(All dollar amounts are in U.S. dollars unless otherwise indicated. This release should be read in conjunction with the
Company's unaudited condensed interim consolidated Financial Statements for the quarter ended February 28,
2017 and the Management's Discussion and Analysis found on the Company's website or on SEDAR.)
TORONTO, April 28, 2017 /CNW/ - LSC Lithium Corporation
(the "Company" or "LSC") (TSXV: LSC) today reported its second quarter ended February 28, 2017
financial results.
FIRST QUARTER FINANCIAL AND OPERATING HIGHLIGHTS
The following tables summarize the financial results for the quarter ended February 28,
2017.
Statement of Financial Position
|
|
|
|
|
(in thousands of United States dollars)
|
|
February 28, 2017
|
August 31, 2016
|
Cash and cash equivalents
|
|
|
26,389
|
1,720
|
Exploration and evaluation assets
|
|
|
27,992
|
510
|
Total assets
|
|
|
59,377
|
2,583
|
Total liabilities
|
|
|
(6,999)
|
(370)
|
|
|
|
|
|
Statement of Loss and Comprehensive Loss
|
|
|
|
|
|
Three months ended
|
Six months ended
|
|
Feb 28, 2017
|
Feb 29, 2016
|
Feb 28, 2017
|
Feb 29, 2016
|
(in thousands of United States dollars, except per share
amounts)
|
$
|
$
|
$
|
$
|
Operating loss
|
(1,884)
|
-
|
(4,158)
|
-
|
Total comprehensive loss
|
(1,898)
|
-
|
(4,375)
|
-
|
Basic and diluted loss per share
|
(0.03)
|
-
|
(0.10)
|
-
|
|
|
|
|
|
Statement of Cash Flows
|
|
|
|
|
|
Three months ended
|
Six months ended
|
|
Feb 28, 2017
|
Feb 29, 2016
|
Feb 28, 2017
|
Feb 29, 2016
|
(in thousands of United States dollars)
|
$
|
$
|
$
|
$
|
Cash flows from operating activities
|
(519)
|
-
|
(2,225)
|
-
|
Cash flows from investing activities
|
(1,854)
|
-
|
(8,851)
|
-
|
Cash flows from financing activities
|
28,754
|
-
|
35,489
|
-
|
Net effect of movement in foreign exchange on cash and cash
equivalents
|
256
|
-
|
256
|
-
|
Net change in cash and cash equivalents
|
26,637
|
-
|
24,669
|
-
|
Financial
- Net loss of $1.8 million and a total comprehensive loss of $1.9
million for the quarter.
- Cash used in operations of $0.5 million.
- As LSC is an exploration stage company, there was no revenue in either the current or comparative periods.
The significant components of the expenses incurred during the quarter ended February 28, 2017
were as follows:
- Management fees of $0.4 million, which consisted of payments made to certain key management
personnel;
- Employee benefits, including salaries and wages, of $0.3 million;
- Travel of $0.1 million, which consisted of transportation, accommodation, and meals;
- Professional fees of $0.8 million, which consisted of audit, legal, and tax fees;
- Regulatory and related fees of $0.1 million which consisted of transfer agent, listing, and
filing fees;
- Loss on the revaluation of warrant liability of $0.2 million; and
- Foreign exchange gain of $0.3 million on cash and cash equivalents held in Canadian
dollars.
Operational
- LSC raised gross proceeds of $5.5 million by way of a private placement of units and
completed its financing of subscription receipts for aggregate gross proceeds of C$40.0 million.
The financing was completed in three tranches.
- LSC entered into a strategic relationship with Enirgi Group Corporation ("Enirgi Group") for the exploration and
development of lithium projects in Argentina. LSC has exclusive access to Enirgi Group's DXP
Technology in Argentina with the objective of fast-tracking its portfolio of prospective
lithium rich salars into production.
- LSC announced the closing of a qualifying transaction involving the reverse take-over by way of amalgamation.
OUTLOOK
LSC continues to focus on exploration and development of our major development properties located in the provinces of Salta
and Jujuy, Argentina. Specifically, LSC is currently focused on its exploration program on the
salar de Pozuelos property in Salta province, Argentina (the "Pozuelos Property"). LSC
previously announced its pending acquisition of the Property by way of the exercise of an option to acquire 100% of the issued
and outstanding shares of LitheA Inc. ("LitheA") from BMC Global Limited ("BMC"). The completion of the acquisition is
subject to TSX Venture Exchange ("TSXV") approval.
LSC and Enirgi Group are strategically cooperating on lithium development in Argentina
pursuant to a Relationship Agreement (defined below) whereby, among other things, the parties will examine the most economic
solution to process LSC's brines which may include supplying LSC's brines for processing at Enirgi Group's planned future
regional processing facility at the Salar del Rincón in Salta, Argentina. LSC expects to be able
to begin shipping brine from the Property for testing at Enirgi Group's demonstration plant on the Salar del Rincón, following
its anticipated commissioning, in the second half of this year. LSC's major development properties are located in close proximity
to Enirgi Group's Salar del Rincón Project. The Pozuelos property is located approximately 80km from the Salar del Rincón.
DISCUSSION OF OPERATIONS
The following is a discussion of operations for the quarter ended February 28, 2017.
Pre-RTO Capital Raising
On December 7 and December 12, 2016, the Company completed a
private placement of 5,623,327 units at a price of C$1.30 each for gross proceeds of $5.5 million, each unit consisting of one common share of LSC and one common share purchase warrant of LSC.
Each common share purchase warrant of LSC is exercisable for one common share of LSC at an exercise price of C$1.50 per share for a period ending 18 months from the closing date.
On February 10, 2017 Dajin Corp. exercised 384,615 share purchase warrants issued by LSC Lithium
at an exercise price of C$1.30 each for a total consideration of C$0.5
million.
Strategic Relationship with Enirgi Group Corporation
On December 12, 2016 Lithium S Corporation S.A. ("Lithium Argentina"), a wholly owned subsidiary
of LSC, and ADY Resources Limited ("ADY", a wholly-owned subsidiary of Enirgi Group) entered into a purchase agreement (the "ADY
Tenement Purchase Agreement") pursuant to which on December 22, 2016 ADY sold, and Lithium
Argentina purchased, ADY's 100% undivided interest in certain mineral rights in the Provinces of Jujuy and Salta, Argentina including interests in Salar Pastos Grandes, Salar Rio Grande, Arizaro, Pocitos, Cauchari and
Salar Salinas Grande (the "ADY Tenements") in consideration for 4,504,130 common shares of LSC
Lithium Subco Inc. ("LSC Lithium"), a wholly owned subsiary of LSC, with a fair value of C$1.30 per
common share for a total value of $4.3 million.
On December 12, 2016 Lithium Argentina and ADY entered into a tenement purchase pursuant to
which Lithium Argentina agreed to purchase ADY's interest in certain mineral rights located in the Province of Jujuy in
consideration for 80,714 common shares of LSC Lithium with a fair value of C$1.30 per common share
for a total value of $0.1 million.
On December 12, 2016, the Company entered into a memorandum of understanding with Enirgi Group
respecting their future lithium processing and marketing arrangements which will be formalized at a later date pursuant to
definitive documentation.
On December 12, 2016, the Company entered into a side letter agreement with Enirgi Group ("Side
Letter Agreement"). Under the terms of the Side Letter Agreement, subject to approval of the TSXV, Enirgi will have the one-time
right, to be exercised at the time the LSC exercises its proportionate shareholding interest option to purchase all of the issued
shares of LitheA, to subscribe for such number of common shares of LSC at a price equal to C$1.30
per common share of LSC such that, after such subscription, its pro rata interest in LSC shall not exceed 20%.
On December 12, 2016 Lithium Argentina and ADY Resources Limited, Sucursal Argentina ("ADY
Argentina") entered into a mining management support agreement ("Mining Management Support Agreement") on December 12, 2016. Under the terms of the Mining Management Support Agreement, ADY Argentina may provide
management support services to Lithium Argentina in Argentina relating to the management of day
to day operations of Lithium Argentina, as may be mutually agreed upon by Lithium Argentina and ADY Argentina from time to time
and to the extent that ADY Argentina can reasonably provide the services.
On December 22, 2016 LSC Lithium entered into a relationship agreement ("Relationship
Agreement") with Enirgi Group on December 22, 2016. Under the Relationship Agreement, Enirgi Group
will be entitled to nominate that number of individuals equal to fifty percent (50%) of the total number of directors of LSC for
appointment or election as a director of LSC. Enirgi Group shall also be entitled to nominate the CEO of LSC for ultimate review
and approval by the board of directors of LSC. The Relationship Agreement provides for strategic cooperation between Enirgi Group
and LSC.
On December 22, 2016, each of Angstrom Capital Ltd., Iso Capital Ltd., Modulus Capital Ltd.,
Regent Mercantile Holdings Limited, Juan Carlos Grosso, Analogue Capital Ltd., David Dattels, Graham Dattels, Smoke Rise Holdings Limited, Tudorcroft
Investments Inc., Enirgi Group and LSC entered into a voting and support agreement on December 22,
2016 ("Voting and Support Agreement").
On December 22, 2016, LSC Lithium and ADY entered into a mining data purchase agreement
concurrently with the transfer of the ADY Tenements pursuant to the ADY Tenement Purchase Agreement. Under the terms of the
mining data purchase agreement, ADY transferred to LSC Lithium its records, files, reports, data and documents directly relating
to the mining data and all work done thereon (which may include maps, drill logs and other drilling data, core tests, pulps,
reports, surveys, assays, analyses, production reports, operations, technical, and other material information developed by or on
behalf of ADY or, where it is available, a previous holder of the ADY Tenements). LSC Lithium issued to ADY 10,822,181
common shares of LSC Lithium as consideration for the mining data with a fair value of C$1.30 per
common share for a total value of $10.4 million.
On December 22, 2016, LSC and Enirgi Group entered into a management support agreement (the
"Head Office Management Support Agreement"). Pursuant to the terms of the Head Office Management Support Agreement, Enirgi Group
and LSC agreed to share the premises located at 3001-1 Adelaide Street East, Toronto, Ontario, Canada M5C 2V9 as well as certain employee resources on a cost plus ten percent (10%)
basis. Under the Head Office Management Support Agreement, Enirgi Group will provide management support services to LSC, as may
be mutually agreed upon by LSC and Enirgi Group from time to time and to the extent that Enirgi Group can reasonably provide such
services.
Other Property Acquisitions
Pursuant to an agreement entered into on September 15, 2016, as amended on December 21, 2016, Lithium S acquired the mining rights known as Maria Clara and
Blas in the Province of Jujuy, Argentina from Mario Angel Blas
Moncholi for a total consideration of $0.3 million.
Qualifying Transaction Involving the Reverse Take-Over by Way of Amalgamation
On February 22, 2017, LSC announced the closing of a qualifying transaction involving the
acquisition of all the issued and outstanding common shares of LSC Lithium by way of the Amalgamation. Prior to the closing
of the Amalgamation, LSC Lithium completed its financing of 30,769,231 subscription receipts (the "Subscription Receipts") at a
price of C$1.30 each for aggregate gross proceeds of C$40.0 million.
The financing was completed in three tranches. At the closing of the Amalgamation, the holders of the Subscription Receipts
received 30,769,231 common shares of LSC. In connection with the Subscription Receipts agent commissions and finder's fees, an
additional 1,545,450 warrants to purchase LSC common shares exercisable at a price of C$1.30 per
share for a period of 12 months following the applicable closing were issued.
Pursuant to the Amalgamation, (i) each outstanding LSC Lithium common share was exchanged for LSC common shares on a
one-for-one basis, and (ii) each outstanding LSC Lithium warrant was exchanged for LSC warrants on a one-for-one basis on the
same terms and conditions as contained in the LSC Lithium warrants. In addition, the Relationship Agreement, Head Office
Management Services Agreement, Side Letter Agreement and Voting and Support Agreement were assigned from LSC Lithium to LSC.
SUBSEQUENT EVENTS
The following is a discussion of significant transactions entered into subsequent to the quarter ended February 28, 2017.
Exercise of Option to Purchase LitheA
On March 15, 2017 the Company announced that it has delivered notice of exercise of its option
to acquire 100% of the issued and outstanding share capital of LitheA from BMC. LitheA's principal asset is the Pozuelos Property
located in the Province of Salta, Argentina. The consideration payable by the Company upon the exercise of the LitheA
Option will be approximately $44.0 million, of which $38.5 million
will be payable to BMC (in exchange for all of the outstanding shares of LitheA) and $5.5 million
(plus interest) will be payable to a beneficial shareholder of BMC (in exchange for a $5.5 million
promissory note issued by LitheA to such shareholder). The $38.5 million payment will be satisfied,
as to $14.3 million plus interest at the rate of 24% per annum from November
14, 2016 by a cash payment and/or the assignment of all or part of the BMC Loan and as to the balance by the issuance of
common shares of LSC Lithium (valued at $0.964 each). The payment of the $5.5 million (plus interest at the rate of 12% per annum from November 14, 2016)
will be satisfied as to cash in the amount of any accrued and unpaid interest, and the balance either in cash and/or through the
issuance of common shares of LSC Lithium (valued at $0.964 each) at the option of the lender.
The Company expects to close the acquisition on or before June 29, 2017, subject to receipt of TSXV
approval.
Concurrently, under the LitheA Put/Call Agreement, Enirgi Group elected to convert its $5.0
million loan principal into LSC Shares and the beneficial owner of BMC has agreed to convert $3.0
million of his loan principal into LSC shares, on closing of the acquisition of Lithea.
A fee of $500,000 is payable to an employee of LitheA for introducing the opportunity, upon the
successful completion of the acquisition. The Company will seek to pay such fee in LSC shares, subject to regulatory
approval.
Grid Note with LitheA
Pursuant to a secured promissory grid note (the "Note") entered into on December 22, 2016,
LitheA has $600,000 outstanding under a loan facility from the Company. The loan has been primarily
used by LitheA to advance due diligence and exploration work on the Pozuelos Property. On March 14,
2017, the LSC board of directors approved increasing the Note to $2.0 million. Any
amounts outstanding under the Note at the closing of the acquisition of LitheA will become an inter-company debt of LSC.
Transaction with Orocobre Limited
On March 28, 2017, the Company entered into an agreement among LSC, its Argentine subsidiary,
Orocobre, South American Salars SA ("SAS") and Borax Argentina SA ("BA") pursuant to which LSC will acquire all tenements and
other mineral rights held by Orocobre, SAS and BA located in the Salinas Grandes Salar, in Salta and Jujuy provinces,
Argentina, covering approximately 32,727 hectares. The purchase consideration
includes:
- a cash payment of $4.0 million;
- issuance of three non-interest bearing promissory notes to Orocobre on behalf of SAS (individually a "Promissory Note" and
collectively, the "Promissory Notes"), each in the amount of $1.0 million, the first one being
due on the first anniversary of the closing date, the second one being due on the second anniversary of the closing date and
the third one being due on the third anniversary of the closing date (and such third Promissory Note shall be subject to
adjustment in accordance with the agreement);
- the granting of a 2% royalty on the brine concentrate produced from the Salinas Grandes tenements; and
- the transfer of LSC's Olaroz tenements to BA.
The closing is subject to the satisfaction of certain conditions precedent and is expected to occur in the fourth quarter of
fiscal 2017.
Transaction with Advantage Lithium
On March 28, 2017 the Company entered into an agreement with Advantage Lithium pursuant to which
LSC will be granted the right to purchase Advantage Lithium's option over the 1,471 hectare Stella Marys Project located in the
Salinas Grandes Salar in Salta province, Argentina in return for a 2% royalty on the brine
concentrate produced from the Company's Salinas Grandes tenements, payment of $0.7 million in cash
and 256,520 shares in LSC.
The closing is subject to the satisfaction of certain conditions precedent and is currently expected to occur in the fourth
quarter of 2017.
LIQUIDITY AND CAPITAL RESOURCES
The Company is in the process of assessing viable mineral properties, assets or businesses and therefore has no regular cash
flow. To date, the Company has not earned significant revenues and is in the acquisition stage. The Financial Statements have
been prepared on a going concern basis which assumes that the Company will be able to raise the capital required and discharge
its liabilities in the normal course of business for the foreseeable future. Accordingly, the Financial Statements do not include
any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern. The continuing operations of the Company are dependent
upon its ability to raise adequate financing to sustain such operations in future.
As at February 28, 2017, the Company had a working capital position of $24.1 million. The Company has sufficient capital resources to meet current financial obligations.
Additional capital may be required in the longer term. The ability to raise additional finances may be impaired, or such
financing may not be available on favorable terms, due to conditions beyond the control of the Company, such as continued
uncertainty in the capital markets.
In particular, the Company will need to maintain sufficient working capital to meet its commitments to acquire LitheA and
purchase the mining tenements from Orocobre and Advantage Lithium, as well as to meet its obligations under its exploration
programs on its properties. The anticipated acquisition of LitheA in the third quarter is expected to have the most significant
impact on LSC's working capital. Enirgi Group has agreed to convert its $5.0 million loan principal
into LSC shares and the shareholder of BMC has agreed to convert $3.0 million of its $5.5 million loan principal into LSC shares. However, the exact allocation of the total purchase price for
LitheA between cash and LSC shares will depend, in large part, on whether the other lenders elect to receive cash and/or LSC
shares which will be determined no later than two weeks prior to the closing date. LSC's working capital may also be impacted
depending on whether the finder's fee can be paid in LSC shares and whether Enirgi decides to exercise its top-up right to
subscribe for more LSC shares.
SHARES ISSUED AND OUTSTANDING
As of the date hereof, the Company's shares, stock options and warrants to purchase the Company's shares issued and
outstanding are as follows:
Equity Instrument
|
Number
|
Common Shares
|
84,695,841
|
Options exercisable for Common Shares
|
6,000,000
|
Warrants exercisable for Common Shares
|
18,011,342
|
On February 22, 2017 a total of six million stock options were issued to employees and directors
of the Company whereby one third of the options granted become exercisable at any time after the first anniversary date, one
third at any time after the second anniversary date and the balance at any time after the third anniversary date. The options
have an exercise price of C$1.30 for a term of five years. No other stock options are issued
and outstanding.
CLARIFICATION REGARDING CERTAIN DISCLOSURE
As a result of a review by staff of the Ontario Securities Commission, we are issuing the following clarification with respect
to our disclosure of potential future production rates of the Company contained in a presentation on the Company's website (the
"Presentation").
LSC had included in the Presentation disclosure with respect to potential future production in lithium carbonate equivalent
tonnes per annum on certain of its properties. This disclosure was intended to be conceptual in nature and readers were
cautioned that such estimates were contingent on the occurrence of a number of factors.
As these potential future production estimates were not based on current resources and supported by a technical report,
National Instrument 43-101 ("NI 43-101)" does not permit such disclosure. Accordingly, the Company has made the necessary
amendments to the Presentation to ensure compliance with NI 43-101 requirements and has removed all references to potential
future production from the Presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND CONSOLIDATED FINANCIAL STATEMENTS
LSC's unaudited condensed interim consolidated financial statements and MD&A for the three and six months ended
February 28, 2017 will be filed today and will be available on SEDAR at www.sedar.com and on the Company's website at www.lsclithium.com.
ABOUT LSC LITHIUM CORPORATION:
LSC has amassed a large portfolio of tenements on prospective lithium rich salars in Northern
Argentina. LSC's six major development plays are on the salars Pozuelos (pending completion of the acquisition), Pastos
Grandes, Salinas Grandes (Salta), Salinas Grandes (Jujuy), Rio Grande and Jama, all of which are located in the "Lithium
Triangle," an area at the intersection of Argentina, Bolivia
and Chile where the world's most abundant lithium brine deposits are found. After completion of
announced acquisitions, LSC will hold a land package portfolio totaling approximately 300,000 hectares, which represents
extensive lithium prospective tenement holdings in Argentina.
Forward-Looking Statements
Certain statements in this news release may constitute "forward-looking" statements which involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or achievements expressed or implied by such
forward-looking statements. When used in this news release, such statements use such words as "will", "may", "could", "intends",
"potential", "plans", "believes", "expects", "projects", "estimates", "anticipates", "continue", "potential", "predicts" or
"should" and other similar terminology. These statements reflect current expectations regarding future events and operating
performance and speak only as of the date of this news release.
Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future
performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A
number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements,
including, but not limited to, the risk factors set forth under "Risk Factors" in the MD&A .Although the
forward-looking statements contained in this news release are based upon what management of the Company believes are reasonable
assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements.
These forward looking statements include, among other things, statements relating to: uncertainties relating to receiving mining,
exploration, environmental and other permits or approvals in Argentina; proposed exploration
activities and costs for the mineral exploration projects; the continued growth of the lithium industry; anticipated results and
time frames of exploration activities and work programs; ability to maintain sufficient working capital; ability to classify
mineral resources in conformance with NI 43-101; availability of additional financing and the Company's ability to obtain
additional financing on satisfactory terms; ability to retain key executive and senior management; the exercise of options to
acquire interests in mineral projects, including the exercise of the LitheA Option; expected closing of the transactions with
Advantage Lithium; Orocobre and LitheA; future performance and successful application, use and licensing of Enirgi's DXP
Technology; the timing of testing brines at Enirgi's demonstration plant at the Salar del Rincón ; the ability to
achieve production at any of the Company's mineral exploration properties; the timing and ability of Enirgi to construct a
regional processing facility at Salar del Rincon; and the ongoing strategic relationship with Enirgi.
In particular, the forward-looking statements assume factors that could cause actual events, performance or results to
differ materially from those set forth in the forward-looking statements, which include, but are not limited to: risks
around final commissioning of Enirgi Group's demonstration plant; the risks around timing, permitting, funding and
construction of a regional processing facility at the Salar del Rincón by Enirgi Group and the ability of LSC to fast-track
production from its own properties by supplying brine to such a facility; risks relating to proposed acquisitions including
TSXV approvals; volatility in the market price for minerals; uncertainty of whether there will ever be production at the
Company's mineral exploration properties; geological, technical, drilling or processing problems; liabilities and permitting and
development risks, including environmental liabilities and risks, inherent in mineral extraction operations; fluctuations in
currency exchange and interest rates; incorrect assessments of the value of acquisitions; unanticipated results of exploration
activities; competition for, amongst other things, capital, undeveloped lands and skilled personnel; lack of availability of
additional financing; unpredictable weather conditions; the requirement for, and the Company's ability to obtain future funding
on favourable terms or at all, to fund exploration, development and operations; the economy generally and stock market
volatility; receipt of and timeliness of government or regulatory approvals; and other risks detailed from time to time in the
Company's ongoing quarterly and annual filings with applicable securities regulators, and those which are discussed under the
heading "Risk Factors" in the MD&A.
The Company's actual results could differ materially from those anticipated in these forward-looking statements and
information as a result of both known and unknown risks, including the risk factors set forth under "Risk Factors" in the
MD&A. The factors set forth under the heading "Risk Factors" in the MD&A should not be construed
as exhaustive. Readers should not place undue reliance on forward-looking statements as the plans, intentions or expectations
upon which they are based might not occur. Readers are cautioned that the foregoing lists of factors are not exhaustive. Each of
the forward-looking statements contained in this news release is expressly qualified by this cautionary statement. These
forward-looking statements are made as of the date of this news release and are expressly qualified in their entirety by this
cautionary statement. Subject to applicable securities laws, the Company does not assume any obligation to update or revise them
to reflect new events or circumstances.
Neither the TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. The TSX Venture Exchange Inc.
has neither approved nor disapproved the contents of this news release.
SOURCE LSC Lithium Corporation
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