU, RSU and SAR programs. As at December 31, 2023, the
total return swap covered 2,571,569 common shares of the Company.
60
Consolidated Financial Statements ▪ 17
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
6.
Inventories
Raw materials
Finished goods
Total inventories
(2022 – $118,643).
7. Other current assets
Cash held in escrow (Note 4 and 29)
Indexed deposit agreement
Prepaids and others
Total other current assets
For the year ended December 31, 2023, a total of $101,176 of inventories was included as an expense in cost of sales
For the year ended December 31, 2023, a total of $38 previously written down was recognized as a reduction of expenses
in cost of sales concurrently with the related inventories being sold ($15 for the Specialty Semiconductors segment and
$23 for the Performance Materials segment). For the year ended December 31, 2022, a total of $1,464 previously written
down was recognized as a reduction of expenses in cost of sales concurrently with the related inventories being sold ($22
for the Specialty Semiconductors segment and $1,442 for the Performance Materials segment).
The majority of inventories are pledged as security for the revolving credit facility (Note 14).
2023
$
36,297
69,553
105,850
2022
$
28,436
57,818
86,254
2023
2,212
$
-
3,495
5,707
2022
$
10,613
5,517
3,727
19,857
During 2023, the Company recovered cash held in escrow for an amount of 7,950 euros. This amount, previously recorded
since the acquisition as payable to the previous shareholder of AZUR, was recovered as per stipulations in the share
purchase agreement not related to AZUR’s performance post-acquisition.
In March 2023, the indexed deposit agreement entered with a major Canadian financial institution in June 2017, was
amended to a total return swap wherein share price fluctuations are settled via cash annually. As part of this amendment,
the Company received, $6,506 which represents the fair value of the indexed deposit agreement as at the amendment
date.
The Company entered into the total return swap, previously the indexed deposit agreement, to reduce its income exposure
to fluctuations in its share price relating to the DSU, PSU, RSU and SAR programs. Pursuant to the agreement, the Company
receives the economic benefit of the share price appreciation while providing payments to the financial institution for the
institution’s cost of funds and any share price depreciation. The net effect of the total return swap partly offset movements
in the Company’s share price impacting the cost of the DSU, PSU, RSU and SAR programs. As at December 31, 2023, the
total return swap covered 2,571,569 common shares of the Company.
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61
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
During 2023, the Company recorded an impairment of non-current assets of $672 in relation to Property, plant and
equipment included within the Performance Materials segment, to reflect the assessment of the carrying value of
production equipment following the Company’s decision to switch to higher capacity equipment.
During 2022, the Company recorded an impairment of non-current assets of $7,092, included in the Performance Materials
segment, to reflect the assessment of the carrying value of property, plant and equipment following the intention to halt
production at its manufacturing facility in Tilly, Belgium. Consequently, the Company’s projections regarding the future
cashflows from the property, plant and equipment of Tilly were minimal. The impairment charges are recognized under
Other expenses within the consolidated statement of earnings (loss) (Note 4).
As at December 31, 2023, property, plant and equipment include $6,669 of prepayments for construction in progress
($4,001 as at December 31, 2022).
Most of the property, plant and equipment are pledged as security for the revolving credit facility (Note 14).
Variable lease payments not included in the measurement of lease liabilities(3)
9. Leases
Right-of-use assets
Net book value as at December 31, 2021
Business combination
Additions
Modification to lease contracts
Divestiture of subsidiary (Note 4)
Depreciation
Effect of foreign exchange and others
Net book value as at December 31, 2022
Additions
Modification to lease contracts
Depreciation
Effect of foreign exchange and others
Net book value as at December 31, 2023
As at December 31, 2022
Cost
Accumulated depreciation
Net book value
As at December 31, 2023
Cost
Accumulated depreciation
Net book value
Buildings
$
31,543
(938)
2,300
198
-
(2,364)
(1,167)
29,572
229
654
(2,292)
618
28,781
35,319
(5,747)
29,572
35,357
(6,576)
28,781
Production
equipment
$
238
-
107
-
(55)
(128)
(4)
158
12
24
(66)
-
128
Office equipment
and rolling stock
$
417
-
290
-
(140)
(210)
(5)
352
207
-
(180)
2
381
305
(147)
158
335
(207)
128
509
(157)
352
737
(356)
381
Total
$
32,198
(938)
2,697
198
(195)
(2,702)
(1,176)
30,082
448
678
(2,538)
620
29,290
36,133
(6,051)
30,082
36,429
(7,139)
29,290
Lease liabilities
Current portion
Non-current portion
Total lease liabilities
Amounts recognized in the consolidated statements of earnings:
Imputed interest(1)
Income from sub-leasing right-of-use assets(2)
Expenses relating to short-term leases(3)
Expenses relating to leases of low-value assets,
excluding short-term leases of low-value assets(3)
Included in financial expenses.
Included in other expenses (income), net.
(1)
(2)
(3)
Included in cost of sales and selling, general and administrative expenses.
10. Intangible Assets
Net book value as at December 31, 2021
Business combination
Additions
Divestiture of subsidiary (Note 4)
Amortization
Impairment
Additions
Amortization
Effect of foreign exchange
Net book value as at December 31, 2022
Effect of foreign exchange
Net book value as at December 31, 2023
As at December 31, 2022
Cost
Accumulated amortization
Net book value
As at December 31, 2023
Cost
Accumulated amortization
Net book value
2023
$
1,811
28,328
30,139
2023
$
690
(71)
200
103
256
$
13,597
(3,534)
993
(66)
(1,320)
(263)
(129)
9,278
902
(1,364)
103
8,919
15,465
(6,187)
9,278
16,503
(7,584)
8,919
2022
$
2,136
28,266
30,402
2022
$
605
(123)
235
188
173
Total
$
40,474
(973)
993
(66)
(3,313)
(5,386)
(166)
31,563
902
(3,275)
114
29,304
40,913
(9,350)
31,563
41,973
(12,669)
29,304
Customer
relationship
Trade name,
software,
development costs
Technology
and others
$
15,805
(423)
-
-
-
-
-
(742)
(5,123)
9,517
(688)
8,829
10,425
(908)
9,517
10,425
(1,596)
8,829
$
11,072
2,984
-
-
-
-
(1,251)
(37)
12,768
(1,223)
11
11,556
15,023
(2,255)
12,768
15,045
(3,489)
11,556
62
Consolidated Financial Statements ▪ 19
Consolidated Financial Statements ▪ 20
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
During 2023, the Company recorded an impairment of non-current assets of $672 in relation to Property, plant and
equipment included within the Performance Materials segment, to reflect the assessment of the carrying value of
production equipment following the Company’s decision to switch to higher capacity equipment.
During 2022, the Company recorded an impairment of non-current assets of $7,092, included in the Performance Materials
segment, to reflect the assessment of the carrying value of property, plant and equipment following the intention to halt
production at its manufacturing facility in Tilly, Belgium. Consequently, the Company’s projections regarding the future
cashflows from the property, plant and equipment of Tilly were minimal. The impairment charges are recognized under
Other expenses within the consolidated statement of earnings (loss) (Note 4).
As at December 31, 2023, property, plant and equipment include $6,669 of prepayments for construction in progress
($4,001 as at December 31, 2022).
Most of the property, plant and equipment are pledged as security for the revolving credit facility (Note 14).
9. Leases
Right-of-use assets
Net book value as at December 31, 2021
Business combination
Additions
Modification to lease contracts
Divestiture of subsidiary (Note 4)
Depreciation
Effect of foreign exchange and others
Net book value as at December 31, 2022
Modification to lease contracts
Additions
Depreciation
Effect of foreign exchange and others
Net book value as at December 31, 2023
As at December 31, 2022
Accumulated depreciation
Net book value
As at December 31, 2023
Cost
Cost
Accumulated depreciation
Net book value
Buildings
Production
equipment
Office equipment
and rolling stock
$
31,543
(938)
2,300
198
-
(2,364)
(1,167)
29,572
229
654
(2,292)
618
28,781
35,319
(5,747)
29,572
35,357
(6,576)
28,781
$
238
107
-
-
(55)
(128)
(4)
158
12
24
(66)
-
128
305
(147)
158
335
(207)
128
$
417
290
-
-
(140)
(210)
(5)
352
207
(180)
-
2
381
509
(157)
352
737
(356)
381
Total
$
32,198
(938)
2,697
198
(195)
(2,702)
(1,176)
30,082
448
678
(2,538)
620
29,290
36,133
(6,051)
30,082
36,429
(7,139)
29,290
Lease liabilities
Current portion
Non-current portion
Total lease liabilities
Amounts recognized in the consolidated statements of earnings:
Imputed interest(1)
Income from sub-leasing right-of-use assets(2)
Variable lease payments not included in the measurement of lease liabilities(3)
Expenses relating to short-term leases(3)
Expenses relating to leases of low-value assets,
excluding short-term leases of low-value assets(3)
(1)
(2)
(3)
Included in financial expenses.
Included in other expenses (income), net.
Included in cost of sales and selling, general and administrative expenses.
10. Intangible Assets
2023
$
1,811
28,328
30,139
2023
$
690
(71)
200
103
256
Net book value as at December 31, 2021
Business combination
Additions
Divestiture of subsidiary (Note 4)
Amortization
Impairment
Effect of foreign exchange
Net book value as at December 31, 2022
Additions
Amortization
Effect of foreign exchange
Net book value as at December 31, 2023
As at December 31, 2022
Cost
Accumulated amortization
Net book value
As at December 31, 2023
Cost
Accumulated amortization
Net book value
Customer
relationship
$
15,805
(423)
-
-
(742)
(5,123)
-
9,517
-
(688)
-
8,829
10,425
(908)
9,517
10,425
(1,596)
8,829
Trade name,
software,
development costs
and others
$
13,597
(3,534)
993
(66)
(1,320)
(263)
(129)
9,278
902
(1,364)
103
8,919
Technology
$
11,072
2,984
-
-
(1,251)
-
(37)
12,768
-
(1,223)
11
11,556
15,023
(2,255)
12,768
15,045
(3,489)
11,556
15,465
(6,187)
9,278
16,503
(7,584)
8,919
2022
$
2,136
28,266
30,402
2022
$
605
(123)
235
188
173
Total
$
40,474
(973)
993
(66)
(3,313)
(5,386)
(166)
31,563
902
(3,275)
114
29,304
40,913
(9,350)
31,563
41,973
(12,669)
29,304
Consolidated Financial Statements ▪ 19
Consolidated Financial Statements ▪ 20
63
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
In 2022, the Company recorded an impairment of non-current assets of $5,386, included in the Specialty Semiconductors
segment, to reflect the assessment of the carrying value of intangible assets impacted by the invasion of Ukraine by Russia,
more precisely in reference to Russia based customers. The Company’s initial assumptions regarding the timing of future
cashflows from these customers can no longer be supported given the uncertainty associated with recent international
sanctions against Russia, and the unknown duration of the conflict. The impairment charges are recognized under Other
expenses within the consolidated statement of earnings (loss).
As at December 31, 2023, intangible assets that were not depreciated until ready for their intended use amounted to
$1,568 (2022 ─ $812). The category of development costs which includes capitalized costs of $11,295 (2022 - $10,798),
consists of internally generated intangible assets.
11. Goodwill
Beginning of year
Business combination
End of year
2023
$
11,825
-
11,825
2022
$
13,841
(2,016)
11,825
Senior secured revolving facility of $124,000 with a syndicate of banks,
maturing in April 2026
Subordinated term loan, maturing in March 2024
Goodwill is allocated to the Specialty Semiconductor segment. For the purposes of the Company’s annual goodwill
impairment test, AZUR is considered as its own CGU. Based on the result of this test, no impairment charges are required.
The recoverable amount was determined based on the CGU’s value in use which was calculated by using a discounted
cash flow (DCF) approach.
Less current portion of long-term debt
Senior secured revolving facility
The key assumptions used for the purposes of the DCF are outlined below:
-
-
Cash flows: Estimated cash flows were projected based on actual operating results from internal sources as well
as industry and market trends. The first three years of the five-year projection period were forecasted by
Management. The extended two-year period was calculated using the 2018-2023 Compound Annual Growth Rate
for the revenues;
Terminal growth rate: A terminal growth rate of 5.0% is used to extrapolate the Company’s projection and it was
determined using the industry expectation and market trends; and
- Discount rate: Cash flows are discounted using pre-tax discount rate which is estimated based on the historical
industry average weighted-average cost of capital. The discount rate used is 9.2% (2022 – 9.9%).
12. Other assets
Deferred costs
Investment in equity instruments
Prepaids
Restricted investment and other
Total other assets
2023
$
519
3,000
836
604
4,959
2022
$
777
2,000
-
623
3,400
In December 2023 and January 2021, the Company acquired a minority equity stake in Microbion Corporation (Microbion)
for an amount of $1,000 and $2,000 respectively.
The Company also owns a restricted investment of $603 (2022 - $620) which is valued at fair value through profit or loss.
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
13. Trade and Accrued Liabilities
Trade payables
Accrued liabilities(1)
Consideration payable (Note 7 and 29)
Total trade and accrued liabilities
14. Long-Term Debt
(1) As at December 31, 2023, an amount of $2,210 was still outstanding with respect to the provision of $2,675 outstanding as at December 31, 2022. Provisions
of $289 were taken in 2023, of which $152 was still outstanding as at December 31, 2023.
2023
$
17,906
19,118
-
37,024
2023
$
83,500
25,000
108,500
(25,000)
83,500
2022
$
14,281
17,440
8,479
40,200
2022
$
96,000
25,000
121,000
-
121,000
In June 2022, the Company signed a senior secured multi-currency revolving credit facility of $124,000 maturing in
April 2026 to replace its existing $124,000 senior secured revolving facility maturing in April 2023. At any time, the
Company has the option to request that the credit facility be expanded through the exercise of an additional $30,000
accordion feature, subject to review and approval by the lenders. This revolving credit facility can be drawn in US dollars,
Canadian dollars or Hong Kong dollars (up to $4,000). Drawings bear interest at either the Canadian prime rate, US base
rate, Hong Kong base rate or SOFR, plus a margin based on the Company’s senior net debt to consolidated EBITDA ratio.
Under the terms of its credit facility, the Company is required to satisfy certain restrictive covenants as to financial ratios.
As at December 31, 2023, the Company had met all covenants.
Subordinated term loan
In February 2019, the Company signed a five-year subordinated term loan with Investissement Québec. The loan was
disbursed in two tranches: the first tranche of $5,000 on February 6, 2019 and the second tranche of $20,000 on March
22, 2019. The two tranches of the term loan bear interest equivalent to the 5-year US dollar swap rate plus a margin of
4.19%, which equals to 6.82% and 6.64% respectively. Under the terms of the loan, the Company is required to satisfy
certain restrictive covenants as to financial ratios. As at December 31, 2023, the Company has met all covenants.
64
Consolidated Financial Statements ▪ 21
Consolidated Financial Statements ▪ 22
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
In 2022, the Company recorded an impairment of non-current assets of $5,386, included in the Specialty Semiconductors
segment, to reflect the assessment of the carrying value of intangible assets impacted by the invasion of Ukraine by Russia,
more precisely in reference to Russia based customers. The Company’s initial assumptions regarding the timing of future
cashflows from these customers can no longer be supported given the uncertainty associated with recent international
sanctions against Russia, and the unknown duration of the conflict. The impairment charges are recognized under Other
expenses within the consolidated statement of earnings (loss).
As at December 31, 2023, intangible assets that were not depreciated until ready for their intended use amounted to
$1,568 (2022 ─ $812). The category of development costs which includes capitalized costs of $11,295 (2022 - $10,798),
consists of internally generated intangible assets.
13. Trade and Accrued Liabilities
Trade payables
Accrued liabilities(1)
Consideration payable (Note 7 and 29)
Total trade and accrued liabilities
2023
$
17,906
19,118
-
37,024
2022
$
14,281
17,440
8,479
40,200
(1) As at December 31, 2023, an amount of $2,210 was still outstanding with respect to the provision of $2,675 outstanding as at December 31, 2022. Provisions
of $289 were taken in 2023, of which $152 was still outstanding as at December 31, 2023.
2023
$
-
11,825
11,825
2022
$
13,841
(2,016)
11,825
14. Long-Term Debt
Senior secured revolving facility of $124,000 with a syndicate of banks,
maturing in April 2026
Subordinated term loan, maturing in March 2024
Less current portion of long-term debt
2023
$
83,500
25,000
108,500
(25,000)
83,500
2022
$
96,000
25,000
121,000
-
121,000
Senior secured revolving facility
In June 2022, the Company signed a senior secured multi-currency revolving credit facility of $124,000 maturing in
April 2026 to replace its existing $124,000 senior secured revolving facility maturing in April 2023. At any time, the
Company has the option to request that the credit facility be expanded through the exercise of an additional $30,000
accordion feature, subject to review and approval by the lenders. This revolving credit facility can be drawn in US dollars,
Canadian dollars or Hong Kong dollars (up to $4,000). Drawings bear interest at either the Canadian prime rate, US base
rate, Hong Kong base rate or SOFR, plus a margin based on the Company’s senior net debt to consolidated EBITDA ratio.
Under the terms of its credit facility, the Company is required to satisfy certain restrictive covenants as to financial ratios.
As at December 31, 2023, the Company had met all covenants.
Subordinated term loan
In February 2019, the Company signed a five-year subordinated term loan with Investissement Québec. The loan was
disbursed in two tranches: the first tranche of $5,000 on February 6, 2019 and the second tranche of $20,000 on March
22, 2019. The two tranches of the term loan bear interest equivalent to the 5-year US dollar swap rate plus a margin of
4.19%, which equals to 6.82% and 6.64% respectively. Under the terms of the loan, the Company is required to satisfy
certain restrictive covenants as to financial ratios. As at December 31, 2023, the Company has met all covenants.
11. Goodwill
Beginning of year
Business combination
End of year
12. Other assets
Deferred costs
Investment in equity instruments
Prepaids
Restricted investment and other
Total other assets
Goodwill is allocated to the Specialty Semiconductor segment. For the purposes of the Company’s annual goodwill
impairment test, AZUR is considered as its own CGU. Based on the result of this test, no impairment charges are required.
The recoverable amount was determined based on the CGU’s value in use which was calculated by using a discounted
cash flow (DCF) approach.
The key assumptions used for the purposes of the DCF are outlined below:
-
Cash flows: Estimated cash flows were projected based on actual operating results from internal sources as well
as industry and market trends. The first three years of the five-year projection period were forecasted by
Management. The extended two-year period was calculated using the 2018-2023 Compound Annual Growth Rate
for the revenues;
-
Terminal growth rate: A terminal growth rate of 5.0% is used to extrapolate the Company’s projection and it was
determined using the industry expectation and market trends; and
- Discount rate: Cash flows are discounted using pre-tax discount rate which is estimated based on the historical
industry average weighted-average cost of capital. The discount rate used is 9.2% (2022 – 9.9%).
2023
$
519
3,000
836
604
4,959
2022
$
777
2,000
-
623
3,400
In December 2023 and January 2021, the Company acquired a minority equity stake in Microbion Corporation (Microbion)
for an amount of $1,000 and $2,000 respectively.
The Company also owns a restricted investment of $603 (2022 - $620) which is valued at fair value through profit or loss.
Consolidated Financial Statements ▪ 21
Consolidated Financial Statements ▪ 22
65
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
15. Employee Benefit Plan Obligations
The Company operates two defined pension plans in Germany based on employee pensionable earnings and length of
service.
Unfunded defined benefit plan
Former general and senior managers had been provided with direct benefit commitments. Employees had been provided
with indirect benefit commitments via the Unterstützungseinrichtung der HEK GmbH e.V. Such promises had been made
for employees with an entry date of December 31, 1993 or earlier.
Funded defined benefit plan
The pension obligations are via a pension fund with commitments to old-age, disability and survivors’ pension to managers
as well as employees. Such promises had been made for employees with an entry date of December 31, 2007 or earlier.
Vesting of benefits is being determined by the employers’ pension-plan act (Gesetz über die Verbesserung der
betrieblichen Altersversorgung). The pension scheme is fully funded by two absolute return strategies funds at Generali
Pensionsfond AG. These investment funds have quoted prices in active markets.
Fair value of plan assets
Present value of funded obligation
Present value of net obligation for funded obligation
Present value of unfunded obligation
Present value of net obligations
Movement in the defined benefit obligations is as follows:
Beginning of year
Current service cost
Interest cost
Effect of foreign exchange
Benefits paid
Actuarial losses (gains)
From changes in financial
assumptions
From changes in other
assumptions
End of year
Unfunded
$
10,581
39
432
374
(695)
761
331
Funded
$
3,425
-
140
131
(187)
304
26
2023
Total
$
14,006
39
572
505
(882)
1,065
357
11,823
3,839
15,662
Movement in plan assets is as follows:
Beginning of year
Interest income
Return on plan assets, excluding amounts included in interest income
Contributions
Pension benefits paid
Effect of foreign exchange
End of year
66
2023
$
2,269
3,839
1,570
11,823
13,393
Unfunded
$
14,725
58
165
(862)
(655)
Funded
$
5,575
-
63
(350)
(177)
2022
$
2,363
3,425
1,062
10,581
11,643
2022
Total
$
20,300
58
228
(1,212)
(832)
(3,481)
(1,728)
(5,209)
631
10,581
42
3,425
673
14,006
Specific to employee benefit obligations, the Company is mainly exposed to economic and demographic risks such as salary
inflation and changes in life expectancy. The plans’ obligations are to provide benefits for the duration of the life of its
members, therefore, increases in life expectancy will result in an increase in the plans’ liabilities. In addition, the obligations
are impacted by the discount rate.
2023
$
2,363
97
(150)
65
(187)
81
2,269
2022
$
3,069
34
(377)
-
(177)
(186)
2,363
Consolidated Financial Statements ▪ 23
Consolidated Financial Statements ▪ 24
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The principal actuarial assumptions as at December 31 were as follows:
Unfunded
3.5%
2.5%
2.3%
2023
Funded
3.5%
2.5%
2.0%
Unfunded
4.2%
2.5%
2.3%
2022
Funded
4.2%
2.5%
2.0%
Discount rate
Salary growth rate
Pension growth rate
benefit plan.
Assumptions regarding mortality are based on mortality tables “Richttafeln 2018 G” by Prof. Dr. Klaus Heubeck as
biometrical basis in accordance with age of earliest retirement by law RV-Altersgrenzenanpassungsgesetz, dated
April 20, 2007 for the unfunded defined benefit plan and with age of earliest retirement by 65 years for the funded defined
The sensitivity of the defined benefit obligations to changes in assumptions is set out below. The effects on each plan of a
change in an assumption are weighted proportionately to the total plan obligations to determine the total impact for each
assumption presented.
Impact on defined benefit obligations
Change in assumption
Increase in assumption
Decrease in assumption
Discount rate
Salary growth rate
Pension growth rate
Unfunded
Funded
Unfunded
0.50%
0.50%
0.50%
0.50%
0.50%
0.50%
(5.02%)
0.24%
4.51%
Funded
(5.93%)
-%
5.28%
Unfunded
5.50%
(0.23%)
(4.18%)
Funded
6.58%
-%
(4.88%)
Increase by 1 year
in assumption
Decrease by 1 year
in assumption
Unfunded
4.05%
Funded
3.48%
Unfunded
(3.58%)
Funded
(3.11%)
Life expectancy
detailed below:
The weighted average duration of the unfunded and funded defined benefit obligations are 10.51 years and 12.35 years
(2022 – 10.29 years and 12.10 years).
Though its defined benefit pension plans, the Company is exposed to a number of risks, the most significant of which are
Defined benefit pension plan assets are invested in order to meet funded pension obligations. The ability of the Company’s
fund assets to meet employee benefit obligations is subject to market risk such as foreign currency risk, interest rate risk,
and other price risk. Credit risk also affects plan assets, as they are partially comprised of investments in bonds. The default
of a bond issuer would decrease plan assets and the Company’s corresponding ability to meet employee benefit
obligations.
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
15. Employee Benefit Plan Obligations
service.
Unfunded defined benefit plan
The Company operates two defined pension plans in Germany based on employee pensionable earnings and length of
Former general and senior managers had been provided with direct benefit commitments. Employees had been provided
with indirect benefit commitments via the Unterstützungseinrichtung der HEK GmbH e.V. Such promises had been made
for employees with an entry date of December 31, 1993 or earlier.
Funded defined benefit plan
The pension obligations are via a pension fund with commitments to old-age, disability and survivors’ pension to managers
as well as employees. Such promises had been made for employees with an entry date of December 31, 2007 or earlier.
Vesting of benefits is being determined by the employers’ pension-plan act (Gesetz über die Verbesserung der
betrieblichen Altersversorgung). The pension scheme is fully funded by two absolute return strategies funds at Generali
Pensionsfond AG. These investment funds have quoted prices in active markets.
Fair value of plan assets
Present value of funded obligation
Present value of net obligation for funded obligation
Present value of unfunded obligation
Present value of net obligations
Movement in the defined benefit obligations is as follows:
Beginning of year
Current service cost
Interest cost
Effect of foreign exchange
Benefits paid
Actuarial losses (gains)
From changes in financial
assumptions
From changes in other
assumptions
End of year
Beginning of year
Interest income
Contributions
Pension benefits paid
Effect of foreign exchange
End of year
Movement in plan assets is as follows:
Return on plan assets, excluding amounts included in interest income
$
10,581
39
432
374
(695)
761
331
3,425
$
-
140
131
(187)
304
26
2023
Total
$
14,006
39
572
505
(882)
1,065
357
11,823
3,839
15,662
Unfunded
$
14,725
58
165
(862)
(655)
Funded
$
5,575
-
63
(350)
(177)
2023
$
2,269
3,839
1,570
11,823
13,393
2023
$
2,363
97
(150)
65
(187)
81
2,269
2022
$
2,363
3,425
1,062
10,581
11,643
2022
Total
$
20,300
58
228
(1,212)
(832)
2022
$
3,069
34
(377)
-
(177)
(186)
2,363
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
The principal actuarial assumptions as at December 31 were as follows:
Discount rate
Salary growth rate
Pension growth rate
Unfunded
3.5%
2.5%
2.3%
2023
Funded
3.5%
2.5%
2.0%
Unfunded
4.2%
2.5%
2.3%
2022
Funded
4.2%
2.5%
2.0%
Assumptions regarding mortality are based on mortality tables “Richttafeln 2018 G” by Prof. Dr. Klaus Heubeck as
biometrical basis in accordance with age of earliest retirement by law RV-Altersgrenzenanpassungsgesetz, dated
April 20, 2007 for the unfunded defined benefit plan and with age of earliest retirement by 65 years for the funded defined
benefit plan.
The sensitivity of the defined benefit obligations to changes in assumptions is set out below. The effects on each plan of a
change in an assumption are weighted proportionately to the total plan obligations to determine the total impact for each
assumption presented.
Impact on defined benefit obligations
Change in assumption
Increase in assumption
Decrease in assumption
Discount rate
Salary growth rate
Pension growth rate
Unfunded
0.50%
0.50%
0.50%
Funded
0.50%
0.50%
0.50%
Unfunded
(5.02%)
0.24%
4.51%
Funded
(5.93%)
-%
5.28%
Unfunded
5.50%
(0.23%)
(4.18%)
Funded
6.58%
-%
(4.88%)
Unfunded
Funded
Life expectancy
Increase by 1 year
in assumption
Decrease by 1 year
in assumption
Unfunded
4.05%
Funded
3.48%
Unfunded
(3.58%)
Funded
(3.11%)
The weighted average duration of the unfunded and funded defined benefit obligations are 10.51 years and 12.35 years
(2022 – 10.29 years and 12.10 years).
Though its defined benefit pension plans, the Company is exposed to a number of risks, the most significant of which are
detailed below:
(3,481)
(1,728)
(5,209)
631
10,581
42
3,425
673
14,006
Specific to employee benefit obligations, the Company is mainly exposed to economic and demographic risks such as salary
inflation and changes in life expectancy. The plans’ obligations are to provide benefits for the duration of the life of its
members, therefore, increases in life expectancy will result in an increase in the plans’ liabilities. In addition, the obligations
are impacted by the discount rate.
Defined benefit pension plan assets are invested in order to meet funded pension obligations. The ability of the Company’s
fund assets to meet employee benefit obligations is subject to market risk such as foreign currency risk, interest rate risk,
and other price risk. Credit risk also affects plan assets, as they are partially comprised of investments in bonds. The default
of a bond issuer would decrease plan assets and the Company’s corresponding ability to meet employee benefit
obligations.
Consolidated Financial Statements ▪ 23
Consolidated Financial Statements ▪ 24
67
2023 ANNUAL REPORT 5N+
Earnings (loss) before income tax
Canadian statutory income tax rates
Income tax on earnings (losses) at Canadian statutory rate
Increase (decrease) resulting from:
Unrecorded losses carried forward
Non-deductible expense for tax purposes
Non-taxable litigation and restructuring income
(Non-taxable) non-deductible foreign exchange
Effect of difference of foreign tax rates compared to Canadian tax rates
Withholding tax on group dividend
Adjustment in respect of prior years’ estimates
Other
Income tax expense
operates.
Movement in the deferred income tax amounts is as follows:
Tax charge relating to components of other comprehensive income (loss)
Credited to consolidated statement of earnings
Beginning of year
Business combination
Impact of foreign exchange
End of year
2023
$
18,674
26.5%
4,949
911
312
(2,341)
(1,354)
3
410
431
(46)
3,275
2023
(957)
$
-
492
3,399
43
2,977
)
2022
$
(18,288)
26.5%
(4,846)
3,268
3,670
-
1,868
299
522
(56)
(14)
4,711
2022
$
(638)
(1,071)
(1,300)
2,154
(102)
(957)
The Company’s applicable tax rate is the Canadian combined rates applicable in the jurisdiction in which the Company
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Expected maturity analysis of undiscounted pension liability:
A reconciliation of income taxes at Canadian statutory rates with the reported income taxes is as follows:
Less than a year
Between 1 and 5 years
Over 5 years
Total
Unfunded
$
710
2,984
14,553
18,247
Funded
$
198
845
5,537
6,580
2023
Total
$
908
3,829
20,090
24,827
Unfunded
$
676
2,796
14,140
17,612
Funded
$
186
786
5,378
6,350
Expected contributions to pension benefit plans for the year ending December 31, 2024 are $908.
16. Deferred revenue
Prepayments from clients
Current portion of deferred revenue related to long-term contracts
Current portion of deferred revenue
Non-current portion of deferred revenue related to long-term contracts
Non-current portion of deferred revenue
Total deferred revenue
2023
$
11,591
1,846
13,437
5,629
5,629
19,066
2022
Total
$
862
3,582
19,518
23,962
2022
$
9,409
2,321
11,730
2,354
2,354
14,084
For the year ended December 31, 2023, $10,441 (2022 - $5,605) of revenue was realized in relation to the deferred
revenue balance outstanding at the beginning of the year.
17. Other Liabilities
Beginning of year
Divestiture of subsidiary (Note 4)
Increase in liabilities
Utilized
Effect of foreign exchange
End of year
18. Income Taxes
Current tax:
Current tax for the year
Adjustment in respect of prior years’ estimates
Total current tax
Deferred tax:
Recognition and reversal of temporary differences
Adjustment in respect of prior years’ estimates
Total deferred tax
Income tax expense
68
2023
$
2,141
-
1,723
(231)
36
3,669
2023
$
6,459
215
6,674
(3,615)
216
(3,399)
3,275
2022
$
1,255
(195)
1,140
-
(59)
2,141
2022
$
7,213
(348)
6,865
(2,446)
292
(2,154)
4,711
Consolidated Financial Statements ▪ 25
Consolidated Financial Statements ▪ 26
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
Expected maturity analysis of undiscounted pension liability:
A reconciliation of income taxes at Canadian statutory rates with the reported income taxes is as follows:
Less than a year
Between 1 and 5 years
Over 5 years
Total
$
710
2,984
14,553
18,247
$
198
845
5,537
6,580
Unfunded
Funded
Unfunded
Funded
2023
Total
$
908
3,829
20,090
24,827
$
676
2,796
14,140
17,612
$
186
786
5,378
6,350
Expected contributions to pension benefit plans for the year ending December 31, 2024 are $908.
16. Deferred revenue
Prepayments from clients
Current portion of deferred revenue related to long-term contracts
Current portion of deferred revenue
Non-current portion of deferred revenue related to long-term contracts
Non-current portion of deferred revenue
Total deferred revenue
For the year ended December 31, 2023, $10,441 (2022 - $5,605) of revenue was realized in relation to the deferred
revenue balance outstanding at the beginning of the year.
Earnings (loss) before income tax
Canadian statutory income tax rates
Income tax on earnings (losses) at Canadian statutory rate
Increase (decrease) resulting from:
Unrecorded losses carried forward
Non-deductible expense for tax purposes
Non-taxable litigation and restructuring income
(Non-taxable) non-deductible foreign exchange
Effect of difference of foreign tax rates compared to Canadian tax rates
Withholding tax on group dividend
Adjustment in respect of prior years’ estimates
Other
Income tax expense
2023
$
18,674
26.5%
4,949
911
312
(2,341)
(1,354)
3
410
431
(46)
3,275
2022
$
(18,288)
26.5%
(4,846)
3,268
3,670
-
1,868
299
522
(56)
(14)
4,711
The Company’s applicable tax rate is the Canadian combined rates applicable in the jurisdiction in which the Company
operates.
Movement in the deferred income tax amounts is as follows:
Beginning of year
Business combination
Tax charge relating to components of other comprehensive income (loss)
Credited to consolidated statement of earnings
Impact of foreign exchange
End of year
2023
$
(957)
-
492
3,399
43
)
2,977
2022
$
(638)
(1,071)
(1,300)
2,154
(102)
(957)
2022
Total
$
862
3,582
19,518
23,962
2022
$
9,409
2,321
11,730
2,354
2,354
14,084
2022
$
1,255
(195)
1,140
-
(59)
2,141
2022
$
7,213
(348)
6,865
(2,446)
292
(2,154)
4,711
2023
$
11,591
1,846
13,437
5,629
5,629
19,066
2023
2,141
$
-
1,723
(231)
36
3,669
2023
$
6,459
215
6,674
(3,615)
216
(3,399)
3,275
17. Other Liabilities
Beginning of year
Divestiture of subsidiary (Note 4)
Increase in liabilities
Utilized
Effect of foreign exchange
End of year
18. Income Taxes
Adjustment in respect of prior years’ estimates
Recognition and reversal of temporary differences
Adjustment in respect of prior years’ estimates
Current tax:
Current tax for the year
Total current tax
Deferred tax:
Total deferred tax
Income tax expense
Consolidated Financial Statements ▪ 25
Consolidated Financial Statements ▪ 26
69
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
e
m
a
s
e
h
t
n
i
h
t
i
w
s
e
c
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A
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Deferred income tax liabilities have not been recognized for the withholding tax and taxes that would be payable on the
unremitted earnings of certain subsidiaries. Such amounts are permanently reinvested. Unremitted earnings totalled
$60,089 as at December 31, 2023 (2022 - $43,260).
As at December 31, 2023, the Company had the following operating tax losses available for carry forward for which no
deferred tax benefit has been recorded in the accounts:
$
15,631
36,736
10,014
Expiry
No limit
No limit
No limit
As at December 31, 2023, the Company had other deductible temporary differences of $323 for which no deferred tax
Belgium
United States
Hong Kong
benefit has been recorded (2022 – $440).
19. Fair Value of Financial Instruments
The fair value of a financial instrument is determined by reference to the available market information at the reporting
date. When no active market exists for a financial instrument, the Company determines the fair value of that
instrument based on valuation methodologies as discussed below. In determining assumptions required under a
valuation model, the Company primarily uses external, readily observable market data inputs. Assumptions or inputs
that are not based on observable market data incorporate the Company’s best estimates of market participant
assumptions, and are used when external data is not available. Counterparty credit risk and the Company’s own credit
risk are taken into account in estimating the fair value of all financial assets and financial liabilities.
The following assumptions and valuation methodologies have been used to measure fair value of financial instruments:
-
-
-
-
The fair value of its short-term financial assets and financial liabilities, including cash and cash equivalents,
accounts receivable, cash held in escrow and trade and accrued liabilities approximates their carrying value due
to the short-term maturities of these instruments;
The fair value of its investment in equity is determined using significant unobservable inputs such as the best
The fair value of its restricted investment is determined using the expected mortality of life, present value of the
estimated future cash flows and estimated discount rates. Assumptions are based on market conditions prevailing
information available.
at each reporting date.
The fair value of derivative instruments, which include the total return swap and the indexed deposit agreement,
is calculated as the present value of the estimated future cash flows using an appropriate interest rate yield curve,
foreign exchange rate and the stock price. Assumptions are based on market conditions prevailing at each
reporting date. Derivative instruments reflect the estimated amount that the Company would receive or pay to
settle the contracts at the reporting date; and
-
The fair value of long-term debt is estimated based on discounted cash flows using current interest rate for
instruments with similar terms and remaining maturities.
70
Consolidated Financial Statements ▪ 28
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
Deferred income tax liabilities have not been recognized for the withholding tax and taxes that would be payable on the
unremitted earnings of certain subsidiaries. Such amounts are permanently reinvested. Unremitted earnings totalled
$60,089 as at December 31, 2023 (2022 - $43,260).
As at December 31, 2023, the Company had the following operating tax losses available for carry forward for which no
deferred tax benefit has been recorded in the accounts:
Belgium
United States
Hong Kong
$
15,631
36,736
10,014
Expiry
No limit
No limit
No limit
As at December 31, 2023, the Company had other deductible temporary differences of $323 for which no deferred tax
benefit has been recorded (2022 – $440).
19. Fair Value of Financial Instruments
The fair value of a financial instrument is determined by reference to the available market information at the reporting
date. When no active market exists for a financial instrument, the Company determines the fair value of that
instrument based on valuation methodologies as discussed below. In determining assumptions required under a
valuation model, the Company primarily uses external, readily observable market data inputs. Assumptions or inputs
that are not based on observable market data incorporate the Company’s best estimates of market participant
assumptions, and are used when external data is not available. Counterparty credit risk and the Company’s own credit
risk are taken into account in estimating the fair value of all financial assets and financial liabilities.
The following assumptions and valuation methodologies have been used to measure fair value of financial instruments:
-
-
-
-
-
The fair value of its short-term financial assets and financial liabilities, including cash and cash equivalents,
accounts receivable, cash held in escrow and trade and accrued liabilities approximates their carrying value due
to the short-term maturities of these instruments;
The fair value of its investment in equity is determined using significant unobservable inputs such as the best
information available.
The fair value of its restricted investment is determined using the expected mortality of life, present value of the
estimated future cash flows and estimated discount rates. Assumptions are based on market conditions prevailing
at each reporting date.
The fair value of derivative instruments, which include the total return swap and the indexed deposit agreement,
is calculated as the present value of the estimated future cash flows using an appropriate interest rate yield curve,
foreign exchange rate and the stock price. Assumptions are based on market conditions prevailing at each
reporting date. Derivative instruments reflect the estimated amount that the Company would receive or pay to
settle the contracts at the reporting date; and
The fair value of long-term debt is estimated based on discounted cash flows using current interest rate for
instruments with similar terms and remaining maturities.
Consolidated Financial Statements ▪ 28
71
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The carrying values which approximate the fair values of financial instruments, by class, are as follows as at December 31,
2023 and 2022:
Fair value hierarchy
As at December 31, 2023
Financial assets
Cash and cash equivalents
Accounts receivable
Derivative financial assets
Other current assets
Other non-current assets
Total
Financial liabilities
Trade and accrued liabilities
Long-term debt
Total
As at December 31, 2022
Financial assets
Cash and cash equivalents
Accounts receivable
Other current assets
Other non-current assets
Total
Financial liabilities
Trade and accrued liabilities
Long-term debt
Total
At fair value
through profit
or loss
$
At amortized
cost
$
Financial
liabilities at
amortized
cost
$
-
-
591
-
3,603
4,194
-
-
-
34,706
33,437
-
2,212
-
70,355
-
-
-
At fair value
through profit
or loss
$
At amortized
cost
$
-
-
5,517
2,620
8,137
-
-
-
42,691
32,872
10,613
-
86,176
-
-
-
-
-
-
-
-
-
37,024
108,500
145,524
Financial
liabilities at
amortized
cost
$
-
-
-
-
-
40,200
121,000
161,200
Carrying
value
Total
$
34,706
33,437
591
2,212
3,603
74,549
37,024
108,500
145,524
Carrying
value
Total
$
42,691
32,872
16,130
2,620
94,313
40,200
121,000
161,200
The fair value hierarchy reflects the significance of the inputs used in making the measurements and has the following
levels:
-
-
-
Level 1:
Level 2:
Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3:
Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table presents the financial instruments, by level, which are recognized at fair value in the consolidated
statements of financial position:
As at December 31, 2023
Level 1
Financial assets
At fair value through profit or loss
Total return swap (Note 7)
Investment in equity instruments (Note 12)
Restricted investment (Note 12)
Total
Financial assets
At fair value through profit or loss
Indexed deposit agreement (Note 7)
Investment in equity instruments (Note 12)
Restricted investment (Note 12)
Total
As at December 31, 2022
Level 1
$
-
-
-
-
$
-
-
-
-
Level 2
$
591
-
-
591
Level 2
$
5,517
-
-
5,517
Level 3
3,000
603
3,603
Level 3
$
-
$
-
2,000
620
2,620
72
Consolidated Financial Statements ▪ 29
Consolidated Financial Statements ▪ 30
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
The carrying values which approximate the fair values of financial instruments, by class, are as follows as at December 31,
Fair value hierarchy
2023 and 2022:
As at December 31, 2023
Financial assets
Cash and cash equivalents
Accounts receivable
Derivative financial assets
Other current assets
Other non-current assets
Total
Financial liabilities
Trade and accrued liabilities
Long-term debt
Total
As at December 31, 2022
Financial assets
Cash and cash equivalents
Accounts receivable
Other current assets
Other non-current assets
Total
Financial liabilities
Trade and accrued liabilities
Long-term debt
Total
At fair value
through profit
or loss
$
At amortized
cost
$
Financial
liabilities at
amortized
cost
$
591
3,603
4,194
34,706
33,437
2,212
70,355
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37,024
108,500
145,524
Financial
liabilities at
amortized
cost
$
40,200
121,000
161,200
-
-
-
-
-
-
-
-
-
At fair value
through profit
or loss
At amortized
cost
$
5,517
2,620
8,137
42,691
32,872
10,613
86,176
Carrying
value
Total
$
34,706
33,437
591
2,212
3,603
74,549
37,024
108,500
145,524
Carrying
value
Total
$
42,691
32,872
16,130
2,620
94,313
40,200
121,000
161,200
The fair value hierarchy reflects the significance of the inputs used in making the measurements and has the following
levels:
-
-
-
Level 1:
Level 2:
Level 3:
Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table presents the financial instruments, by level, which are recognized at fair value in the consolidated
statements of financial position:
As at December 31, 2023
Financial assets
At fair value through profit or loss
Total return swap (Note 7)
Investment in equity instruments (Note 12)
Restricted investment (Note 12)
Total
As at December 31, 2022
Financial assets
At fair value through profit or loss
Indexed deposit agreement (Note 7)
Investment in equity instruments (Note 12)
Restricted investment (Note 12)
Total
Level 1
$
-
-
-
-
Level 1
$
-
-
-
-
Level 2
$
591
-
-
591
Level 2
$
5,517
-
-
5,517
Level 3
$
-
3,000
603
3,603
Level 3
$
-
2,000
620
2,620
Consolidated Financial Statements ▪ 29
Consolidated Financial Statements ▪ 30
73
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
20. Operating Segments
The following tables summarize the information reviewed by the entity’s chief operating decision maker when
measuring performance:
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The geographic distribution of the Company’s revenues based on the location of the customers for the years ended
December 31, 2023 and 2022, and the identifiable non-current assets as at December 31, 2023 and 2022 are summarized
Specialty Semiconductors
Performance Materials
Total revenue
Specialty Semiconductors
Performance Materials
Corporate and unallocated
Adjusted EBITDA(1)
Interest on long-term debt, imputed interest and
other interest expense
Depreciation and amortization
Share-based compensation expense
Foreign exchange and derivative (gain) loss
Impairment of non-current assets (Note 29)
Loss on divestiture of subsidiary (Notes 4 and 29)
Loss on disposal of property, plant and equipment (Note 8 and 29)
Loss on disposal of assets held for sale (Note 8 and 29)
Litigation and restructuring (income) costs (Note 29)
Earnings (loss) before income tax
2023
$
156,479
85,892
242,371
27,544
21,948
(11,169)
38,323
8,834
16,110
1,432
(136)
672
-
1,051
-
(8,314)
18,674
2022
$
121,918
142,305
264,223
24,318
17,277
(11,567)
30,028
5,192
17,732
999
42
12,478
7,834
-
216
3,823
(18,288)
(1)
Earnings (loss) before income tax, depreciation and amortization, share-based compensation expense, impairment of non-current assets, loss on
divestiture of subsidiary, loss on disposal of property, plant and equipment, loss on disposal of assets held for sale, litigation and restructuring
(income) costs and financial expense.
Non-current assets (other than deferred tax assets and financial instruments)
Capital expenditures
Specialty Semiconductors
Performance Materials
Corporate and unallocated
Total
Assets excluding the deferred tax assets
Specialty Semiconductors
Performance Materials
Corporate and unallocated
Total
2023
$
12,838
4,458
45
17,341
2023
$
195,087
131,570
15,284
341,941
2022
$
10,038
5,944
80
16,062
2022
$
180,473
129,901
31,609
341,983
For the year ended December 31, 2023, one customer represented approximately 23% (2022 – 17%) of revenues of which
23% (2022 – 14%) is within the Specialty Semiconductors segment and nil (2022 – 3%) is within the Performance Materials
21. Supplemental Cash Flow Information
a) Net change in non-cash working capital balances related to operations consists of the following:
2023
$
12,846
4,270
20,211
107,158
9,128
43,284
5,334
3,425
9,426
23,709
3,580
242,371
2023
$
3,132
12,382
31,566
109,295
156,375
2023
$
74
(18,844)
3,811
7,838
(7,774)
(4,245)
4,340
(14,800)
2022
$
10,815
4,453
27,139
95,517
19,911
41,314
7,276
9,604
13,831
29,587
4,776
264,223
2022
$
3,411
13,590
27,156
108,044
152,201
2022
$
5,364
2,435
(437)
(427)
(1,691)
3,169
1,830
10,243
as follows:
Revenues
Asia
China
Japan
Other(1)
United States
Americas
Other
Europe
Germany
Belgium
Netherlands
France
Other(1)
Other
Total
(1) None exceeding 10%
Segment.
Asia
United States
Canada
Germany
Total
Decrease (increase) in assets:
Accounts receivable
Inventories
Income tax receivable
Other current assets
(Decrease) increase in liabilities:
Trade and accrued liabilities
Income tax payable
Deferred revenue
Net change
74
Consolidated Financial Statements ▪ 31
Consolidated Financial Statements ▪ 32
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
20. Operating Segments
measuring performance:
Specialty Semiconductors
Performance Materials
Total revenue
Specialty Semiconductors
Performance Materials
Corporate and unallocated
Adjusted EBITDA(1)
Interest on long-term debt, imputed interest and
other interest expense
Depreciation and amortization
Share-based compensation expense
Foreign exchange and derivative (gain) loss
Impairment of non-current assets (Note 29)
Loss on divestiture of subsidiary (Notes 4 and 29)
Loss on disposal of property, plant and equipment (Note 8 and 29)
Loss on disposal of assets held for sale (Note 8 and 29)
Litigation and restructuring (income) costs (Note 29)
Earnings (loss) before income tax
Capital expenditures
Specialty Semiconductors
Performance Materials
Corporate and unallocated
Total
Assets excluding the deferred tax assets
Specialty Semiconductors
Performance Materials
Corporate and unallocated
Total
2023
$
156,479
85,892
242,371
27,544
21,948
(11,169)
38,323
8,834
16,110
1,432
(136)
672
1,051
-
-
(8,314)
18,674
2023
$
12,838
4,458
45
17,341
2023
$
195,087
131,570
15,284
341,941
2022
$
121,918
142,305
264,223
24,318
17,277
(11,567)
30,028
5,192
17,732
999
42
12,478
7,834
-
216
3,823
(18,288)
2022
$
10,038
5,944
80
16,062
2022
$
180,473
129,901
31,609
341,983
The following tables summarize the information reviewed by the entity’s chief operating decision maker when
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
The geographic distribution of the Company’s revenues based on the location of the customers for the years ended
December 31, 2023 and 2022, and the identifiable non-current assets as at December 31, 2023 and 2022 are summarized
as follows:
Revenues
Asia
China
Japan
Other(1)
Americas
United States
Other
Europe
Germany
Belgium
Netherlands
France
Other(1)
Other
Total
(1) None exceeding 10%
2023
$
12,846
4,270
20,211
107,158
9,128
43,284
5,334
3,425
9,426
23,709
3,580
242,371
2022
$
10,815
4,453
27,139
95,517
19,911
41,314
7,276
9,604
13,831
29,587
4,776
264,223
For the year ended December 31, 2023, one customer represented approximately 23% (2022 – 17%) of revenues of which
23% (2022 – 14%) is within the Specialty Semiconductors segment and nil (2022 – 3%) is within the Performance Materials
Segment.
(1)
Earnings (loss) before income tax, depreciation and amortization, share-based compensation expense, impairment of non-current assets, loss on
divestiture of subsidiary, loss on disposal of property, plant and equipment, loss on disposal of assets held for sale, litigation and restructuring
(income) costs and financial expense.
Non-current assets (other than deferred tax assets and financial instruments)
Asia
United States
Canada
Germany
Total
2023
$
3,132
12,382
31,566
109,295
156,375
21. Supplemental Cash Flow Information
a) Net change in non-cash working capital balances related to operations consists of the following:
Decrease (increase) in assets:
Accounts receivable
Inventories
Income tax receivable
Other current assets
(Decrease) increase in liabilities:
Trade and accrued liabilities
Income tax payable
Deferred revenue
Net change
2023
$
74
(18,844)
3,811
7,838
(7,774)
(4,245)
4,340
(14,800)
2022
$
3,411
13,590
27,156
108,044
152,201
2022
$
5,364
2,435
(437)
(427)
(1,691)
3,169
1,830
10,243
Consolidated Financial Statements ▪ 31
Consolidated Financial Statements ▪ 32
75
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
b) The reconciliation of assets/liabilities arising from financing activities consists of the following:
23. Earnings per Share
December 31
2022
$
121,000
30,402
Cash flows
$
(12,500)
(2,858)
Imputed
interest
$
-
690
Non-Cash changes
Foreign
exchange
movement
$
-
779
Fair value
changes
$
-
-
Non-cash
working
capital
$
-
1,126
December 31
2023
$
108,500
30,139
151,402
(15,358)
690
779
-
1,126
138,639
December
31 2021
$
116,000
109
32,640
Cash flows
$
5,000
-
(2,999)
Imputed
interest
$
-
-
605
Non-Cash changes
Foreign
exchange
movement
$
-
-
(1,617)
Fair value
changes
$
-
(109)
-
Non-cash
working
capital
$
-
-
1,773
December
31 2022
$
121,000
-
30,402
148,749
2,001
605
(1,617)
(109)
1,773
151,402
number of shares due to their anti-dilutive effect due to net loss for the year.
Long-term debt
Lease liabilities
Total net liabilities from
financing liabilities
Long-term debt
Interest rate swap
Lease liabilities
Total net liabilities from
financing liabilities
c) The consolidated statements of cash flows exclude or include the following transactions:
Excluded additions unpaid at end of the year:
Additions to property, plant and equipment
Included additions unpaid at beginning of year:
Additions to property, plant and equipment
Excluded non-cash proceeds on the disposal of
Property, plant and equipment (Note 29)
d) Additions to property, plant and equipment consist of the following:
Additions to property, plant and equipment before prepayments
Prepayments for construction in progress
Less: Non-cash deposits for construction in progress
Additions to property, plant and equipment
22. Share Capital
2023
$
2,826
2,329
2,515
2023
$
17,387
2,469
(2,515)
17,341
2022
$
2,329
3,095
-
2022
$
12,193
3,869
-
16,062
The following table reconciles the numerators and denominators used for the computation of basic and diluted earnings
Net earnings (loss) for the year
(loss) per share:
Numerators
Denominators
Dilutive effect:
Stock options
Basic weighted average number of shares
Diluted weighted average number of shares
2023
$
15,399
2023
2022
$
(22,999)
2022
88,533,263
88,330,236
517,120
89,050,383
-
88,330,236
As at December 31, 2023, a total number of 219,864 stock options was excluded from the diluted weighted average
number of shares due to their anti-dilutive effect.
As at December 31, 2022, a total number of 1,598,938 stock options was excluded from the diluted weighted average
24. Share-Based Compensation
Restricted Share Unit and Performance Share Unit Plan
On November 4, 2015, the Company adopted a new Restricted Share Unit (“RSU”) and Performance Share Unit (“PSU”)
Plan (the “RSU & PSU Plan”) to replace the previous RSU Plan, for the purpose of enhancing the Company's ability to attract
and retain talented individuals to serve as employees, officers and executives of the Company and its affiliates and
promoting a greater alignment of interests between such employees, officers and executives and the shareholders of the
Company. The RSU & PSU Plan enables the Company to award eligible participants: (i) phantom RSUs that vest no later
than three years following the grant date; and (ii) phantom PSUs that vest after certain periods of time, not exceeding
three years, and subject to the achievement of certain performance criteria as determined by the Board of Directors. Such
plan provides for the settlement of RSUs and PSUs through either cash or the issuance of common shares of the Company
from treasury, for an amount equivalent to the volume weighted average of the trading price of the common shares of
the Company on the TSX for the five trading days immediately preceding the applicable RSU vesting determination date
or PSU vesting determination date.
In the case of a participant’s termination by the Company for cause or as a result of a voluntary resignation by the
participant before the end of a performance cycle, all RSUs and PSUs will be forfeited immediately as of the date on which
the participant is advised of his termination or resigns.
In the case of a participant’s termination by the Company other than for cause, if such participant is deemed to be on long-
term disability or if such participant retires before the end of a performance cycle, the number of RSUs which will vest at
such event will be prorated based on the number of months worked at the end of the performance cycle and all PSUs will
be forfeited immediately.
In the case of a participant’s death before the end of a performance cycle, the number of RSUs which will vest will be
prorated based on the number of months worked at the end of the fiscal year preceding the participant’s death and all
PSUs will be forfeited immediately.
An unlimited number of common shares, participating, with no par value, entitling the holder to one vote per
share; and
An unlimited number of preferred shares, issuable in one or more series with specific terms, privileges and
restrictions to be determined for each class by the Board of Directors. As at December 31, 2023 and 2022, no
preferred shares were issued.
Authorized:
-
Consolidated Financial Statements ▪ 33
Consolidated Financial Statements ▪ 34
-
76
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
b) The reconciliation of assets/liabilities arising from financing activities consists of the following:
23. Earnings per Share
Non-Cash changes
Foreign
Imputed
exchange
interest
movement
Fair value
changes
December 31
2022
Cash flows
$
121,000
30,402
$
(12,500)
(2,858)
151,402
(15,358)
December
31 2021
Cash flows
$
116,000
109
32,640
5,000
$
-
(2,999)
Long-term debt
Lease liabilities
Total net liabilities from
financing liabilities
Long-term debt
Interest rate swap
Lease liabilities
Total net liabilities from
financing liabilities
$
-
779
779
$
-
-
(1,617)
$
-
690
690
$
-
-
605
605
Non-Cash changes
Imputed
interest
Foreign
exchange
movement
Fair value
changes
Non-cash
working
capital
148,749
2,001
(1,617)
(109)
1,773
151,402
c) The consolidated statements of cash flows exclude or include the following transactions:
Non-cash
working
capital
$
-
1,126
1,126
December 31
2023
$
108,500
30,139
138,639
December
31 2022
121,000
$
-
$
-
-
1,773
30,402
$
-
-
-
$
-
-
(109)
2023
$
2,826
2,329
2,515
2023
$
17,387
2,469
(2,515)
17,341
2022
$
2,329
3,095
-
2022
$
12,193
3,869
-
16,062
Excluded additions unpaid at end of the year:
Additions to property, plant and equipment
Included additions unpaid at beginning of year:
Additions to property, plant and equipment
Excluded non-cash proceeds on the disposal of
Property, plant and equipment (Note 29)
d) Additions to property, plant and equipment consist of the following:
Additions to property, plant and equipment before prepayments
Prepayments for construction in progress
Less: Non-cash deposits for construction in progress
Additions to property, plant and equipment
22. Share Capital
Authorized:
-
-
share; and
An unlimited number of common shares, participating, with no par value, entitling the holder to one vote per
The following table reconciles the numerators and denominators used for the computation of basic and diluted earnings
(loss) per share:
Numerators
Net earnings (loss) for the year
Denominators
Basic weighted average number of shares
Dilutive effect:
Stock options
Diluted weighted average number of shares
2023
$
15,399
2023
2022
$
(22,999)
2022
88,533,263
88,330,236
517,120
89,050,383
-
88,330,236
As at December 31, 2023, a total number of 219,864 stock options was excluded from the diluted weighted average
number of shares due to their anti-dilutive effect.
As at December 31, 2022, a total number of 1,598,938 stock options was excluded from the diluted weighted average
number of shares due to their anti-dilutive effect due to net loss for the year.
24. Share-Based Compensation
Restricted Share Unit and Performance Share Unit Plan
On November 4, 2015, the Company adopted a new Restricted Share Unit (“RSU”) and Performance Share Unit (“PSU”)
Plan (the “RSU & PSU Plan”) to replace the previous RSU Plan, for the purpose of enhancing the Company's ability to attract
and retain talented individuals to serve as employees, officers and executives of the Company and its affiliates and
promoting a greater alignment of interests between such employees, officers and executives and the shareholders of the
Company. The RSU & PSU Plan enables the Company to award eligible participants: (i) phantom RSUs that vest no later
than three years following the grant date; and (ii) phantom PSUs that vest after certain periods of time, not exceeding
three years, and subject to the achievement of certain performance criteria as determined by the Board of Directors. Such
plan provides for the settlement of RSUs and PSUs through either cash or the issuance of common shares of the Company
from treasury, for an amount equivalent to the volume weighted average of the trading price of the common shares of
the Company on the TSX for the five trading days immediately preceding the applicable RSU vesting determination date
or PSU vesting determination date.
In the case of a participant’s termination by the Company for cause or as a result of a voluntary resignation by the
participant before the end of a performance cycle, all RSUs and PSUs will be forfeited immediately as of the date on which
the participant is advised of his termination or resigns.
In the case of a participant’s termination by the Company other than for cause, if such participant is deemed to be on long-
term disability or if such participant retires before the end of a performance cycle, the number of RSUs which will vest at
such event will be prorated based on the number of months worked at the end of the performance cycle and all PSUs will
be forfeited immediately.
An unlimited number of preferred shares, issuable in one or more series with specific terms, privileges and
restrictions to be determined for each class by the Board of Directors. As at December 31, 2023 and 2022, no
preferred shares were issued.
In the case of a participant’s death before the end of a performance cycle, the number of RSUs which will vest will be
prorated based on the number of months worked at the end of the fiscal year preceding the participant’s death and all
PSUs will be forfeited immediately.
Consolidated Financial Statements ▪ 33
Consolidated Financial Statements ▪ 34
77
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
The maximum number of common shares which may be issued under the RSU & PSU Plan is 5,000,000. Common shares
in respect of RSUs or PSUs to be settled through the issuance of common shares but that have been forfeited, cancelled
or settled in cash shall be available for RSUs or PSUs to be granted thereafter pursuant to this plan. No RSUs or PSUs to be
settled through the issuance of common shares may be granted to any participant unless the number of common shares:
(a) issued to "Insiders" within any one-year period; and (b) issuable to "Insiders" at any time, under the plan, or when
combined with all of the Company's other security-based compensation arrangements, could not exceed 10% of the total
number of issued and outstanding common shares, respectively.
For the year ended December 31, 2023, the Company granted 155,873 RSUs (2022 – 95,881), 111,458 RSUs were paid
(2022 – 146,549) and 3,000 RSUs were forfeited (2022 – 13,110). As at December 31, 2023, 319,896 RSUs were
outstanding (2022 – 278,481).
For the year ended December 31, 2023, the Company granted nil PSUs (2022 – nil), nil PSUs were paid (2022 – nil) and
nil PSUs were cancelled (2022 – 200,000). As at December 31, 2023, nil PSUs were outstanding (2022 – nil).
Stock Appreciation Rights Plan
On June 7, 2010, the Company adopted a Restricted Share Unit for Foreign Employees Plan (the “RSUFE Plan”) which was
slightly amended on November 7, 2012 by the Company to become the Stock Appreciation Rights plan (the “SAR Plan”)
which replaced the RSUFE Plan. The SAR Plan enables the Company to award eligible participants phantom stock options
to foreign directors, officers and employees. SARs usually have a six-year term and vest equally over a four-year period at
an annual rate of 25% per year beginning one year following the SARs grant date. The amount of cash payout is equal to
the sum of the positive differences between the volume weighted average trading price of the common shares of the
Company on the TSX in the last twenty (20) trading days immediately preceding the exercise date and the grant price of
each SAR redeemed.
At the end of each financial period, changes in the Company’s payment obligations due to changes in the market value of
the common shares on the TSX are recorded as an expense. For the year ended December 31, 2023, the Company granted
63,839 SARs (2022 – 171,025), 127,874 SARs were paid (2022 – 200,000) and 16,250 SARs were forfeited (2022 – 377,500).
As at December 31, 2023, 843,872 SARs were outstanding (2022 – 924,157).
Deferred Share Unit Plan
On May 7, 2014, the Company adopted a Deferred Share Unit (“DSU”) Plan (the “DSU Plan”) which enables the Company
to provide Board directors and key officers and employees designated by the Board with phantom share units to enhance
the Company's ability to attract and retain individuals with the right combination of skills and experience to serve on the
Company’s Board or as Company’s executives. Unless the Board of Directors decides otherwise at its sole discretion, DSUs
vest entirely at their date of grant and become payable in cash upon termination of services of a director, or termination
of employment of an officer or employee. The amount of cash payout is equal to the volume weighted average trading
price of the common shares of the Company on the TSX of the twenty (20) trading days immediately preceding the date
of payment of the DSU.
For the year ended December 31, 2023, the Company granted 156,701 DSUs (2022 – 476,152) and nil DSUs were paid
(2022 – 348,277). As at December 31, 2023, 1,859,544 DSUs were outstanding (2022 – 1,702,843).
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Stock Option Plan
On April 11, 2011, the Company adopted a new stock option plan (the “Stock Option Plan”) under which a maximum
number of options granted cannot exceed 5,000,000. Options granted under the Stock Option Plan may be exercised
during a period not exceeding ten years from the date of grant. The stock options outstanding on December 31, 2023, may
be exercised during a period not exceeding six years from their date of grant. Unless the Board of Directors decides
otherwise at its sole discretion, options vest at a rate of 25% (100% for directors) per year, beginning one year following
the grant date of the options. Any unexercised options will expire one month after the date beneficiary ceases to be an
employee, director or officer (collectively the “optionee”) and one year after the optionee’s death, retirement or
permanent disability, as the case may be, or prior to the expiration of the term of the option, whichever occurs earlier.
The following table presents information concerning all outstanding stock options:
Number
of options
Weighted average
exercise price
Number
of options
Weighted average
exercise price
2023
CA$
1.91
2.74
2.28
1.90
2.10
Outstanding, beginning of year
Granted
Exercised
Outstanding, end of year
Exercisable, end of year
1,598,938
140,712
(374,488)
1,365,162
458,454
825,968
772,970
-
1,598,938
457,749
The outstanding stock options as at December 31, 2023 are as follows:
Exercise price
Number of options
February 2024
March 2025
March 2026
May 2027
December 2027
March 2028
May 2028
February 2029
Exercisable
Outstanding
contractual life
Low
CA$
2.71
3.43
2.10
3.38
2.42
2.27
1.23
2.74
High
CA$
2.71
3.43
2.10
3.38
2.42
2.27
1.23
2.74
35,165
30,940
24,106
175,000
18,243
175,000
-
-
35,165
30,940
12,163
48,212
325,000
72,970
700,000
140,712
458,454
1,365,162
The fair value of stock options at the grant date was measured using the Black-Scholes option pricing model. The historical
share price of the Company’s common shares is used to estimate expected volatility, and government bond rates are used
to estimate the risk-free interest rate.
The following table illustrates the inputs used in the average measurement of the fair values of the stock options at the
grant date granted during the years ended December 31, 2023 and 2022:
Expected stock price volatility
Dividend
Risk-free interest rate
Expected option life
Fair value – weighted average of options issued
2023
60%
None
3.81%
4 years
CA$1.36
2022
53%
None
2.59%
4 years
CA$0.57
2022
CA$
2.46
1.33
-
1.91
2.41
0.15
1.17
2.17
3.36
3.92
4.18
4.39
5.15
4.10
Weighted
average
remaining
(in years)
78
Consolidated Financial Statements ▪ 35
Consolidated Financial Statements ▪ 36
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The maximum number of common shares which may be issued under the RSU & PSU Plan is 5,000,000. Common shares
in respect of RSUs or PSUs to be settled through the issuance of common shares but that have been forfeited, cancelled
or settled in cash shall be available for RSUs or PSUs to be granted thereafter pursuant to this plan. No RSUs or PSUs to be
settled through the issuance of common shares may be granted to any participant unless the number of common shares:
(a) issued to "Insiders" within any one-year period; and (b) issuable to "Insiders" at any time, under the plan, or when
combined with all of the Company's other security-based compensation arrangements, could not exceed 10% of the total
number of issued and outstanding common shares, respectively.
For the year ended December 31, 2023, the Company granted 155,873 RSUs (2022 – 95,881), 111,458 RSUs were paid
(2022 – 146,549) and 3,000 RSUs were forfeited (2022 – 13,110). As at December 31, 2023, 319,896 RSUs were
outstanding (2022 – 278,481).
For the year ended December 31, 2023, the Company granted nil PSUs (2022 – nil), nil PSUs were paid (2022 – nil) and
nil PSUs were cancelled (2022 – 200,000). As at December 31, 2023, nil PSUs were outstanding (2022 – nil).
Stock Appreciation Rights Plan
On June 7, 2010, the Company adopted a Restricted Share Unit for Foreign Employees Plan (the “RSUFE Plan”) which was
slightly amended on November 7, 2012 by the Company to become the Stock Appreciation Rights plan (the “SAR Plan”)
which replaced the RSUFE Plan. The SAR Plan enables the Company to award eligible participants phantom stock options
to foreign directors, officers and employees. SARs usually have a six-year term and vest equally over a four-year period at
an annual rate of 25% per year beginning one year following the SARs grant date. The amount of cash payout is equal to
the sum of the positive differences between the volume weighted average trading price of the common shares of the
Company on the TSX in the last twenty (20) trading days immediately preceding the exercise date and the grant price of
each SAR redeemed.
At the end of each financial period, changes in the Company’s payment obligations due to changes in the market value of
the common shares on the TSX are recorded as an expense. For the year ended December 31, 2023, the Company granted
63,839 SARs (2022 – 171,025), 127,874 SARs were paid (2022 – 200,000) and 16,250 SARs were forfeited (2022 – 377,500).
As at December 31, 2023, 843,872 SARs were outstanding (2022 – 924,157).
Deferred Share Unit Plan
On May 7, 2014, the Company adopted a Deferred Share Unit (“DSU”) Plan (the “DSU Plan”) which enables the Company
to provide Board directors and key officers and employees designated by the Board with phantom share units to enhance
the Company's ability to attract and retain individuals with the right combination of skills and experience to serve on the
Company’s Board or as Company’s executives. Unless the Board of Directors decides otherwise at its sole discretion, DSUs
vest entirely at their date of grant and become payable in cash upon termination of services of a director, or termination
of employment of an officer or employee. The amount of cash payout is equal to the volume weighted average trading
price of the common shares of the Company on the TSX of the twenty (20) trading days immediately preceding the date
of payment of the DSU.
For the year ended December 31, 2023, the Company granted 156,701 DSUs (2022 – 476,152) and nil DSUs were paid
(2022 – 348,277). As at December 31, 2023, 1,859,544 DSUs were outstanding (2022 – 1,702,843).
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
Stock Option Plan
On April 11, 2011, the Company adopted a new stock option plan (the “Stock Option Plan”) under which a maximum
number of options granted cannot exceed 5,000,000. Options granted under the Stock Option Plan may be exercised
during a period not exceeding ten years from the date of grant. The stock options outstanding on December 31, 2023, may
be exercised during a period not exceeding six years from their date of grant. Unless the Board of Directors decides
otherwise at its sole discretion, options vest at a rate of 25% (100% for directors) per year, beginning one year following
the grant date of the options. Any unexercised options will expire one month after the date beneficiary ceases to be an
employee, director or officer (collectively the “optionee”) and one year after the optionee’s death, retirement or
permanent disability, as the case may be, or prior to the expiration of the term of the option, whichever occurs earlier.
The following table presents information concerning all outstanding stock options:
Outstanding, beginning of year
Granted
Exercised
Outstanding, end of year
Exercisable, end of year
Number
of options
1,598,938
140,712
(374,488)
1,365,162
458,454
2023
Weighted average
exercise price
CA$
1.91
2.74
2.28
1.90
2.10
Number
of options
825,968
772,970
-
1,598,938
457,749
2022
Weighted average
exercise price
CA$
2.46
1.33
-
1.91
2.41
The outstanding stock options as at December 31, 2023 are as follows:
Exercise price
Number of options
February 2024
March 2025
March 2026
May 2027
December 2027
March 2028
May 2028
February 2029
Low
CA$
2.71
3.43
2.10
3.38
2.42
2.27
1.23
2.74
High
CA$
2.71
3.43
2.10
3.38
2.42
2.27
1.23
2.74
Exercisable
Outstanding
35,165
30,940
-
24,106
175,000
18,243
175,000
-
458,454
35,165
30,940
12,163
48,212
325,000
72,970
700,000
140,712
1,365,162
Weighted
average
remaining
contractual life
(in years)
0.15
1.17
2.17
3.36
3.92
4.18
4.39
5.15
4.10
The fair value of stock options at the grant date was measured using the Black-Scholes option pricing model. The historical
share price of the Company’s common shares is used to estimate expected volatility, and government bond rates are used
to estimate the risk-free interest rate.
The following table illustrates the inputs used in the average measurement of the fair values of the stock options at the
grant date granted during the years ended December 31, 2023 and 2022:
Expected stock price volatility
Dividend
Risk-free interest rate
Expected option life
Fair value – weighted average of options issued
Consolidated Financial Statements ▪ 35
2023
60%
None
3.81%
4 years
CA$1.36
2022
53%
None
2.59%
4 years
CA$0.57
Consolidated Financial Statements ▪ 36
79
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The following table shows the share-based compensation expense recorded in the consolidated statements of earnings
for the years ended December 31, 2023 and 2022:
27. Financial Risk Management
Expense
RSUs
SARs
DSUs
Stock options
Total return swap (Note 7)
Total
The following amounts were recorded:
Liability
RSUs
SARs
DSUs
Total
Intrinsic value of vested units
25. Commitments and Contingencies
Commitments
2023
$
304
528
1,662
274
(1,336)
1,432
2023
$
474
1,007
5,051
6,532
6,046
2022
$
202
244
1,121
326
(894)
999
2022
$
375
562
3,906
4,843
4,015
As at December 31, 2023, in the normal course of business, the Company contracted letters of credit for an amount of
$551 (2022 – $883).
Contingencies
In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or assets.
As at the date of issue of the consolidated financial statements, the Company was not aware of any significant events that
would have a material effect on its consolidated financial statements.
26. Related Party Transactions
The Company’s related parties are its directors and executive members.
Unless otherwise stated, none of the transactions incorporated special terms and conditions and no guarantees were given
or received. Outstanding balances are settled in cash.
Key management compensation
Key management includes directors (executive and non-executive) and certain senior management. The compensation
expense paid or payable to key management for employee services is as follows:
In the normal course of operations, the Company is exposed to various financial risks. These risk factors include market
risk (foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
Market risk is the risk that changes in market price, such as foreign exchange rates, equity prices and interest rates, will
affect the Company’s net earnings or the value of financial instruments.
The objective of market risk management is to mitigate exposures within acceptable limits, while maximizing
Market risk
returns.
a) Foreign currency risk
Foreign currency risk is defined as the Company’s exposure to a gain or a loss in the value of its financial instruments
as a result of fluctuations in foreign exchange rates. The Company is exposed to foreign exchange rate variability
primarily in relation to certain sales commitments, expected purchase transactions, certain local operating expenses
and debt denominated in a foreign currency. In addition, these operations have exposure to foreign exchange rates
primarily through cash and cash equivalents and other working capital accounts denominated in currencies other
than their functional currencies.
The following table summarizes
in US dollar equivalents the Company’s major currency exposures as at
December 31, 2023:
Cash and cash equivalents
Accounts receivable
Derivative financial assets
Other current assets
Other non current assets
Trade and accrued liabilities
Lease liabilities
Net financial assets (liabilities)
HKD
MYR
2023
Other
CA$
$
489
1,662
591
-
-
EUR
$
1,999
6,594
-
2,212
603
(6,360)
(16,605)
(297)
1,762
GBP
$
67
-
-
-
-
-
$
34
-
-
-
-
(116)
(69)
(151)
(12,987)
(9,349)
(436)
(166)
(55)
(369)
(129)
(46)
$
36
1
-
-
-
-
$
9
-
-
-
-
-
For the Company’s subsidiaries with a functional currency other than the US dollar, their exposures of financial assets and
financial liabilities denominated in US dollars are $10,401 and $496 respectively with a net position of $9,905. A
strengthening or weakening in the exchange rate between the functional currencies of these subsidiaries and the US dollar
of five-percentage points results in a decrease or increase of $495 to earnings before income tax.
The following table shows the impact on earnings before income tax of a five-percentage point strengthening or weakening
of foreign currencies against the US dollar as at December 31, 2023 for the Company’s financial instruments denominated
in non-functional currencies:
Wages and salaries
Share-based compensation and others (Note 24)
Total
2023
$
2,160
2,563
4,723
2022
$
1,995
1,677
3,672
5% Strengthening
5% Weakening
CA$
$
(830)
830
EUR
$
88
(88)
GBP
$
(18)
18
HKD
MYR
Other
$
(8)
8
$
(6)
6
$
(2)
2
80
Consolidated Financial Statements ▪ 37
Consolidated Financial Statements ▪ 38
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
The following table shows the share-based compensation expense recorded in the consolidated statements of earnings
27. Financial Risk Management
for the years ended December 31, 2023 and 2022:
Stock options
Total return swap (Note 7)
The following amounts were recorded:
Expense
RSUs
SARs
DSUs
Total
Liability
RSUs
SARs
DSUs
Total
Intrinsic value of vested units
25. Commitments and Contingencies
Commitments
$551 (2022 – $883).
Contingencies
2023
$
304
528
1,662
274
(1,336)
1,432
2023
$
474
1,007
5,051
6,532
6,046
2022
$
202
244
1,121
326
(894)
999
2022
$
375
562
3,906
4,843
4,015
As at December 31, 2023, in the normal course of business, the Company contracted letters of credit for an amount of
In the normal course of operations, the Company is exposed to events that could give rise to contingent liabilities or assets.
As at the date of issue of the consolidated financial statements, the Company was not aware of any significant events that
would have a material effect on its consolidated financial statements.
26. Related Party Transactions
The Company’s related parties are its directors and executive members.
Unless otherwise stated, none of the transactions incorporated special terms and conditions and no guarantees were given
or received. Outstanding balances are settled in cash.
Key management compensation
Key management includes directors (executive and non-executive) and certain senior management. The compensation
expense paid or payable to key management for employee services is as follows:
In the normal course of operations, the Company is exposed to various financial risks. These risk factors include market
risk (foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
Market risk
Market risk is the risk that changes in market price, such as foreign exchange rates, equity prices and interest rates, will
affect the Company’s net earnings or the value of financial instruments.
The objective of market risk management is to mitigate exposures within acceptable limits, while maximizing
returns.
a) Foreign currency risk
Foreign currency risk is defined as the Company’s exposure to a gain or a loss in the value of its financial instruments
as a result of fluctuations in foreign exchange rates. The Company is exposed to foreign exchange rate variability
primarily in relation to certain sales commitments, expected purchase transactions, certain local operating expenses
and debt denominated in a foreign currency. In addition, these operations have exposure to foreign exchange rates
primarily through cash and cash equivalents and other working capital accounts denominated in currencies other
than their functional currencies.
The following table summarizes
December 31, 2023:
in US dollar equivalents the Company’s major currency exposures as at
Cash and cash equivalents
Accounts receivable
Derivative financial assets
Other current assets
Other non current assets
Trade and accrued liabilities
Lease liabilities
Net financial assets (liabilities)
CA$
$
489
1,662
591
-
-
(12,987)
(6,360)
(16,605)
EUR
$
1,999
6,594
-
2,212
603
(9,349)
(297)
1,762
GBP
$
67
-
-
-
-
(436)
-
(369)
HKD
$
34
-
-
-
-
(116)
(69)
(151)
MYR
$
36
1
-
-
-
(166)
-
(129)
2023
Other
$
9
-
-
-
-
(55)
-
(46)
For the Company’s subsidiaries with a functional currency other than the US dollar, their exposures of financial assets and
financial liabilities denominated in US dollars are $10,401 and $496 respectively with a net position of $9,905. A
strengthening or weakening in the exchange rate between the functional currencies of these subsidiaries and the US dollar
of five-percentage points results in a decrease or increase of $495 to earnings before income tax.
The following table shows the impact on earnings before income tax of a five-percentage point strengthening or weakening
of foreign currencies against the US dollar as at December 31, 2023 for the Company’s financial instruments denominated
in non-functional currencies:
Wages and salaries
Share-based compensation and others (Note 24)
Total
2023
$
2,160
2,563
4,723
2022
$
1,995
1,677
3,672
5% Strengthening
5% Weakening
CA$
$
(830)
830
EUR
$
88
(88)
GBP
$
(18)
18
HKD
$
(8)
8
MYR
$
(6)
6
Other
$
(2)
2
Consolidated Financial Statements ▪ 37
Consolidated Financial Statements ▪ 38
81
2023 ANNUAL REPORT 5N+
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
The Company will occasionally enter into foreign exchange forward contracts to sell US dollars in exchange for Canadian
dollars and Euros. These contracts would hedge a portion of ongoing foreign exchange risk on the Company’s cash flows
since much of its non-US dollar expenses are incurred in Canadian dollars and Euros. The Company may also enter into
foreign exchange contracts to sell Euros for US dollars. As at December 31, 2023, the Company has no foreign exchange
contracts outstanding.
b)
Interest rate risk
Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest rates.
The Company’s policy is to limit its exposure to interest rate risk fluctuation by ensuring that a reasonable portion
of its long-term debt is made of subordinated debts at fixed rate. The Company is exposed to interest rate
fluctuations on its revolving credit facility, which bears a floating interest rate. A 1% increase/decrease in interest
rates would have an impact of approximately $835 on the Company’s earnings before income tax on a twelve-month
horizon based on the balance outstanding on December 31, 2023.
c) Other price risk
Other price risk is the risk that fair value or future cash flows will fluctuate because of changes in market prices, other
than those arising from interest rate risk or currency risk.
Credit risk
Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a contract and, as
a result, create a financial loss for the Company. The Company has a credit policy that defines standard credit practice.
This policy dictates that all new customer accounts be reviewed prior to approval and establishes the maximum amount
of credit exposure per customer. The creditworthiness and financial well-being of the customer are monitored on an
ongoing basis.
The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit
loss allowance for trade receivables.
The expected loss rates are based on the Company’s historical credit losses experienced over the three-year period
prior to the period end. The historical loss rates are then adjusted for current and forward-looking information on
macroeconomic factors affecting the Company’s customers. Historically, the Company has not incurred any significant
losses in respect of its trade receivables. Therefore, the loss allowance at the end of each period and the change
recorded for each period is insignificant.
The past due receivables are as follows:
Current
More than 30 days past due
More than 60 days past due
Gross carrying amount
Loss allowance
Total trade receivables
82
2023
$
23,889
71
1,195
25,155
(38)
25,117
2022
$
24,152
192
1,911
26,255
(152)
26,103
Consolidated Financial Statements ▪ 39
Consolidated Financial Statements ▪ 40
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
The following table summarizes the changes in the loss allowance for trade receivables:
2023
152
$
2
(116)
38
2022
149
$
3
-
152
Beginning of year
Increase during the year
Unused amounts reversed
End of year
recovery.
Liquidity risk
The loss allowance is included in selling, general and administrative expenses in the consolidated statement of earnings,
and is net of any recoveries that were provided for in prior periods.
Amounts charged to the loss allowance account are generally written off when there is no reasonable expectation of
Counterparties to financial instruments may also expose the Company to credit losses in the event of non-performance.
Counterparties for derivative and cash transactions are limited to high credit quality financial institutions, which are
monitored on an ongoing basis. Counterparty credit assessments are based on the financial health of the institutions and
their credit ratings from external agencies, therefore no impairment loss was identified as at December 31, 2023.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company
manages liquidity risk through the management of its capital structure. It also manages liquidity risk by continually
monitoring actual and projected cash flows, taking into account the Company’s sales and receipts and matching the
maturity profile of financial assets and financial liabilities. The Board of Directors reviews and approves the Company’s
annual operating and capital budgets as well as any material transactions out of the ordinary course of business, including
proposals on acquisitions and other major investments.
The following table reflects the contractual cash flows of the Company’s financial liabilities as at December 31, 2023:
Carrying
amount
$
37,024
108,500
30,139
175,663
1 year
2 years
3 years
4 years
$
37,024
31,184
2,761
70,969
$
-
5,766
2,642
8,408
$
-
85,422
2,558
87,980
Over
5 years
$
-
-
$
-
-
2,534
2,534
26,803
26,803
2023
Total
$
37,024
122,372
37,298
196,694
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
The Company requires the approval of its lenders on some of the capital transactions such as the payment of dividends
and capital expenditures over a certain level.
The Company monitors capital on the basis of the debt-to-equity ratio. This ratio is calculated as net debt divided by total
equity. Net debt is calculated as total borrowings (comprising long-term debt in the consolidated statement of financial
position) less cash and cash equivalents. Any introduced IFRS 16 reporting measures in reference to lease liabilities are
excluded from the calculation.
Trade and accrued liabilities
Long-term debt
Lease liabilities
Total
28. Capital Management
the cost of capital.
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
The Company will occasionally enter into foreign exchange forward contracts to sell US dollars in exchange for Canadian
The following table summarizes the changes in the loss allowance for trade receivables:
dollars and Euros. These contracts would hedge a portion of ongoing foreign exchange risk on the Company’s cash flows
since much of its non-US dollar expenses are incurred in Canadian dollars and Euros. The Company may also enter into
foreign exchange contracts to sell Euros for US dollars. As at December 31, 2023, the Company has no foreign exchange
contracts outstanding.
b)
Interest rate risk
c) Other price risk
Credit risk
ongoing basis.
Interest rate risk refers to the risk that future cash flows will fluctuate as a result of changes in market interest rates.
The Company’s policy is to limit its exposure to interest rate risk fluctuation by ensuring that a reasonable portion
of its long-term debt is made of subordinated debts at fixed rate. The Company is exposed to interest rate
fluctuations on its revolving credit facility, which bears a floating interest rate. A 1% increase/decrease in interest
rates would have an impact of approximately $835 on the Company’s earnings before income tax on a twelve-month
horizon based on the balance outstanding on December 31, 2023.
Other price risk is the risk that fair value or future cash flows will fluctuate because of changes in market prices, other
than those arising from interest rate risk or currency risk.
Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a contract and, as
a result, create a financial loss for the Company. The Company has a credit policy that defines standard credit practice.
This policy dictates that all new customer accounts be reviewed prior to approval and establishes the maximum amount
of credit exposure per customer. The creditworthiness and financial well-being of the customer are monitored on an
The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit
loss allowance for trade receivables.
The expected loss rates are based on the Company’s historical credit losses experienced over the three-year period
prior to the period end. The historical loss rates are then adjusted for current and forward-looking information on
macroeconomic factors affecting the Company’s customers. Historically, the Company has not incurred any significant
losses in respect of its trade receivables. Therefore, the loss allowance at the end of each period and the change
recorded for each period is insignificant.
The past due receivables are as follows:
Current
More than 30 days past due
More than 60 days past due
Gross carrying amount
Loss allowance
Total trade receivables
2023
$
23,889
71
1,195
25,155
(38)
25,117
2022
$
24,152
192
1,911
26,255
(152)
26,103
Beginning of year
Increase during the year
Unused amounts reversed
End of year
2023
$
152
2
(116)
38
2022
$
149
3
-
152
The loss allowance is included in selling, general and administrative expenses in the consolidated statement of earnings,
and is net of any recoveries that were provided for in prior periods.
Amounts charged to the loss allowance account are generally written off when there is no reasonable expectation of
recovery.
Counterparties to financial instruments may also expose the Company to credit losses in the event of non-performance.
Counterparties for derivative and cash transactions are limited to high credit quality financial institutions, which are
monitored on an ongoing basis. Counterparty credit assessments are based on the financial health of the institutions and
their credit ratings from external agencies, therefore no impairment loss was identified as at December 31, 2023.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company
manages liquidity risk through the management of its capital structure. It also manages liquidity risk by continually
monitoring actual and projected cash flows, taking into account the Company’s sales and receipts and matching the
maturity profile of financial assets and financial liabilities. The Board of Directors reviews and approves the Company’s
annual operating and capital budgets as well as any material transactions out of the ordinary course of business, including
proposals on acquisitions and other major investments.
The following table reflects the contractual cash flows of the Company’s financial liabilities as at December 31, 2023:
Carrying
amount
$
37,024
108,500
30,139
175,663
1 year
$
37,024
31,184
2,761
70,969
2 years
$
-
5,766
2,642
8,408
3 years
$
-
85,422
2,558
87,980
4 years
$
-
-
2,534
2,534
Over
5 years
$
-
-
26,803
26,803
2023
Total
$
37,024
122,372
37,298
196,694
Trade and accrued liabilities
Long-term debt
Lease liabilities
Total
28. Capital Management
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The Company requires the approval of its lenders on some of the capital transactions such as the payment of dividends
and capital expenditures over a certain level.
The Company monitors capital on the basis of the debt-to-equity ratio. This ratio is calculated as net debt divided by total
equity. Net debt is calculated as total borrowings (comprising long-term debt in the consolidated statement of financial
position) less cash and cash equivalents. Any introduced IFRS 16 reporting measures in reference to lease liabilities are
excluded from the calculation.
Consolidated Financial Statements ▪ 39
Consolidated Financial Statements ▪ 40
83
2023 ANNUAL REPORT 5N+
In January 2024, the Company increased its minority equity stake in Microbion Corporation (Microbion) for an amount of
$1,000. As at December 31, 2023, the Company’s stake in Microbion was valued at $3,000 (Note 12).
Notes to Consolidated Financial Statements
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
Years ended December 31
(in thousands of United States dollars)
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Debt-to-equity ratios as at December 31, 2023 and 2022 are as follows:
30. Subsequent Event
Long-term debt including current portion
Total debt
Less: Cash and cash equivalents
Net debt
Shareholders’ equity
Debt-to-equity ratio
29. Expenses by Nature
Expenses by nature include the following:
Wages and salaries
Depreciation of property, plant and equipment (Note 8)
Depreciation of right-of-use assets (Note 9)
Amortization of other assets (Note 12)
Other expenses (income), net
Amortization of intangible assets (Note 10)
Share-based compensation expense (Note 24)
Loss (gain) on disposal of property, plant and equipment(1)
Loss on disposal of assets held for sale (Note 8)(2)
Loss on divestiture of subsidiary (Note 4)
Impairment of non-current assets (Notes 4, 8 and 10)
Research and development, net of tax credits(3)
Litigation and restructuring (income) costs, net(4)
Other income
2023
$
108,500
108,500
(34,706)
73,794
128,592
57%
2023
$
54,772
10,297
2,538
258
3,275
1,432
973
-
-
672
2,890
(8,314)
(172)
2022
$
121,000
121,000
(42,691)
78,309
112,776
69%
2022
$
55,107
11,717
2,702
260
3,313
999
(13)
216
7,834
12,478
4,638
3,823
(291)
(1)
(2)
Includes a loss on disposal of $1,051 on production equipment following a change of technical requirements and functionalities by the Company.
The Company disposed this production equipment in a non-monetary transaction with the supplier in exchange for a credit to be applied against
future purchases of production equipment.
A loss of $216 on the disposal of assets held for sale was recorded in 2022 within “Other expenses (income), net” within the consolidated
statement of earnings (loss). The asset, which was previously presented as held for sale within the Specialty Semiconductors segment, pertains
to a reclassification from buildings for an amount of $3,032 in 2022. The reclassification relates to the planned relocation of operations from
Canada of one of the Company’s subsidiaries situated in Asia, announced in the third quarter of 2020.
(3) Reduced research and development, net of tax credits by an amount of $4,060 for the year ended December 31, 2023 resulting from research
and development subsidies. There is an outstanding receivable related to these grants as at December 31, 2023 for an amount of $2,045 included
within Accounts receivable.
Reduced research and development, net of tax credits by an amount of $3,667 for the year ended December 31, 2022 resulting from research
and development subsidies. There is an outstanding receivable related to these grants as at December 31, 2022 for an amount of $1,460 included
within Accounts receivable.
(4)
In 2023, the Company recorded litigation and restructuring costs. The main costs are as follows:
- Income of $8,974 received from the previous shareholder of AZUR. The income was received as per stipulations in the share purchase
agreement and is not related to AZUR’s performance post-acquisition;
- Costs related to site closure in Asia for an amount of $131;
- Changes in senior management for an amount of $158; and
- Charge related to a non-trade receivable which became non recoverable during the year for an amount of $228.
In 2022, the Company recorded litigation and restructuring costs. The main costs are as follows:
- Costs related to the divestiture of a subsidiary of $2,594 (Note 4);
- Change in senior executive management for an amount of $241;
- Settlement of a contract by mutual agreement for an amount of $372; and
- Costs related to site closure in Asia for an amount of $358.
84
Consolidated Financial Statements ▪ 41
Consolidated Financial Statements ▪ 42
5N+ 2023 ANNUAL REPORT
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
5N PLUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31
(in thousands of United States dollars, unless otherwise indicated)
Notes to Consolidated Financial Statements
Years ended December 31
(in thousands of United States dollars)
Debt-to-equity ratios as at December 31, 2023 and 2022 are as follows:
30. Subsequent Event
In January 2024, the Company increased its minority equity stake in Microbion Corporation (Microbion) for an amount of
$1,000. As at December 31, 2023, the Company’s stake in Microbion was valued at $3,000 (Note 12).
Consolidated Financial Statements ▪ 42
85
Long-term debt including current portion
Less: Cash and cash equivalents
Total debt
Net debt
Shareholders’ equity
Debt-to-equity ratio
29. Expenses by Nature
Expenses by nature include the following:
Wages and salaries
Depreciation of property, plant and equipment (Note 8)
Depreciation of right-of-use assets (Note 9)
Amortization of other assets (Note 12)
Other expenses (income), net
Amortization of intangible assets (Note 10)
Share-based compensation expense (Note 24)
Loss (gain) on disposal of property, plant and equipment(1)
Loss on disposal of assets held for sale (Note 8)(2)
Loss on divestiture of subsidiary (Note 4)
Impairment of non-current assets (Notes 4, 8 and 10)
Research and development, net of tax credits(3)
Litigation and restructuring (income) costs, net(4)
Other income
2023
$
108,500
108,500
(34,706)
73,794
128,592
57%
2023
$
54,772
10,297
2,538
258
3,275
1,432
973
-
-
672
2,890
(8,314)
(172)
2022
$
121,000
121,000
(42,691)
78,309
112,776
69%
2022
$
55,107
11,717
2,702
260
3,313
999
(13)
216
7,834
12,478
4,638
3,823
(291)
(1)
Includes a loss on disposal of $1,051 on production equipment following a change of technical requirements and functionalities by the Company.
The Company disposed this production equipment in a non-monetary transaction with the supplier in exchange for a credit to be applied against
future purchases of production equipment.
(2)
A loss of $216 on the disposal of assets held for sale was recorded in 2022 within “Other expenses (income), net” within the consolidated
statement of earnings (loss). The asset, which was previously presented as held for sale within the Specialty Semiconductors segment, pertains
to a reclassification from buildings for an amount of $3,032 in 2022. The reclassification relates to the planned relocation of operations from
Canada of one of the Company’s subsidiaries situated in Asia, announced in the third quarter of 2020.
(3) Reduced research and development, net of tax credits by an amount of $4,060 for the year ended December 31, 2023 resulting from research
and development subsidies. There is an outstanding receivable related to these grants as at December 31, 2023 for an amount of $2,045 included
within Accounts receivable.
within Accounts receivable.
Reduced research and development, net of tax credits by an amount of $3,667 for the year ended December 31, 2022 resulting from research
and development subsidies. There is an outstanding receivable related to these grants as at December 31, 2022 for an amount of $1,460 included
(4)
In 2023, the Company recorded litigation and restructuring costs. The main costs are as follows:
- Income of $8,974 received from the previous shareholder of AZUR. The income was received as per stipulations in the share purchase
agreement and is not related to AZUR’s performance post-acquisition;
- Costs related to site closure in Asia for an amount of $131;
- Changes in senior management for an amount of $158; and
- Charge related to a non-trade receivable which became non recoverable during the year for an amount of $228.
In 2022, the Company recorded litigation and restructuring costs. The main costs are as follows:
- Costs related to the divestiture of a subsidiary of $2,594 (Note 4);
- Change in senior executive management for an amount of $241;
- Settlement of a contract by mutual agreement for an amount of $372; and
- Costs related to site closure in Asia for an amount of $358.
Consolidated Financial Statements ▪ 41
2023 ANNUAL REPORT 5N+
86
5N+ 2023 ANNUAL REPORT Corporate Information
Stock Exchange
5N Plus is listed on the Toronto Stock Exchange, under the symbol VNP.
Transfer Agent and Registrar
Computershare Investor Services Inc.
Auditors
PricewaterhouseCoopers LLP
Head Office
4385 Garand Street, Montreal, Quebec H4R 2B4
For more information, please contact:
Investor Relations
5N Plus Inc.
4385 Garand Street, Montreal, Quebec H4R 2B4
T: 514-856-0644
invest@5nplus.com
Si vous souhaitez obtenir une copie en français de ce rapport annuel,
communiquez avec :
Relations avec les investisseurs
5N Plus inc.
4385, rue Garand, Montréal (Québec) H4R 2B4
Aussi disponible à l’adresse www.5nplus.com
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5N Plus Inc.
4385 Garand Street
Montréal, Quebec, Canada
H4R 2B4
www.5nplus.com
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