(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