TORONTO--(BUSINESS WIRE)--Lithium Royalty Corp. (TSX: LIRC) ("LRC" or the "Company") is pleased to report its first quarter results for 2024. "The beginning of 2024 presented the industry with the most challenging conditions faced in the last two years, with a year-on-year lithium price decline of 81% through the end of the quarter. However, lithium prices appeared to reach a bottom during the quarter with prices firming up in March. Current market prices for spodumene are trading approximately 25% higher than the lows seen in January and February this year as demand signals continue to firm up led by growth from China.
Going forward, we expect the improving pricing environment, coupled with the expected start-up of additional lithium projects in the LRC portfolio, to provide positive tailwinds to the Company for the balance of the year. The demand outlook for lithium remains strong, with an upward bias to prices given the demand trajectory, rising cost intensity for the industry, and improved inventory positioning for battery materials," stated LRC's CEO, Ernie Ortiz.
LRC is reporting 45 Lithium Carbonate Equivalent Tonnes (LCETs) or 597 Spodumene Concentrate Equivalent Tonnes (SCETs) in the quarter1 compared to 54 LCETs or 576 SCETs last quarter.
Financial Highlights
3 months ended March 31, | |||||
2024 | 2023 | Variance | % | ||
Royalty Revenue | 631 | 708 | (77) | (11)% | |
Depletion | (142) | (238) | (96) | 40% | |
Gross Profit | 489 | 470 | 19 | 4% | |
Net loss | (1,045) | (1,738) | 693 | ||
Income taxes | (163) | 838 | (1,001) | ||
Finance income | (62) | (277) | 215 | ||
Depletion | 142 | 238 | (96) | ||
EBITDA | (1,128) | (939) | (189) | ||
Foreign exchange loss (gain) | 30 | (803) | 833 | ||
One time IPO share-based compensation (SBC) | 436 | 201 | 235 | ||
One-time IPO costs | - | 869 | (869) | ||
Exploration costs | - | 414 | (414) | ||
Decrease in fair value of financial assets | - | 37 | (37) | ||
Adjusted EBITDA | (662) | (221) | (441) | ||
Royalty revenue decreased from $708 to $631 (11%) for the three months ended March 31, 2024, compared to the same period last year. The decrease in royalty revenue is attributable to the 81% decline in lithium prices, which decreased from SC6 $5,258/tonne in 1Q23 to $1,001/tonne in the first quarter of 2024 according to Shanghai Metals Market (SMM) CIF China SC6 prices. Compared to last quarter, prices declined 48% from $1,909/tonne in 4Q23. In addition to the adverse impact of price declines, the timing of shipments by LRC portfolio companies also negatively impacted our royalty revenue sequentially.
On March 27, 2024, Sigma Lithium announced a shipment of 22,000 tonnes at a price of $1,160/tonne, for the delivery in April 2024. Separately, Core Lithium publicly disclosed that it had only one shipment in 1Q24 and held 19,756 tonnes of spodumene concentrate in inventory at the end of 1Q24.
Adjusted EBITDA was a loss of $662 in the quarter, as compared to a loss of $221 in the same period last year. Although production by project operators was higher as compared to the same period last year, the decline in lithium prices more than offset that impact. In addition, compared to the same period last year, G&A costs increased as LRC established itself as a public company following its IPO in mid-March 2023.
At quarter-end, LRC held $9.3 million of cash. Our credit facility remains undrawn.
LRC Royalty Activity Updates
Core Lithium Finniss Royalty: In April 2024, Core Lithium announced an updated mineral resource on the Finniss Project on the back of their exploration drilling in 2023. The resource grew to 27.9Mt measured and indicated resource at 1.32% Li2O and 20.3Mt inferred resource at 1.18% Li2O. At the end of 1Q24, Core Lithium held 19,756 tonnes of spodumene concentrate available for sale. Furthermore, Core Lithium disclosed that it plans to restart the Finniss operation if lithium prices increase sufficiently to enable Core Lithium to generate positive cash flow from the Finniss Project. LRC holds a 2.5% GOR royalty on the Finniss Project.
Ganfeng Mariana Royalty: Construction at Mariana commenced in June 2022 and has advanced materially with brine deposited into the brine ponds in late 2022. Works on the brine ponds, brine wells, chemical plants, photovoltaic and other infrastructure facilities are progressing smoothly according to Ganfeng. Ganfeng disclosed in its 2023 Annual Report issued in March 2024 that the project is scheduled to commence production in late 2024. Current resources at Mariana amounted to approximately 8.12Mt of Lithium Carbonate Equivalent (LCE). LRC holds a net 0.45% NSR royalty on the Mariana Project.
Sigma Lithium Grota do Cirilo Royalty: In April 2024, Sigma Lithium announced the final investment decision (FID) on Phase 2 of their Grota do Cirilo Project. Sigma expects the second phase to double production from 270,000 tonnes per annum (tpa) to 520,000tpa. Sigma has already been awarded an environmental license to build and operate the Phase 2 plant, and plans to commission the plant by the end of 2024, for first production in Q1 2025. Sigma anticipates capital expenditures to be fully funded from Sigma's $109.4 million cash balance, unused trade finance lines and expected free cash flow generation. LRC holds a net 0.90% NSR royalty on the Grota do Cirilo Project.
Atlas Lithium Das Neves Royalty: During the quarter, Atlas Lithium announced progress on the construction of their modular dense media separation (DMS) lithium processing plant, which remains on schedule for delivery to Brazil in Q2 2024, with first commissioning and production of lithium concentrate expected by Atlas in Q4 2024. Atlas announced that renowned lithium expert Brian Talbot, the prior COO of Sigma Lithium, joined Atlas as Chief Operating Officer. In addition, Atlas signed definitive investment and offtake agreements with Mitsui & Co., Ltd. ("Mitsui"), with Mitsui agreeing to purchase $30 million of Atlas common shares at a 10% premium and entering into an offtake agreement for the future purchase of 15,000 tonnes of lithium concentrate from Phase 1 and 60,000 tonnes per year for five years from Phase 2 of Atlas Lithium's Das Neves Project in Brazil's Lithium Valley. LRC holds a 3.0% GOR royalty on the Das Neves Project.
Delta Lithium Yinnetharra Royalty: After releasing its maiden resource in December, Delta Lithium continued to focus its exploration efforts at the Yinnetharra Project, with four drill rigs operating and multiple field teams completing extensive geological mapping and surface sampling across the tenement package. Environmental baseline studies are ongoing, with a view to determine the permitting route by the end of 2024. A scoping level study is underway at Yinnetharra based only on the maiden mineral resource estimate at Malinda. Delta Lithium expects to release the results of the scoping study in the September quarter of 2024 and to articulate a project timeline to FID, including project permitting. LRC holds a 1.0% GOR royalty on the Yinnetharra Project.
Winsome Resources Adina Royalty: Winsome Resources completed over 22,000 metres of drilling in the quarter. Through this delineation, Winsome extended the strike length at Adina to 2.11 km, of which only 1.43 km is included in the current resource estimate. Winsome expects to release an updated resource estimate in 2Q24. In April 2024, Winsome announced that it had entered into an exclusive option to acquire the Renard mine infrastructure ("Renard"). Renard first processed ore in 2016 and operated as a diamond mining operation until Q4 2023, when it filed for insolvency protection. The Renard process plant has a design capacity of 2.2Mtpa and over C$900 million of capital had been invested in Renard by the previous owners. Winsome believes that Renard has the potential to materially reduce upfront capital expenditure, project risk and footprint for its Adina Project. Winsome is now working on development studies to confirm the feasibility of repurposing the Renard infrastructure. LRC holds a 4.0% GOR and a 2.0% NSR royalty on certain claims on the Adina Project.
Sayona Moblan Royalty: Sayona released a definitive feasibility study (DFS) for the development of a lithium mine and concentrator at Moblan during the quarter, confirming a post-tax net present value (NPV) of C$2.2 billion for the project. The Moblan DFS is based on an annual production rate of 300ktpa of spodumene concentrate over a 21-year life of mine (LOM) via open pit mining at a rate of 1.8Mtpa. The environmental assessment process for Moblan continued during the quarter, including progressing base line environmental studies which will contribute to the Environmental and Social Impact Assessment (ESIA) that is currently underway. Once completed, the ESIA will be submitted to Québec authorities, with the Cree Nation Government also involved in the approval process. LRC holds a 2.5% GOR royalty on the Moblan Project.
Lithium Market
Electric vehicle sales grew by 25% year-over-year in 1Q24 according to the International Energy Agency (IEA), with growth led by China, the world's largest EV market during the period. Several new electric vehicle (EV) models are anticipated in 2024, with the most recent blockbuster introduction being Xiaomi's SU7 EV, which garnered almost 90,000 reservations within the first day of its release, with a starting price of approximately $30,000.
In China, EV sales grew by approximately 25%, led by the continued adoption of electric vehicles. EV penetration rates for passenger vehicle sales grew to approximately 35% from 31% in the prior year period. China is witnessing intense competition in the electric vehicle market to the benefit of consumers, as choices improve, and offerings become more affordable. The National Development and Reform Commission (NDRC) in China estimates that approximately three-quarters of all new vehicle introductions in 2024 within the country will be a new energy vehicle (NEV). Recent trade-in subsidy programs in China are expected to provide further support to EV sales for the balance of the year.
EV adoption trends diverged among European countries, with broader continent EV registrations growing by approximately 6% year-over-year. Within the battery electric vehicle (BEV) category, France recorded sales growth of 23%, Netherlands 20%, and the UK 11% while the German market faced headwinds with a decline of 14%, compared to the same period a year ago.
In North America, plug-in hybrid electric vehicles (PHEV) sales surged in the quarter, with sales growth of 65% compared to the prior year-period. BEV sales increased by 6% in the United States, which contributed to broader EV sales growing by 16% in the quarter. The quarter faced volatility for BEVs in the United States as new Inflation Reduction Act (IRA) sourcing requirements impacted the number of BEV qualifying models available. It is expected that more EV models will be introduced throughout 2024 that should qualify for the $7,500 subsidy and expand consumer choice.
The IEA forecasts EV sales to reach approximately 17 million units in 2024, representing growth of approximately 21% year-over-year. EVs represented approximately 18% of all passenger cars sold globally in 2023 and the IEA expects EV sales to surpass 20% in 2024, or one in five of all sales. As the IEA notes, 1Q24 EV sales typically represent 15-20% of total annual global sales, suggesting a strong backdrop for the balance of the year. As new EV models are introduced globally, more models will qualify for the IRA subsidies in the US, and in Europe, at least 5 new EV models priced below €25,000 are expected to be introduced in 2024.
The lithium industry is witnessing supply curtailment across different levels of the cost curve. As a result, many leading analysts have reduced their supply growth forecasts for 2024. Wood Mackenzie, a leading industry research provider, recently downgraded their 2024 supply projections by 2-3%. Certain lepidolite mines in China are at particular risk of supply curtailments as regulators are inspecting mines and are contemplating additional measures to improve waste profiles. Furthermore, battery and cathode inventory levels have continued to normalize relative to elevated levels in 2023.
Prices for lithium feedstock and chemicals decreased further in 1Q24. SMM reported prices in the quarter of $1,001/tonne for an index tracking 6% spodumene concentrate prices (CIF China). This compares to $5,258/tonne in 1Q23 and $1,909/tonne in 4Q23.
Lithium prices appear to have bottomed in the first quarter, with spodumene prices increasing by approximately 25% from the lows reached in January and February 2024. Furthermore, the quarter brought additional moves toward price transparency, with Albemarle, a leading lithium producer, undertaking auctions of both spodumene concentrate and lithium chemicals. While lithium prices are likely to remain volatile, many industry analysts have commented that prices should continue to recover given that depressed reinvestment economics at current prices will limit future supply growth. Both futures prices and investment research providers forecast rising lithium prices over the near-to-medium term.
LRC Acquisition Activity in 2023 and 2024
Operator | Project | % | Acquisition Date |
M4E Lithium | Whitebushes, Mt. Elephant - Brazil | 1.5% GOR2 | March 2024 |
Q2 Metals | Mia - Québec, Canada | 1.0% NSR3 | November 2023 |
Pinnacle Minerals4 | Adina East - Québec, Canada | 2.0% GOR | October 2023 |
Zijin Mining | Tres Quebradas - Catamarca, Argentina | 0.5% GOR | July 2023 |
Power Metals Corp. | Case Lake - Ontario, Canada | 2.0% GOR | May 2023 |
Atlas Lithium | Das Neves - Minas Gerais, Brazil | 3.0% GOR | May 2023 |
Allkem Limited | James Bay - Québec, Canada | 1.5% NSR | 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 |
Important Dates and Events
Date | Event |
May 20-22, 2024 | LRC at SME Mining Conference |
June 4-6, 2024 | LRC at The Mining Investment Event of the North |
June 12, 2024 | Annual General Meeting of Shareholders |
June 12-13, 2024 | LRC at Brazil Lithium Summit |
June 19, 2024 | LRC at Cormark Annual Inflection Conference |
June 24-27, 2024 | LRC at Fastmarkets Lithium Supply and Battery Materials Conference |
August 08, 2024 | Q2 2024 Earnings Release and Earnings Call. Click here for call details. |
Shareholder Information
The Consolidated Financial Statements and Management's Discussion & Analysis for Q1 2024 are available on our website and SEDAR+.
Qualified Persons
The technical and scientific information contained in this news release was reviewed and approved in accordance with NI 43-101 by Don Hains, P.Geo. of the Hains Engineering Company Limited, a "qualified person" as defined in NI 43-101.
About Lithium Royalty Corp.
LRC is a lithium-focused royalty company organized in Canada, which has established a globally diversified portfolio of 35 revenue royalties on mineral properties that are related to the electrification and decarbonization of the global economy. The Company's royalty portfolio is focused on the battery supply chain for the transportation and energy storage industries and is underpinned by mineral properties that produce or are expected to produce lithium and other battery materials. 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. Forward-looking information is based on management's beliefs and assumptions and on information currently available to management. The forward-looking statements herein are made as of the date of this press release only and LRC does not assume any obligation to update or revise them to reflect new information, estimates or opinions, future events or results or otherwise, except as required by applicable law.
A number of factors could cause actual events or results to differ materially from any forward-looking statement, including, without limitation: fluctuations in the prices of the primary commodities that drive royalty revenue (including various lithium products); fluctuations in the value of the Canadian and Australian dollar and any other currency in which revenue is generated, relative to the U.S. dollar; changes in national and local government legislation, including permitting and licensing regimes and taxation policies and the enforcement thereof; the adoption of a global minimum tax on corporations; regulatory, political or economic developments in any of the countries where properties in which LRC holds a royalty or other interest are located or through which they are held; risks related to the operators of the properties in which LRC holds a royalty or other interest, including changes in the ownership and control of such operators; relinquishment or sale of mineral properties; influence of macroeconomic developments; business opportunities that become available to, or are pursued by LRC; reduced access to debt and equity capital; litigation; title, permit or license disputes related to interests on any of the properties in which LRC holds a royalty or other interest; whether or not the Company is determined to have "passive foreign investment company" ("PFIC") status as defined in Section 1297 of the United States Internal Revenue Code of 1986, as amended; excessive cost escalation as well as development, permitting, infrastructure, operating or technical difficulties on any of the properties in which LRC holds a royalty or other interest; actual mineral content may differ from the resources and reserves contained in technical reports; rate and timing of production differences from resource estimates, other technical reports and mine plans; risks associated with the solvency of operators of projects that LRC has royalties over; risks and hazards associated with the business of development and mining on any of the properties in which LRC holds a royalty or other interest, including, but not limited to unusual or unexpected geological and metallurgical conditions, slope failures or cave-ins, sinkholes, flooding and other natural disasters, terrorism, civil unrest or an outbreak of contagious disease; and the integration of acquired assets. The forward-looking statements contained in this press release are based upon assumptions management believes to be reasonable, including, without limitation: the ongoing operation of the properties in which LRC holds a royalty or other interest by the owners or operators of such properties in a manner consistent with past practice; the accuracy of public statements and disclosures made by the owners or operators of such underlying properties; no material adverse change in the market price of the commodities (including various lithium products) that underlie the asset portfolio; the Company's ongoing income and assets relating to determination of its PFIC status; no material changes to existing tax treatment; the expected application of tax laws and regulations by taxation authorities; no adverse development in respect of any significant property in which LRC holds a royalty or other interest; the solvency of project operators; the accuracy of publicly disclosed expectations for the development of underlying properties that are not yet in production; integration of acquired assets; and the absence of any other factors that could cause actions, events or results to differ from those anticipated, estimated or intended. However, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Investors are cautioned that forward-looking statements are not guarantees of future performance. LRC cannot assure investors that actual results will be consistent with these forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements due to the inherent uncertainty therein.
For additional information with respect to risks, uncertainties and assumptions, please refer to LRC's most recent Annual Information Form dated March 27, 2024 and filed with the Canadian securities regulatory authorities on www.sedarplus.com. These risks and uncertainties include, but are not limited to, those described under "Risk Factors" in the Annual Information Form, and in particular risks summarized under the "Risks Related to Mining Operations" heading.
Non-IFRS Measures
This earnings release makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Accordingly, the non-IFRS measures should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS.
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS financial measure, which excludes the following from net earnings:
- income tax expense
- finance costs, netted against finance income
- depletion and amortization
- impairment charges
- gain/loss on sale / disposition of assets/mineral interests
- foreign currency translation gains/losses
- increase/decrease in fair value of financial assets
- non-recurring charges
Management believes that Adjusted EBITDA is a valuable indicator of our ability to generate liquidity by producing operating cash flow to fund working capital needs and fund acquisitions. Management uses Adjusted EBITDA for this purpose. Adjusted EBITDA is also frequently used by investors and investment research analysts for valuation purposes whereby Adjusted EBITDA is multiplied by a factor or "multiple'' that is based on an observed or inferred relationship between Adjusted EBITDA and market values to determine the approximate total enterprise value of a company. LRC believes that Adjusted EBITDA assists analysts, investors and our shareholders to better understand our ability to generate liquidity from operating cash flow, as LRC believes that the excluded amounts are not indicative of the performance of our core business and do not necessarily reflect the underlying operating results for the periods presented.
3 months ended March 31, | |||
2024 | 2023 | Variance | |
Net loss | (1,045) | (1,738) | 693 |
Income taxes | (163) | 838 | (1,001) |
Finance income | (62) | (277) | 215 |
Depletion | 142 | 238 | (96) |
EBITDA | (1,128) | (939) | (189) |
Foreign exchange loss (gain) | 30 | (803) | 833 |
One time IPO share-based compensation (SBC) | 436 | 201 | 235 |
One-time IPO costs | - | 869 | (869) |
Exploration costs | - | 414 | (414) |
Decrease in fair value of financial assets | - | 37 | (37) |
Adjusted EBITDA | (662) | (221) | (441) |
1LRC calculates LCETs by dividing royalty revenue for the quarter by the average spot market price of $14,073 during the quarter for 99.5% lithium carbonate, delivered in China, and calculates SCETs by dividing royalty revenue for the quarter by the average spot market price of $1,057 during the quarter for 6% spodumene concentrate, delivered to China. Spot market prices were based on Asian Metal data on Bloomberg.
2Gross Overriding Revenue (GOR) royalties are based on the total revenue stream from the sale of production from a property with few, if any, deductions.
3Net Smelter Return (NSR) royalties are based on the value of production or net proceeds received by the operator from the smelter or refinery that treats the operator's mineral production. These proceeds are usually subject to deductions or charges for transportation, insurance, smelting and refining costs as set out in the royalty agreement, but may also be subject to other deductions or charges.
4Pinnacle Minerals' acquisition of the underlying mineral claims closed in December 2023. LRC holds a pre-existing royalty on those claims.
Contacts
Contact Information for Inquiries:
Jonida Zaganjori
Investor Relations
(647) 792-1100
jonida@lithiumroyaltycorp.com
