(All dollar amounts are in thousands of 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 May 31, 2017 and the Management's Discussion and
Analysis found on the Company's website or on SEDAR.)
TORONTO, July 27, 2017 /CNW/ - LSC Lithium
Corporation (the "Company" or "LSC") (TSXV: LSC) today reported its
third quarter ended May 31, 2017
results.
THIRD QUARTER FINANCIAL AND OPERATING HIGHLIGHTS
The following tables summarize the financial results for the
quarter ended May 31, 2017:
Statement of
Financial Position
|
|
|
|
|
May 31,
2017
|
August 31,
2016
|
(in thousands of
United States dollars)
|
|
$
|
$
|
Cash and cash
equivalents
|
|
21,821
|
1,720
|
Exploration and
evaluation assets
|
|
33,614
|
510
|
Total
assets
|
|
59,430
|
2,583
|
Total
liabilities
|
|
(4,935)
|
(370)
|
Working
capital
|
|
20,881
|
1,703
|
|
|
|
|
Statement of
Loss and Comprehensive Loss
|
|
|
|
|
Three months ended
May 31
|
Nine months ended
May 31
|
|
2017
|
2016
|
2017
|
2016
|
(in thousands of
United States dollars, except per share amounts)
|
$
|
$
|
$
|
$
|
Operating
loss
|
(642)
|
-
|
(4,800)
|
-
|
Total comprehensive
income (loss)
|
215
|
-
|
(4,160)
|
-
|
Basic income (loss)
per share
|
0.00
|
-
|
(0.07)
|
-
|
Diluted income (loss)
per share
|
0.00
|
-
|
(0.07)
|
-
|
|
|
|
|
|
Statement of
Cash Flows
|
|
|
|
|
|
Three months ended
May 31
|
Nine months ended
May 31
|
|
2017
|
2016
|
2017
|
2016
|
(in thousands of
United States dollars)
|
$
|
$
|
$
|
$
|
Cash flows used in
operating activities
|
(3,014)
|
-
|
(6,481)
|
-
|
Cash flows used in
investing activities
|
(785)
|
-
|
(8,394)
|
-
|
Cash flows (used in)
from financing activities
|
(375)
|
-
|
35,114
|
-
|
Net effect of
movement in foreign exchange on cash and cash
equivalents
|
(394)
|
-
|
(138)
|
-
|
Net change in cash
and cash equivalents
|
(4,568)
|
-
|
20,101
|
-
|
Financial
- Net loss of $0.642 million for
the quarter.
- Cash used in operations of $3.0
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 May 31, 2017 were as
follows:
Significant
components of expenses (income)
|
|
|
|
|
|
Three months ended
May 31
|
Nine months ended
May 31
|
|
2017
|
2016
|
2017
|
2016
|
(in thousands of
United States dollars)
|
$
|
$
|
$
|
$
|
Management
fees
|
(58)
|
-
|
350
|
-
|
Employee benefits,
including salaries and wages
|
306
|
-
|
799
|
-
|
Travel and related
costs
|
25
|
-
|
447
|
-
|
Professional and
consultant fees
|
531
|
-
|
2,998
|
-
|
Regulatory and
related fees
|
1
|
-
|
110
|
-
|
Changes in fair value
of warrant liability
|
(1,397)
|
-
|
(1,205)
|
-
|
Foreign
exchange
|
376
|
-
|
430
|
-
|
Operational
- LSC continued to fund LitheA Inc. ("LitheA") predominantly for
exploration work on the Salar de Pozuelos ("Pozuelos"), in
expectation of acquiring 100% of the shares of LitheA pursuant to
the LitheA Option Agreement and LitheA Put/Call agreement. The
acquisition of LitheA was completed on June
29, 2017, after the third quarter, following completion of
due diligence and receipt of regulatory approvals. For further
information on the LitheA Acquisition, LitheA Option Agreement and
LitheA Put/Call agreement, please refer to the corresponding
management's discussion and analysis of results of operations and
financial condition for the three and nine months ended
May 31, 2017 (the "MD&A").
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 in Salta province, Argentina.
During the third quarter, exploration work consisted of
exploration holes between 35 and 330 m, pumping wells and tests,
and a seismic survey. In the coming months, we anticipate
additional exploration holes, pumping wells and tests, and a
hydrogeologic study that considers measurements of the fresh water
– brine interphase and other studies. We expect to complete the
work within the second half of 2017.
LSC and Enirgi Group Corporation ("Enirgi Group") are
strategically cooperating on lithium development in Argentina pursuant to a Relationship Agreement
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 May 31, 2017.
Update on LitheA
On March 15, 2017, the Company
announced that it had delivered notice of exercise of the LitheA
Option to acquire 100% of the issued and outstanding share capital
of LitheA from BMC Holdings Limited ("BMC Holdings"). On
June 29, 2017, the Company closed the
LitheA Acquisition. For further information on the LitheA
Acquisition and LitheA Option Agreement, please refer to subsequent
events section of this news release (below) and the MD&A.
Grid Loan to LitheA
On March 14, 2017, the grid loan
agreement (the "Grid Loan"), pursuant to which Lithium S advanced
funds to LitheA, was amended to increase the maximum principal from
$500 to $2,000 under which LitheA has drawn down a total
of approximately $2,000 as at
May 31, 2017. The Grid Loan,
originally entered into on December 22,
2016, is repayable on demand, bears interest at 10% per
annum, is secured by a second ranking fixed and floating charge
over the assets of LitheA, and became an inter-company loan
post-closing of the LitheA Acquisition.
Other activity
On May 19, 2017, the Company
granted 750,000 options to certain independent directors at an
exercise price of C$1.30 for a term
of five years.
In the third quarter, the Company paid a total of $348 in connection with tenement acquisition
commitments assigned to the Company from ADY under the ADY Tenement
Purchase Agreement and a reimbursement of $196 in associated costs incurred by ADY arising
on the sale of tenements under the ADY Tenement Purchase
Agreement.
Enirgi Group has charged a total of $297 and $675 under
the two management support agreements for the three and nine months
ended May 31, 2017, respectively, and
is due and payable at the balance sheet date. Some of the charges
recorded in the third quarter have been reallocated to exploration
costs and capitalized, resulting in a net three-month credit in
management fees expensed in the period.
Warrants are classified as liabilities as a result of the
exercise price being in a different currency than the functional
and reporting currency of the Company and are remeasured at each
reporting date. The gain arising on the revaluation of the warrant
liabilities of $1,397 and
$1,205 for the three and nine months
ended May 31, 2017 (2016 - $NIL) was
recorded in Other income and expense. The accounting gain is
non-cash and is primarily driven by the passage of time in regards
to the remaining life of the warrants and that impact in the
Black-Scholes option pricing model.
Mina Negrita I Acquisition
On May 17, 2017, the Company
entered into an agreement with MSR to acquire the Mina Negrita I
tenament for a total of $360. The
purchase price is to be paid in installments consisting of
$40 before June 17, 2017, $100
before July 17, 2017, $110 before November 30,
2017 and $110 before
May 30, 2018. On June 15, 2017, the Company paid the first
installment of $40. For further
information on the Mina Negrita I Acquisition, please refer to the
MD&A.
SUBSEQUENT EVENTS
The following is a discussion of significant transactions
entered into subsequent to the quarter ended May 31, 2017.
LitheA Acquisition
On June 29, 2017, pursuant to the
option agreement dated November 23,
2016, as amended, between, LitheA, BMC Global Limited
("BMC"), its parent company BMC Holdings, its beneficial
shareholder Ho Sok Lim ("Lim")
and LSC Lithium Inc. ("LSC Lithium"), a wholly owned subsidiary of
the Company (the "Option Agreement"), the Company (through its
subsidiary) acquired all of the issued and outstanding shares of
LitheA for an aggregate purchase price of approximately
$44 million.
The aggregate purchase price was paid by the issuance of
31,203,355 LSC common shares and the payment of $12,860 in cash. In accordance with the terms of
the Option Agreement and Put/Call Agreement, the purchase price was
satisfied by:
- $9,948 cash payment to BMC;
- $1,467 offset of principal and
accrued interest on indebtedness owed to the Company by BMC
Holdings;
- 5,181,347 common shares of the Company issued to Enirgi Group
at a price of $0.965 per share
- 22,909,975 common shares of the Company issued to BMC at a
price of $0.964 per share;
- $2,912 cash payment to Lim;
and
- 3,112,033 common shares of the Company issued to Lim at a price
of $0.964 per share.
For further information on the LitheA Acquisition, please refer
to the MD&A.
Orocobre Agreement
On June 5, 2017, pursuant to the
agreement made on March 28, 2017, as
amended on June 2, 2017 (the
"LSC-Orocobre Agreement") among LSC, Lithium Argentina, and
Orocobre Limited ("Orocobre") and certain affiliates (the "Orocobre
Group"), LSC (through Lithium Argentina) acquired: (a) all
tenements, as well as rights to tenements, held by the Orocobre
Group located in the Salinas Grandes Salar, in Salta and Jujuy
provinces, Argentina, (the
"Salinas Grandes Tenements"); (b) interests in the portion of a
mining exploration application (cateo) that is in proximity to the
Salinas Grandes Tenements in Jujuy province; (c) a royalty held by
Orocobre in certain tenements located on the Salar de Pozuelos in
Salta province owned by LitheA; and (d) certain usufruct rights to
extract borates located in the Salinas Grandes Salar. For further
information on the LSC-Orocobre Agreement, please refer to the
MD&A.
Advantage Agreement
On June 5, 2017, pursuant to the
agreement made on March 28, 2017 (the
"LSC-Advantage Agreement") between LSC and Advantage, LSC acquired
from Advantage its option over the 1,471 hectare Stella Marys
Project located in the Salinas Grandes salar in Salta province,
Argentina (the "MSR
Option"). For further information on the LSC-Advantage
Agreement, please refer to the MD&A.
LIQUIDITY AND CAPITAL RESOURCES
The Company is in the process of assessing viable mineral
properties, assets or businesses and therefore has irregular cash
flow. To date, the Company has not earned significant revenues, as
it is in the acquisition and exploration 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 the future.
As at May 31, 2017, the Company
had a working capital position of $20.9
million and during the third quarter, the Company maintained
sufficient working capital to meet its commitments to acquire
LitheA and purchase the mining tenements from Orcobre and Advantage
Lithium Corporation ("Advantage Lithium") (subsequent to
quarter-end), as well as to meet its obligations under its
exploration programs on its properties. While the Company had
sufficient capital resources to meet current financial obligations
as at quarter-end, as discussed above, the Company incurred
significant cash expenditures in connection with closing the
Orocobre, Advantage Lithium and LitheA transactions subsequent to
quarter-end. The acquisition of LitheA has had the most significant
impact on LSC's working capital, in part, due to the syndicate of
lenders under the BMC Loan (other than Enirgi Group) electing to be
repaid in cash rather than LSC shares. Accordingly, the Company is
examining its financial commitments and planned exploration program
across its various properties in light of its current working
capital position. In particular, the Company is examining potential
financing options to maintain the planned accelerated exploration
and development program across its properties (which, among other
things, may require increased staffing and contractors). In the
event that financing is not available on acceptable terms or in
amounts required to support such programs, the Company may need to
reduce expenditures, limit exploration and/or defer parts of the
program until such time as sufficient funding is obtained. See Risk
Factors.
The Company's unaudited condensed interim consolidated financial
statements have been prepared on a going concern basis, which
contemplates the realization of assets and settlement of
liabilities in the normal course of business as they become
due.
The Company is an exploration stage mining company and does not
generate revenue. The Company's ability to fund planned exploration
activities and investments and meet related obligations is
contingent upon successful completion of additional financing
arrangements. On July 27, 2017, the
Company engaged GMP Securities L.P to act as a broker with respect
to a proposed "commercially reasonable best efforts" private
placement of up to CAD $20 million to
fund the Company's accelerated and expanded exploration program.
There can be no assurance that this private placement will be
completed or that additional financing will be available in the
future, or available under terms acceptable to the Company, to fund
planned exploration activities and investments and meet related
obligations. These factors represent material uncertainties
that may cast significant doubt as to the Company's ability to
continue as a going concern.
These unaudited condensed interim consolidated financial
statements do not reflect any adjustments to the carrying values of
assets and liabilities and the reported expenses and balance sheet
classifications that would be necessary should the going concern
assumption be inappropriate. Such adjustments could be
material.
SHARES ISSUED AND OUTSTANDING
As of the date hereof, the Company's shares, stock options and
warrants to purchase the Company's issued and outstanding shares
are as follows:
Equity
Instrument
|
Number
|
Common
shares
|
116,155,716
|
Options exercisable
for common shares
|
6,750,000
|
Warrants exercisable
for common shares
|
18,011,342
|
MANAGEMENT'S DISCUSSION AND ANALYSIS AND CONSOLIDATED
FINANCIAL STATEMENTS
LSC's unaudited condensed interim consolidated financial
statements and MD&A for the three and nine months ended
May 31, 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.
Qualified Person/Data Verification
The scientific and technical information included in this press
release is based upon information prepared and approved by
Donald H. Hains, P.Geo. Donald H. Hains is a qualified person, as
defined in NI 43-101 and is independent of LSC and LitheA.
ABOUT LSC LITHIUM CORPORATION:
LSC Lithium has amassed a large portfolio of prospective lithium
rich salars and is focused on the exploration and development of
its tenements on its Pozuelos, Pastos Grandes, Rio Grande, Salinas
Grandes and Jama properties. All LSC tenements 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. LSC Lithium has a land package portfolio
totaling approximately 300,000 hectares across 15 salars, which
represents extensive lithium prospective salar 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; future performance and successful application, use and
licensing of Enirgi Group's DXP Technology; the timing of testing
brines at Enirgi Group'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 Group to construct a regional processing facility at Salar
del Rincon; and the ongoing strategic relationship with Enirgi
Group.
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