Lithium Royalty Corp. Reports Q4 2023 Results

• Royalty revenue up 200% and 228% for the quarter and 2023 respectively
• Record capital deployed to increase royalty assets by $65.5 million
• LRC acquired 8 royalties in 2023, including 6 following the Initial Public Offering
• Over 87% of capital deployed in 2023 was directed to assets that were either in construction or fully financed by year end 2023
• Four new maiden mineral resource estimates announced in 2023 within portfolio
• LRC set up well for a catalyst-rich 2024 highlighting LRC’s robust organic growth

(in thousands of U.S. dollars unless otherwise noted)

Lithium Royalty Corp. (TSX: LIRC) (“LRC” or the “Company”) is pleased to report its fourth quarter results for 2023. “2023 was a milestone year for Lithium Royalty Corp. as the Company completed the only initial public offering in Canada and acquired 6 royalties following the IPO. A substantial portion of the capital we deployed in 2023 was in advanced projects that are expected to deliver cash flow in 2024. In 2023, not only did we deploy a record amount of capital, we were also one of the busiest royalty companies in the world. LRC was able to benefit from its unique competitive advantage in the lithium sector to deploy capital in challenging lithium market conditions. LRC now holds 35 royalties around the world, highlighting the diversity of its portfolio and the catalyst-rich production and development timelines within our portfolio companies,” stated LRC’s CEO, Ernie Ortiz.

LRC is reporting 54 Lithium Carbonate Equivalent Tonnes (LCETs) or 576 Spodumene Concentrate Equivalent Tonnes (SCETs) in the quarter¹.

Financial Highlights

^{*Refer to reconciliation table below}

Royalty revenue increased from $337 to $1,013 (200%) for the three months ended December 31, 2023, compared to the same period last year. The growth in royalty revenue is attributable to increased revenue from Core Lithium Ltd. (ASX: CXO, market cap $209 million), as well as from the Grota do Cirilo project, operated by Sigma Lithium (TSX-V: SGML, market cap $1.2 billion).

EBITDA in the year and quarter ended 2023 was negative compared to the same periods in 2022, primarily due to fair value adjustments of financial assets held by the Company prior to the IPO. Those financial assets were extracted as part of the IPO process and are no longer assets of the Company.

Adjusted EBITDA was a loss of $695 in the quarter, as compared to a loss of $390 in the same period last year. The additional loss in 2023 is attributable to the increased compensation and other expenses attributable to LRC being a public company.

At year end, LRC held $11.8 million of cash and had access to a credit facility, which remained undrawn.

LRC Royalty Activity Updates

Sigma Lithium Grota do Cirilo Royalty: In October 2023, Sigma announced that it had reached record peak production of 890 tonnes per day, equivalent to annualized production of 320,000 tonnes, as compared to its nameplate capacity of 270,000 tonnes. In January 2024, Sigma Lithium updated its mineral resource at the Grota do Cirilo Project, to 94.3Mt of measured and indicated mineral resources at 1.40% Li₂O and 14.6 Mt of inferred mineral resource at 1.37% Li₂O, both with a cut-off grade of 0.3% Li₂O. LRC holds a net 0.90% NSR royalty on the Grota do Cirilo Project.

Grid Metals Donner Lake Royalty: In October 2023, Grid Metals announced positive results from a scoping-level study examining the potential to reconfigure the True North Mill in Bissett, Manitoba to process ore from the Donner Lake Project. The study estimates mill capacity at 450,000 tonnes per annum (tpa) of ore feed to produce spodumene concentrate, based on 90% mill availability. The study also estimates initial capital expenditure for the mill reconfiguration at C$50 million, which includes a 30% contingency and estimates total milling costs of C$316/tonne of spodumene concentrate produced and conceptually targets production of ~ 75,000 tpa of spodumene concentrate based on 70% recoveries. LRC holds a 2.0% GOR royalty on the Donner Lake Project.

Atlas Lithium Das Neves Royalty: In December 2023, Atlas Lithium announced that it was fully funded to develop Phase 1 of its Das Neves project, which Atlas is targeting to produce 150,000 tpa of spodumene concentrate. Atlas Lithium has secured $50 million in funding through partnerships with lithium converters Chengxin Lithium and Sichuan Yahua. Atlas has disclosed that this capital infusion would position the Das Neves Project to begin production in late 2024. LRC holds a 3.0% GOR royalty on the Das Neves Project.

Arcadium Lithium James Bay Royalty: In December 2023, Arcadium Lithium (previously Allkem Limited) announced that it had been granted its Certificate of Authorisation, which is the final step in the Environmental and Social Impact Review Committee (COMEX) in Québec to advance the development of the James Bay Project. With provincial and federal environmental reviews complete, Arcadium is seeking to obtain the final near-term federal construction permits to initiate construction. LRC holds a 1.5% NSR royalty on 23 claims of the James Bay Project. The project currently covers 224 mineral claims over an area of approximately 1,195 ha.

Green Technology Metals Seymour Lake and Root Lake Royalties: In December 2023, Green Technology Metals (GT1) received a mining lease for its Seymour Lake project in Ontario. In November 2023, GT1 upgraded the mineral resource at the Seymour Lake Project to 6.1Mt of indicated mineral resource at 1.3% lithium oxide (Li₂O) and 4.2Mt inferred mineral resource at 0.7% Li₂O, both with a cut-off grade of 0.2% Li₂O.

In addition, Green Technology Metals released an integrated preliminary economic assessment (PEA) for its Seymour and Root projects in December 2023. The PEA projected an average annual production rate of 207,000 tonnes of 5.5% spodumene concentrate over a 15-year life of mine (LOM) for both projects, using open pit mining methods. The PEA contemplates mine and concentrator development at each of the Seymour Lake and Root Lake projects, with the Seymour Lake Project commencing production in 2026 and the Root Lake Project in 2031. The PEA estimates initial startup capital expenditure of C$216 million for Phase 1 (the Seymour Lake Project) and initial capital expenditure of C$467 million for Phase 2 (the Root Lake Project), with C1 costs (cash operating costs before royalties) of C$985 per tonne. The PEA estimates an aggregate post-tax NPV(8%) of C$1.2 billion for the Seymour Lake and Root Lake Projects together and the two projects are expected to generate estimated total net revenue of C$8.0 billion over their 15-year LOM. LRC holds a 1.0% GOR royalty on the Seymour and Root Lake projects.

Delta Lithium Yinnetharra Royalty: In December 2023, Delta Lithium announced a maiden mineral resource estimate for the Yinnetharra Project in Australia, comprising 6.7Mt of measured and indicated resources and 19.0Mt of inferred resources, both with a Li₂O grade of 1.0% and a cut-off grade of 0.5%. LRC holds a 1.0% GOR royalty on the Yinnetharra Project.

Winsome Resources Adina Royalty: In December 2023, Winsome Resources announced a maiden inferred mineral resource of 59Mt at 1.12% Li₂O at a cut-off grade of 0.6% on the Adina Project in Québec, making it the fifth largest lithium deposit in the region. Winsome Resources is continuing to explore the Adina Project, with ongoing drilling operations. LRC holds a 4.0% GOR and a 2.0% NSR royalty on certain claims on the Adina Project.

Core Lithium Finniss Royalty: In January 2024, Core Lithium announced that it was temporarily suspending mining operations, while continuing to process stockpiled ore (which was approximately 280,000 tonnes at December 31, 2023) to produce spodumene concentrate. In March 2024, Core announced that as part of its restructuring, prior CEO Gareth Manderson will step down. Doug Warden, Core’s current CFO, will assume the role of Interim CEO while the search for a new CEO is underway. LRC holds a 2.5% GOR royalty on the Finniss Project.

Sayona Moblan Royalty: In February 2024, Sayona released an updated Definitive Feasibility Study (“Moblan DFS”) on the Moblan Project. The Moblan DFS featured an annual production rate of 300,000 tonnes of spodumene concentrate 6% (SC6) over a 21-year LOM via open pit mining. The Moblan DFS estimates capital expenditure at C$962 million, with unit operating costs of C$555 per tonne and all-in sustaining costs of C$748 per tonne. According to the Moblan DFS, the Moblan Project is estimated to have a post-tax NPV(8%) of C$2.2 billion and is expected to generate estimated total net revenue of C$14.4 billion over its 21-year LOM. LRC holds a 2.5% GOR royalty on the Moblan Project.

Zijin Tres Quebradas Royalty: In their 2023 Annual Report, Zijin commented that Phase 1 construction for 20,000 tonnes LCE at Tres Quebradas is near complete. Phase II construction, which will increase the total production to 50,000 tonnes LCE, was initiated in March 2023. Zijin declared that capex for Phase 1 was $620 million and anticipates spending an additional $621 million to complete Phase 2. LRC holds a net 1.4% GOR royalty on the Tres Quebradas Project.

Orion Resource Partners Litigation Update

In August 2023, the Ontario court ruled in LRC’s favour, finding that in January 2021 LRC entered into a binding and enforceable contract to buy an 85% interest in the Thacker Pass royalty from Orion Resource Partners for US$18.7 million total consideration. On January 3, 2024, the Ontario court granted an injunction restraining Orion Resource Partners, and any entity that employs that trade name in its business dealings, and its employees, agents, officers, directors and any other person acting on their behalf or in conjunction with any of them, from any conduct, or causing any conduct, that dissipates, transfers or encumbers the remaining 40% interest in the Thacker Pass royalty held by Orion Resource Partners, that would hinder the delivery up for the Thacker Pass royalty as a remedy to LRC, pending the final disposition of the ongoing litigation between LRC and Orion Resource Partners.

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 August decision that found the binding and enforceable contract. LRC does not recognize this litigation as an asset in its financial statements and expects that resolution of this matter may be subject to further delays. Orion Resource Partners has not asserted any claims against LRC.

Lithium Market

The dominant growth driver for the lithium sector remains electric vehicle (EV) sales, with approximately 62% of 2023 lithium demand emanating from the automotive sector according to Wood Mackenzie. While the growth rate in EV sales slowed in 2023, the growth rate was still robust, at approximately 31% year-over-year (y/y) according to BloombergNEF.

The growth in EV sales was led by China and North America, with Chinese EV sales growing by approximately 37% and both November and December exhibiting sales of over 1 million units in each month. Chinese EV sales seasonality followed historical patterns, with 60% of sales occurring in 2H23. BYD, a Chinese EV OEM, sold over 3 million units and reported growth of 62% in 2023.

North America was the best performing region with US EV sales growth of 58% in 2023. Approximately 80% of North America sales were Battery Electric Vehicles (BEV) and the remaining 20% were Plug-in Hybrid Electric Vehicles (PHEV). Tesla remains the industry leader with nearly half of the EV market share in North America.

European electric vehicle registrations grew by 16% y/y, although growth was negatively impacted by the PHEV market, which contracted by 2.4%. BEV registrations in Europe increased by approximately 28% in 2023. EV sales experienced double-digit growth rates in almost every major European country, including a 18% increase in Italy, 45% in Spain, 24% in the UK and 40% in France. However, Germany stood out as an exception, with a 16% decline due to the withdrawal of PHEV subsidies in late 2022.

LRC estimates that the global lithium market grew by approximately 28% in 2023, with the lithium market approaching almost 1Mt of lithium carbonate equivalent (LCE). Wood Mackenzie estimates the lithium market will reach 1.2Mt in 2024, while industry leader Albemarle projects the market to reach 1.3Mt, implying growth rates of approximately 20-30% in 2024. BloombergNEF expects EV model availability to rise by nearly 31% y/y to 631 models in 2024, which is up significantly from the 49 models available a decade ago. EV sales forecasts vary, but the consensus generally indicates a growth rate of over 20% in 2024. LG Energy Solutions, one of the largest battery manufacturers globally, recently presented their 2024 market outlook in which they estimate the EV market to grow by mid-20% rates in 2024 and low 30% rates in 2025.

In addition to lithium demand from EVs, lithium has applications in batteries for energy storage system (ESS) installations. ESS allows generated power to be stored and consumed at a later time, during periods of higher or peak energy demand. According to Shanghai Metals Market (SMM), global production of LFP battery cells for ESS installations reached 190GWh in 2023, a year-over-year increase of 48% as compared to 2022. BloombergNEF estimates that the global average cost of operating a 4-hour duration ESS installation fell 24% in 2023 to $263/kWh and expects costs to fall another $9/kWh (down 3.4%) in 2024. These ongoing cost reductions for ESS applications should continue to improve the economics of ESS installations and strengthen lithium demand. While lithium alternatives such as sodium-ion batteries have been suggested for ESS installations, Rho Motion (a battery market consultancy) estimates that less than 0.1% of capacity coming online in 2024 will be from sodium-ion batteries.

Prices for lithium were volatile in 2023, with a significant decline throughout the year. SMM reports that spodumene concentrate prices in 2023 averaged $3,610/tonne CIF (Cost, Insurance, and Freight) China, with lithium carbonate prices during 2023 averaging approximately $36,000/tonne. This compares to an average of $4,380/tonne in 2022 for spodumene concentrate and $67,000/tonne for lithium carbonate. According to SMM, prices moved significantly lower throughout 2023, with spodumene prices falling from approximately $5,500/tonne in January 2023, to near $1,100/tonne in December 2023, an intra-year decline of 80%. Prices have recently stabilized given positive demand trends, a reduction in inventories, and curtailment of operations across the industry.

Acquisition Activity in 2023 and 2024

Important Dates and Events

• April 29-30, 2024 – LRC at 2024 Energy Transition Metals Summit
• May 07, 2024 – LRC at Canaccord Genuity 3^rd Annual Global Metals & Mining Conference
• May 13, 2024 – LRC Q1 2024 Earnings Release
• May 14, 2024 – LRC Q1 2024 Earnings Call. Click here for call details
• June 4-6, 2024 – LRC at The Mining Investment Event of the North
• June 12, 2024 – LRC Annual General Meeting of Shareholders
• June 12-13, 2024 – LRC at Brazil Lithium Summit
• June 24 – 27, 2024 – LRC at Fastmarkets Lithium Supply and Battery Materials Conference

Shareholder Information

The Consolidated Financial Statements and Management’s Discussion will be available on our website and SEDAR+.

Lithium Royalty Corp’s Investor Presentation is available here.

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 with a globally diversified portfolio of 35 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, Brazil, Argentina, 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. 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 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; the impact of the COVID-19 (coronavirus) pandemic; 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 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 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 it 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.

Consolidated Statement of Financial Position

The consolidated financial statements and accompanying notes can be found in our 2023 Annual Report and will be available on our website

.

Consolidated Statements of Income and Comprehensive Income (Loss)

Three months ended December 31, 2023 and 2022 and years ended December 31, 2023 and 2022

The following table presents consolidated statements of income and comprehensive income (loss) for the three and months ended December 31, 2023 and 2022 and years ended December 31, 2023 and 2022:

The consolidated financial statements and accompanying notes can be found in our 2023 Annual Report and will be available on our website.

Consolidated Statements of Cash Flows

The consolidated financial statements and accompanying notes can be found in our 2023 Annual Report and will be available on our website

¹LRC calculates LCETs by dividing royalty income for the quarter by the average spot market price of $18,886 during the quarter for 99.5% lithium carbonate, delivered in China, and calculates SCETs by dividing royalty income for the quarter by the average spot market price of $1,757 during the quarter for 6% spodumene concentrate, delivered in China. Spot market prices were based on Asian Metal data on Bloomberg.

²Pinnacle Minerals’ acquisition of the underlying mineral claims closed in December 2023. LRC holds a pre-existing royalty on those claims.

³Altius Minerals Corporation has an indirect 10% interest in the original 1.0% Tres Quebradas lithium royalty through its 10% limited partnership interest in LRC LP I. LRC holds the other 90% limited partnership interest. The additional 0.5% GOR royalty is held solely by LRC and Altius has no interest in this additional royalty.

⁴Gross Overriding Revenue (GOR) royalties are based on the total revenue stream from the sale of production from a property with few, if any, deductions.

⁵Net 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.

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Lithium Royalty Corp Reports Q4 2023 Results