TORONTO–(BUSINESS WIRE)–$LIRC #lithium–Lithium Royalty Corp. (TSX: LIRC) (“LRC” or the “Company”) is pleased to report its third quarter results for 2023. “LRC is proud to report record revenue and our first quarter of positive Adjusted EBITDA since our initial public offering. LRC holds top line exposure to leading lithium assets globally at all stages of development. Asset ramp-ups on several of our projects increased revenue growth at LRC despite spot lithium prices dropping by 45% throughout the quarter. The long term thematic for lithium remains unchanged and we remain positive on our future prospects,” stated LRC’s CEO, Ernie Ortiz.
The royalty business model is proving more prescient than ever, highlighted by the rising cost pressures within the lithium sector. Strategic momentum has continued to accelerate despite the near-term volatility, highlighted by the robust M&A activity taking place in the industry. LRC sees a robust environment for capital allocation with a view to creating sustainable long-term value.
LRC is reporting 90 Lithium Carbonate Equivalent Tonnes (LCETs) or 887 Spodumene Concentrate Equivalent Tonnes (SCETs) in the quarter1.
Financial Highlights
|
3 months ended September 30 |
9 months ended September 30 |
|||||||
|
2023 |
2022 |
Variance |
2023 |
2022 |
Variance |
|||
|
Royalty Income |
2,963 |
448 |
561% |
4,509 |
1,347 |
235% |
||
|
Depletion |
(272) |
(256) |
6% |
(656) |
(769) |
(15%) |
||
|
Gross Profit |
2,691 |
192 |
1300% |
3,853 |
578 |
567% |
||
|
Adjusted EBITDA* |
1,310 |
159 |
722% |
389 |
290 |
34% |
||
|
Adjusted EBITDA Margin |
44% |
36% |
9% |
9% |
22% |
(13%) |
||
*Refer to reconciliation table below
- Adjusted EBITDA margin of 44% in the quarter, compared to 36% in the prior year period
- Continued project ramp-ups and assets entering production should further highlight the scalability of LRC’s business
Royalty income increased from $448 to $2,963 (561%) for the three months ended September 30, 2023, compared to the same period last year. That compares to royalty income of $838 for the quarter ended June 30, 2023 (87%). The growth in royalty income is attributable to increased revenue from Core Lithium Ltd. (ASX: CXO, market cap $490 million), as well as the milestone of the Grota do Cirilo project, operated by Sigma Lithium (TSX-V: SGML, market cap $2.5 billion), commencing operations, resulting in a first royalty payment from Sigma.
LRC has also begun reporting Adjusted EBITDA this quarter, to exclude the impact of the non-cash and/or non-recurring items in our results. The main adjustments relate to non-recurring items such as foreign exchange gains and losses, exploration expenses that pre-date the IPO (and that are not expected to be incurred again), and other gains and losses that are non-recurring in nature. LRC has also removed the impact of one-time IPO costs, including one-time non-cash stock-based compensation at IPO, that is being amortized over the three-year vesting period.
|
Adjusted EBITDA |
3 months ended September 30, |
9 months ended September 30, |
||||||
|
2023 |
2022 |
Variance |
2023 |
2022 |
Variance |
|||
|
Net (loss) Income |
(1,514) |
4,840 |
(6,354) |
(4,141) |
10,157 |
(14,298) |
||
|
Income Taxes |
2,403 |
602 |
1,801 |
3,540 |
1,215 |
2,325 |
||
|
Finance Income |
(201) |
(39) |
(162) |
(1,275) |
(39) |
(1,236) |
||
|
Depletion |
272 |
256 |
16 |
656 |
769 |
(113) |
||
|
EBITDA |
|
960 |
5,659 |
(4,699) |
|
(1,220) |
12,102 |
(13,322) |
|
Foreign Exchange Gain |
(253) |
652 |
(905) |
(1,117) |
986 |
(2,103) |
||
|
One time IPO Share-Based Compensation (SBC) |
603 |
– |
603 |
1,406 |
– |
1,406 |
||
|
One-time IPO Costs |
– |
1,027 |
(1,027) |
869 |
1,549 |
(680) |
||
|
Exploration Costs |
– |
94 |
(94) |
414 |
523 |
(109) |
||
|
Impairment recovery |
|
– |
– |
– |
|
– |
(1,895) |
1,895 |
|
(Increase) decrease in fair value of financial assets |
– |
(7,273) |
7,273 |
37 |
(12,976) |
13,013 |
||
|
Adjusted EBITDA |
1,310 |
159 |
1,151 |
389 |
289 |
100 |
||
Adjusted EBITDA increased to $1.3 million in the quarter, as compared to $159 in the same period last year representing growth of 722% and as compared to an Adjusted EBITDA loss of $0.7 million for the quarter ended June 30, 2023.
At quarter end, LRC held $13.5 million of cash and had access to a $25 million credit facility, which remains undrawn.
Acquisitions/Transactions
- On July 5, 2023, LRC acquired an additional 0.5% GOR royalty on the Tres Quebradas project in Argentina operated by Zijin Mining (SHA: 601899, market cap $42 billion). LRC now holds a net 1.4% GOR royalty on the Tres Quebradas lithium project, where Zijin expects to begin production at the end of this year.
- On October 17, 2023, Pinnacle Minerals Ltd. (ASX: PIM, market cap $5.6 million) announced that it had entered into a conditional agreement to acquire a 75% stake in the Adina East lithium project in Québec’s James Bay lithium district (the “Pinnacle Transaction”) from Waratah’s Electrification and Decarbonization fund, a related party to LRC, spanning 72.7 km2 and located near Winsome Resources’ Adina and Tilly projects, and Loyal Lithium’s Trieste project. Lithium Royalty Corp holds a 2.0% gross overriding revenue (GOR) royalty on the Adina East lithium project. Prior to this quarter, this royalty had been presented under ‘Other’ royalties given its small size and early-stage nature. Given the Pinnacle Transaction, management is of the view that the Adina East lithium project has substantial prospectivity and, as a result, has presented this royalty separately.
- On November 2, 2023, LRC acquired an existing 1.0% net smelter return (NSR) royalty on the Mia lithium project that is 100% owned by Q2 Metals Corp (TSX.V: QTWO, market cap $30 million). The Mia lithium project is an exploration stage project in Québec. Q2 Metals has begun to drill the Mia lithium property and additional news flow is expected in the coming months. For the press release announcing this transaction, please click here.
Financial Developments
- On July 8, LRC signed a $25 million credit agreement with National Bank of Canada that expires July 8, 2026, enhancing our liquidity position; the facility is currently undrawn.
- LRC re-purchased 111,200 shares during the quarter at an average price of C$12.11, for a total cost of C$1.3 million under LRC’s normal course issuer bid (NCIB).
- Insiders purchased 70,250 shares in the quarter, bringing the total aggregate insider buying since IPO to approximately $5.5 million.
- Subsequent to the quarter, LRC made a $2.5 million deferred purchase price payment to Bradda Head after Bradda Head reported a milestone of 1.0 million tonnes (Mt) contained Lithium Carbonate Equivalent (LCE) resource with a minimum grade of 800 ppm lithium at its Basin project.
Orion Resource Partners Litigation Update
On August 15, 2023, the Ontario court released its decision in LRC’s litigation with Orion Resource Partners, finding that LRC and Orion Resource Partners reached a “binding and enforceable” legal agreement for LRC to purchase 85% of Orion Resource Partners’ interest in a royalty over the Thacker Pass lithium project in Nevada. In 2021, Orion Resource Partners sold 60% of its interest in the royalty to a third party, such that it retains only a 40% interest in that royalty and did not complete any sale of the royalty to LRC. The Ontario court has not yet decided on the appropriate remedies for the breach by Orion Resource Partners, which will be addressed in a separate court hearing yet to be scheduled. Orion Resource Partners has commenced an appeal of the Ontario court’s decision. LRC does not currently recognize this litigation as an asset and expects that resolution of this matter may be subject to further delays. Orion Resource Partners has not asserted any claims against LRC.
LRC Royalty Activity Updates
Sayona Mining Moblan Royalty: On July 11, 2023, Sayona Mining announced the first results from its 2023 drill program, identifying a 750-meter eastern extension to the flat-lying South Pegmatite system. Results include 41 meters at 1.66% Li2O from 81 meters. In addition, a new, near surface pegmatite was identified in eastern step out drilling, which included 70 meters at 1.41% Li2O from 11 meters. Sayona Mining commented that the newly identified mineralisation extends outside of the April 2023 JORC resource pit shell, indicating an opportunity to expand the existing resource, which today sits at 49.9Mt at 1.2% Li2O measured and indicated resource, with a 0.25% cut-off grade. LRC holds a 2.5% GOR royalty on the Moblan lithium project.
Grid Metals Donner Lake Royalty: On July 18, 2023, Grid Metals announced its maiden mineral resource estimate for its Donner Lake project in Manitoba, Canada. The estimate comprises 6.81Mt of inferred resources with a Li2O grade of 1.39%. Additionally, Grid Metals has secured a lease agreement with 1911 Gold Corporation to use the True North mill in Manitoba for lithium spodumene concentrate production, aligning with Grid Metal’s goals of near-term production and expansion in the southeastern Manitoba region. Grid Metals has outlined plans to be in production in 2025. LRC holds a 2.0% GOR royalty on the Donner Lake lithium project.
Allkem Limited James Bay Royalty: On August 11, 2023, Allkem Limited reported a 173% increase in the James Bay mineral resource, which now stands at 110.2Mt. This solidified the James Bay lithium deposit’s status as a significant top-tier lithium pegmatite resource. Furthermore, the inferred mineral resource in the NW Sector of the James Bay deposit shows promising potential for expansion along its current direction and into deeper layers. LRC’s royalty covers claims in the North, Northwest, and Eastern portions of the property. LRC is encouraged that the exploration potential of the property appears to trend more into its royalty area. LRC holds a 1.5% NSR royalty on part of the James Bay lithium project.
Core Lithium Finniss Royalty: On August 17, 2023, Core Lithium announced the completion of an A$100 million institutional equity offering to fund its near-term growth projects during the ramp-up of the Finniss project. The equity offering will provide Core Lithium with the ability to progress early works on the BP33 deposit and pursue a targeted exploration program. The CEO of Core Lithium commented that “[Core Lithium is] excited with our planned exploration program over the next 12 months which aims to deliver mine life extensions and further resource definition at Finniss.” LRC holds a 2.5% GOR royalty on the Finniss lithium project.
Delta Lithium Yinnetharra Royalty: On August 21, 2023, Delta Lithium reported results of early first pass un-optimised metallurgical test results on the Yinnetharra project, suggesting that high grade spodumene Li2O concentrates can be produced at high recovery rates. Recoveries ranged from 61% to 77% with spodumene concentrate grade of 6.3% to 6.4%. In addition, on September 12, the board of Delta Lithium announced the appointment of Chris Ellison as non-executive Chairman. Mr. Ellison is the founder and Managing Director of Mineral Resources Limited, which recently increased its shareholding in Delta Lithium to 17.44%, becoming Delta Lithium’s largest shareholder. On November 10, Delta Lithium disclosed that it expects to announce a maiden mineral resource later this quarter at the Malinda deposit on the Yinnetharra project. LRC holds a 1.0% GOR royalty on the Yinnetharra lithium project.
Winsome Resources Adina Royalty: After delays from the Québec wildfires, drilling recommenced at the Adina project at full cadence, with five rigs on site targeting a 50,000+ meter drill program, with 23,000 meters already completed as of September 30, 2023. The company expects to release a “globally significant” maiden mineral resource at Adina in 1H24. LRC holds a 4.0% GOR and 2% NSR royalty on the Adina lithium project.
Green Technology Metals Root Lake Royalty: Following up on its maiden mineral resource release at Root Lake from April 2023, Green Technology Metals updated its mineral resource estimate at Root to 14.6Mt at 1.21%. This brings the global resource in combination with Seymour to 24.5Mt at 1.14%. LRC holds a 1.0% GOR royalty on each of the Root Lake and Seymour lithium projects. Green Technology Metals has reaffirmed that it aims to start production at its Seymour property in Ontario in 2025.
Atlas Lithium Das Neves Royalty: On October 23, 2023, Atlas Lithium reported high-grade lithium mineralization at its Das Neves project, with drill holes like DHAB-208 intersecting 1.64% Li2O over 18 meters. On September 26, Atlas Lithium announced the appointment of Martin Rowley as Lead Strategic Advisor. On September 20, Atlas Lithium announced a new mineralized shallow pegmatite discovery, as a result of step-out drilling west of their flagship 2.3-kilometer Anitta pegmatite trend. Atlas Lithium expects to release its maiden mineral resource in 1Q24. LRC holds a 3.0% GOR royalty on the Das Neves lithium project.
Bradda Head Lithium Basin-Wikieup Royalty: On September 28, 2023, Bradda Head announced an updated mineral resource estimate for its Basin project in Arizona, adding 729 thousand tonnes (kt) of LCE to the inferred mineral resource, totaling 1.0Mt of LCE. Bradda Head’s announcement triggered a $2.5 million deferred purchase price payment from LRC, with the potential for further expansion through ongoing drilling programs. LRC holds a 2.0% GOR royalty on the Basin-Wikieup lithium project.
Sigma Lithium Grota do Cirilo Royalty: On October 2, 2023, Sigma announced that it had reached record peak production of 890 tonnes per day, equivalent to annualized production of 320,000 tonnes and putting Sigma on track to achieve its annual 2023 production guidance of 130,000 tonnes. Sigma also confirmed that Phase II and III expansion plans are proceeding as planned. LRC holds a 0.90% NSR royalty on the Grota do Cirio lithium project.
Lithium Market
Electric vehicle sales continue to grow at an elevated rate and substantially higher than global GDP. In China, electric vehicle (EV) sales have grown by approximately 37.5% in the year-to-date period through September. EV sales in September were at record levels, suggesting that the normal end of year seasonality is taking hold in China. Historically, more than 60% of annual Chinese EV sales occur in the second half of the year.
In the United States, electric vehicle sales grew by approximately 63% in the quarter, compared to the prior year period and have grown by approximately 66% in the year-to-date period. EV sales reached over 1 million units in the year-to-date period through September, a milestone, and 2023 is on track for pure battery electric vehicle sales to also reach over 1 million units. Starting in January 2024, the United States subsidy regime will shift to a point of sales system, such that the $7,500 government incentive will be provided at the time of purchase as opposed to a tax credit, which should improve customer affordability for qualifying electric vehicles.
In Europe, electric vehicle registrations grew by approximately 35% year-over-year, as compared to 30% in the year-to-date period. The fastest growing regions in 2023 include Belgium, Finland, and Greece. German battery electric vehicle registrations have grown by 42% year-to-date as compared to a 43% decline for plug in hybrid vehicle sales. Battery electric vehicle registrations have grown by 47% in Europe, as compared to 5% for plug-in hybrid vehicles, internal combustion engine registrations of 12%, and diesel of -5% in the year-to-date period.
Bloomberg New Energy Finance (BNEF) estimates that demand from the energy storage system (ESS) sector in GWh will grow by nearly 200% year-over-year in 2023. Energy shifting is representing the biggest demand growth in 2023, as provincial mandates in China require wind or solar projects to be utilized with energy storage. BNEF predicts that 79% of ESS battery storage will use lithium-iron phosphate (LFP) chemistries and retain leading market share for the rest of the decade.
Price reporting agencies report that lithium prices declined by approximately 45% in the third quarter. Spot lithium carbonate prices in China were $22,500/tonne at the end of the quarter although prices outside of China remained at much higher levels. Korean import data showed that September carbonate prices stood at $32,500/tonne and hydroxide prices stood at $41,500/tonne, suggesting higher netbacks outside of China and contract levels trading at a premium to spot tonnages. Channel checks and third-party reports have commented on certain higher cost parties taking downtime and maintenance in China as a result of the price decline. LRC believes that spot prices are at or near marginal cost economics. On October 24, Posco Holdings, one of the leading chemical companies in the world and a major lithium buyer, commented that they believe that lithium prices are close to a bottom, with lithium prices unlikely to fall below $20,000/tonne, as reported by Bloomberg.
Lithium demand is tracking to grow by more than 25% year-over-year in 2023, led by electric vehicle sales and robust energy storage deployment. Incremental supply from Zimbabwe and higher cost Chinese producers are adding more tonnes at the margin to the domestic Chinese market that is discounting Chinese material relative to other geographies. Due to the growing demand and associated supply, cost curves continue to steepen throughout the industry, presenting upward pressure on capex intensity. LRC’s focus on high-grade, low-cost operations should benefit from the steepening in the cost curve over the long term.
Acquisition Activity in 2022 and 2023
|
Operator |
Royalty |
% |
Acquisition Date |
|
Q2 Metals |
Mia |
1.0% NSR |
November 2023 |
|
Pinnacle Minerals2 |
Adina East |
2.0% GOR |
October 2023 |
|
Zijin Mining |
Tres Quebradas – Catamarca, Argentina |
0.5% GOR3 |
July 2023 |
|
Power Metals Corp. |
Case Lake – Ontario, Canada |
2.0% GOR4 |
May 2023 |
|
Atlas Lithium |
Das Neves – Minas Gerais, Brazil |
3.0% GOR |
May 2023 |
|
Allkem Limited |
James Bay – Québec, Canada |
1.5% NSR5 |
March 2023 |
|
Ganfeng Lithium Co. Ltd. |
Mariana – Salta, Argentina |
0.45% NSR |
February 2023 |
|
Winsome Resources Ltd. |
Adina – Québec, Canada |
2.0% NSR |
January 2023 |
|
Arvo Lithium Ltd. |
Kaustinen & Ilmajoki – Finland |
1.25% GOR |
December 2022 |
|
Larvotto Resources Ltd. |
Eyre – Western Australia |
1.0% GOR |
October 2022 |
|
Green Technology Metals |
Seymour Lake – Ontario, Canada Root Lake – Ontario, Canada Wisa Lake – Ontario, Canada |
1.0% GOR |
September 2022 |
|
Morella Corp. |
Tabba Tabba – Western Australia Mt Edon/Mt Edon West – Western Australia |
1.25% GOR |
August 2022 |
|
Delta Lithium Limited |
Yinnetharra – Western Australia |
1.0% GOR |
May 2022 |
|
ACME Lithium Inc. |
Shatford & Cat – Euclid Lake – Manitoba, Canada |
2.0% GOR |
March 2022 |
|
Noram Lithium Corp. |
Zeus – Nevada, USA |
1.0% GOR |
February 2022 |
|
Grid Metals Corp. |
Donner Lake – Manitoba, Canada Campus Creek – Ontario, Canada |
2.0% GOR |
January 2022 |
Sustainability
On October 16, 2023, the World Climate Foundation (“WCF”) distributed a white paper written by LRC’s CFO, Dominique Barker, entitled “Unlocking Québec’s Lithium Opportunity” which is available publicly and can be accessed here. The paper discusses why LRC sees Québec as an attractive place to allocate capital, and why LRC expects Québec to be at the nexus of the energy transition globally over the next decade. LRC is participating in the World Climate Summit – The Investment COP in Dubai and will host an in-person panel around this topic, with guests from the Québec government, Investissement Québec and Winsome Resources. Other participants of the World Climate Summit – The Investment COP include Sigma Lithium, SQM, BHP, and Volkswagen. As a holder of royalties, LRC sees itself playing a role to advance projects as well as improve the profile of the operators in which LRC holds investments.
Important Dates and Events
- November 16, 2023 – LRC at Benchmark Week: Financing the Energy Transition
- November 28, 2023 – LRC at Citi Basic Materials Conference
- November 29, 2023 – LRC at Scotiabank Mining Conference
- December 06, 2023 – LRC at Deutsche Bank 8th Annual Lithium and Battery Supply Chain Conference
- December 04-08, 2023 – LRC at COP 28 in Dubai
- January 17-19, 2024 – LRC at 27th Annual CIBC Western Institutional Conference
- January 23-25, 2024 – LRC at TD Cowen 15th Annual Global Mining Conference
- March 27, 2024 – Q4 2023 results released
- March 28, 2024 – Q4 2023 earnings call
Shareholder Information
The Consolidated Financial Statements and Management’s Discussion can be found on SEDAR+.
Lithium Royalty Corp’s Investor Presentation is available here.
About Lithium Royalty Corp.
LRC is a lithium-focused royalty company with a globally diversified portfolio of 34 revenue royalties on mineral properties around the world that supply and are expected to supply raw materials to support the electrification of transportation and decarbonization of the global economy. Our portfolio is focused on high-grade and low-cost mineral projects that are primarily located in Australia, Canada, South America and the United States. LRC is a signatory to the Principles for Responsible Investment; the integration of ESG factors and sustainable mining are considerations in our investment analysis and royalty acquisitions.
Forward Looking Statements
This press release contains “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian securities laws, which may include, but are not limited to, statements with respect to future events or future performance, management’s expectations regarding LRC’s growth, results of operations, estimated future revenues, performance guidance, carrying value of assets and requirements for additional capital, mineral resource and mineral reserve estimates, production estimates, production costs and revenue, future demand for and prices of commodities, expected mining sequences, business prospects and opportunities, the performance and plans of third party operators and the expected exposure for current and future assessments and available remedies. In addition, statements relating to resources and reserves and mine life are forward-looking statements, as they involve implied assessment, based on certain estimates and assumptions, and no assurance can be given that the estimates and assumptions are accurate and that such resources and reserves or mine life will be realized. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budgets”, “potential for”, “scheduled”, “estimates”, “forecasts”, “predicts”, “projects”, “intends”, “targets”, “aims”, “anticipates” or “believes” or variations (including negative variations) of such words and phrases or may be identified by statements to the effect that certain actions “may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of LRC to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Contacts
Contact Information for Inquiries:
Jonida Zaganjori
Investor Relations
(647) 792-1100
