LRC has also begun reporting Adjusted EBITDA this quarter, to exclude the impact of the non-cash and/or non-recurring items in our results. The main adjustments relate to non-recurring items such as foreign exchange gains and losses, exploration expenses that pre-date the IPO (and that are not expected to be incurred again), and other gains and losses that are non-recurring in nature. LRC has also removed the impact of one-time IPO costs, including one-time non-cash stock-based compensation at IPO, that is being amortized over the three-year vesting period.

Adjusted EBITDA increased to $1.3 million in the quarter, as compared to $159 in the same period last year representing growth of 722% and as compared to an Adjusted EBITDA loss of $0.7 million for the quarter ended June 30, 2023.

At quarter end, LRC held $13.5 million of cash and had access to a $25 million credit facility, which remains undrawn.

Acquisitions/Transactions

• On July 5, 2023, LRC acquired an additional 0.5% GOR royalty on the Tres Quebradas project in Argentina operated by Zijin Mining (SHA: 601899, market cap $42 billion). LRC now holds a net 1.4% GOR royalty on the Tres Quebradas lithium project, where Zijin expects to begin production at the end of this year.

• On October 17, 2023, Pinnacle Minerals Ltd. (ASX: PIM, market cap $5.6 million) announced that it had entered into a conditional agreement to acquire a 75% stake in the Adina East lithium project in Québec’s James Bay lithium district (the "Pinnacle Transaction") from Waratah’s Electrification and Decarbonization fund, a related party to LRC, spanning 72.7 km² and located near Winsome Resources’ Adina and Tilly projects, and Loyal Lithium’s Trieste project. Lithium Royalty Corp holds a 2.0% gross overriding revenue (GOR) royalty on the Adina East lithium project. Prior to this quarter, this royalty had been presented under ‘Other’ royalties given its small size and early-stage nature. Given the Pinnacle Transaction, management is of the view that the Adina East lithium project has substantial prospectivity and, as a result, has presented this royalty separately.

• On November 2, 2023, LRC acquired an existing 1.0% net smelter return (NSR) royalty on the Mia lithium project that is 100% owned by Q2 Metals Corp (TSX.V: QTWO, market cap $30 million). The Mia lithium project is an exploration stage project in Québec. Q2 Metals has begun to drill the Mia lithium property and additional news flow is expected in the coming months. For the press release announcing this transaction, please click here.

Financial Developments

• On July 8, LRC signed a $25 million credit agreement with National Bank of Canada that expires July 8, 2026, enhancing our liquidity position; the facility is currently undrawn.

• LRC re-purchased 111,200 shares during the quarter at an average price of C$12.11, for a total cost of C$1.3 million under LRC’s normal course issuer bid (NCIB).

• Insiders purchased 70,250 shares in the quarter, bringing the total aggregate insider buying since IPO to approximately $5.5 million.

• Subsequent to the quarter, LRC made a $2.5 million deferred purchase price payment to Bradda Head after Bradda Head reported a milestone of 1.0 million tonnes (Mt) contained Lithium Carbonate Equivalent (LCE) resource with a minimum grade of 800 ppm lithium at its Basin project.

Orion Resource Partners Litigation Update

On August 15, 2023, the Ontario court released its decision in LRC’s litigation with Orion Resource Partners, finding that LRC and Orion Resource Partners reached a "binding and enforceable" legal agreement for LRC to purchase 85% of Orion Resource Partners’ interest in a royalty over the Thacker Pass lithium project in Nevada. In 2021, Orion Resource Partners sold 60% of its interest in the royalty to a third party, such that it retains only a 40% interest in that royalty and did not complete any sale of the royalty to LRC. 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 decision. LRC does not currently recognize this litigation as an asset and expects that resolution of this matter may be subject to further delays. Orion Resource Partners has not asserted any claims against LRC.

LRC Royalty Activity Updates

Sayona Mining Moblan Royalty: On July 11, 2023, Sayona Mining announced the first results from its 2023 drill program, identifying a 750-meter eastern extension to the flat-lying South Pegmatite system. Results include 41 meters at 1.66% Li₂O from 81 meters. In addition, a new, near surface pegmatite was identified in eastern step out drilling, which included 70 meters at 1.41% Li₂O from 11 meters. Sayona Mining commented that the newly identified mineralisation extends outside of the April 2023 JORC resource pit shell, indicating an opportunity to expand the existing resource, which today sits at 49.9Mt at 1.2% Li₂O measured and indicated resource, with a 0.25% cut-off grade. LRC holds a 2.5% GOR royalty on the Moblan lithium project.

Grid Metals Donner Lake Royalty: On July 18, 2023, Grid Metals announced its maiden mineral resource estimate for its Donner Lake project in Manitoba, Canada. The estimate comprises 6.81Mt of inferred resources with a Li₂O grade of 1.39%. Additionally, Grid Metals has secured a lease agreement with 1911 Gold Corporation to use the True North mill in Manitoba for lithium spodumene concentrate production, aligning with Grid Metal’s goals of near-term production and expansion in the southeastern Manitoba region. Grid Metals has outlined plans to be in production in 2025. LRC holds a 2.0% GOR royalty on the Donner Lake lithium project.

Allkem Limited James Bay Royalty: On August 11, 2023, Allkem Limited reported a 173% increase in the James Bay mineral resource, which now stands at 110.2Mt. This solidified the James Bay lithium deposit's status as a significant top-tier lithium pegmatite resource. Furthermore, the inferred mineral resource in the NW Sector of the James Bay deposit shows promising potential for expansion along its current direction and into deeper layers. LRC’s royalty covers claims in the North, Northwest, and Eastern portions of the property. LRC is encouraged that the exploration potential of the property appears to trend more into its royalty area. LRC holds a 1.5% NSR royalty on part of the James Bay lithium project.

Core Lithium Finniss Royalty: On August 17, 2023, Core Lithium announced the completion of an A$100 million institutional equity offering to fund its near-term growth projects during the ramp-up of the Finniss project. The equity offering will provide Core Lithium with the ability to progress early works on the BP33 deposit and pursue a targeted exploration program. The CEO of Core Lithium commented that "[Core Lithium is] excited with our planned exploration program over the next 12 months which aims to deliver mine life extensions and further resource definition at Finniss." LRC holds a 2.5% GOR royalty on the Finniss lithium project.

Delta Lithium Yinnetharra Royalty: On August 21, 2023, Delta Lithium reported results of early first pass un-optimised metallurgical test results on the Yinnetharra project, suggesting that high grade spodumene Li₂O concentrates can be produced at high recovery rates. Recoveries ranged from 61% to 77% with spodumene concentrate grade of 6.3% to 6.4%. In addition, on September 12, the board of Delta Lithium announced the appointment of Chris Ellison as non-executive Chairman. Mr. Ellison is the founder and Managing Director of Mineral Resources Limited, which recently increased its shareholding in Delta Lithium to 17.44%, becoming Delta Lithium’s largest shareholder. On November 10, Delta Lithium disclosed that it expects to announce a maiden mineral resource later this quarter at the Malinda deposit on the Yinnetharra project. LRC holds a 1.0% GOR royalty on the Yinnetharra lithium project.

Winsome Resources Adina Royalty: After delays from the Québec wildfires, drilling recommenced at the Adina project at full cadence, with five rigs on site targeting a 50,000+ meter drill program, with 23,000 meters already completed as of September 30, 2023. The company expects to release a "globally significant" maiden mineral resource at Adina in 1H24. LRC holds a 4.0% GOR and 2% NSR royalty on the Adina lithium project.

Green Technology Metals Root Lake Royalty: Following up on its maiden mineral resource release at Root Lake from April 2023, Green Technology Metals updated its mineral resource estimate at Root to 14.6Mt at 1.21%. This brings the global resource in combination with Seymour to 24.5Mt at 1.14%. LRC holds a 1.0% GOR royalty on each of the Root Lake and Seymour lithium projects. Green Technology Metals has reaffirmed that it aims to start production at its Seymour property in Ontario in 2025.

Atlas Lithium Das Neves Royalty: On October 23, 2023, Atlas Lithium reported high-grade lithium mineralization at its Das Neves project, with drill holes like DHAB-208 intersecting 1.64% Li₂O over 18 meters. On September 26, Atlas Lithium announced the appointment of Martin Rowley as Lead Strategic Advisor. On September 20, Atlas Lithium announced a new mineralized shallow pegmatite discovery, as a result of step-out drilling west of their flagship 2.3-kilometer Anitta pegmatite trend. Atlas Lithium expects to release its maiden mineral resource in 1Q24. LRC holds a 3.0% GOR royalty on the Das Neves lithium project.

Bradda Head Lithium Basin-Wikieup Royalty: On September 28, 2023, Bradda Head announced an updated mineral resource estimate for its Basin project in Arizona, adding 729 thousand tonnes (kt) of LCE to the inferred mineral resource, totaling 1.0Mt of LCE. Bradda Head’s announcement triggered a $2.5 million deferred purchase price payment from LRC, with the potential for further expansion through ongoing drilling programs. LRC holds a 2.0% GOR royalty on the Basin-Wikieup lithium project.

Sigma Lithium Grota do Cirilo Royalty: On October 2, 2023, Sigma announced that it had reached record peak production of 890 tonnes per day, equivalent to annualized production of 320,000 tonnes and putting Sigma on track to achieve its annual 2023 production guidance of 130,000 tonnes. Sigma also confirmed that Phase II and III expansion plans are proceeding as planned. LRC holds a 0.90% NSR royalty on the Grota do Cirio lithium project.

Lithium Market

Electric vehicle sales continue to grow at an elevated rate and substantially higher than global GDP. In China, electric vehicle (EV) sales have grown by approximately 37.5% in the year-to-date period through September. EV sales in September were at record levels, suggesting that the normal end of year seasonality is taking hold in China. Historically, more than 60% of annual Chinese EV sales occur in the second half of the year.

In the United States, electric vehicle sales grew by approximately 63% in the quarter, compared to the prior year period and have grown by approximately 66% in the year-to-date period. EV sales reached over 1 million units in the year-to-date period through September, a milestone, and 2023 is on track for pure battery electric vehicle sales to also reach over 1 million units. Starting in January 2024, the United States subsidy regime will shift to a point of sales system, such that the $7,500 government incentive will be provided at the time of purchase as opposed to a tax credit, which should improve customer affordability for qualifying electric vehicles.

In Europe, electric vehicle registrations grew by approximately 35% year-over-year, as compared to 30% in the year-to-date period. The fastest growing regions in 2023 include Belgium, Finland, and Greece. German battery electric vehicle registrations have grown by 42% year-to-date as compared to a 43% decline for plug in hybrid vehicle sales. Battery electric vehicle registrations have grown by 47% in Europe, as compared to 5% for plug-in hybrid vehicles, internal combustion engine registrations of 12%, and diesel of -5% in the year-to-date period.

Bloomberg New Energy Finance (BNEF) estimates that demand from the energy storage system (ESS) sector in GWh will grow by nearly 200% year-over-year in 2023. Energy shifting is representing the biggest demand growth in 2023, as provincial mandates in China require wind or solar projects to be utilized with energy storage. BNEF predicts that 79% of ESS battery storage will use lithium-iron phosphate (LFP) chemistries and retain leading market share for the rest of the decade.

Price reporting agencies report that lithium prices declined by approximately 45% in the third quarter. Spot lithium carbonate prices in China were $22,500/tonne at the end of the quarter although prices outside of China remained at much higher levels. Korean import data showed that September carbonate prices stood at $32,500/tonne and hydroxide prices stood at $41,500/tonne, suggesting higher netbacks outside of China and contract levels trading at a premium to spot tonnages. Channel checks and third-party reports have commented on certain higher cost parties taking downtime and maintenance in China as a result of the price decline. LRC believes that spot prices are at or near marginal cost economics. On October 24, Posco Holdings, one of the leading chemical companies in the world and a major lithium buyer, commented that they believe that lithium prices are close to a bottom, with lithium prices unlikely to fall below $20,000/tonne, as reported by Bloomberg.

Lithium demand is tracking to grow by more than 25% year-over-year in 2023, led by electric vehicle sales and robust energy storage deployment. Incremental supply from Zimbabwe and higher cost Chinese producers are adding more tonnes at the margin to the domestic Chinese market that is discounting Chinese material relative to other geographies. Due to the growing demand and associated supply, cost curves continue to steepen throughout the industry, presenting upward pressure on capex intensity. LRC’s focus on high-grade, low-cost operations should benefit from the steepening in the cost curve over the long term.

Acquisition Activity in 2022 and 2023

Sustainability

On October 16, 2023, the World Climate Foundation ("WCF") distributed a white paper written by LRC’s CFO, Dominique Barker, entitled "Unlocking Québec’s Lithium Opportunity" which is available publicly and can be accessed here. The paper discusses why LRC sees Québec as an attractive place to allocate capital, and why LRC expects Québec to be at the nexus of the energy transition globally over the next decade. LRC is participating in the World Climate Summit – The Investment COP in Dubai and will host an in-person panel around this topic, with guests from the Québec government, Investissement Québec and Winsome Resources. Other participants of the World Climate Summit – The Investment COP include Sigma Lithium, SQM, BHP, and Volkswagen. As a holder of royalties, LRC sees itself playing a role to advance projects as well as improve the profile of the operators in which LRC holds investments.

Important Dates and Events

• November 16, 2023 – LRC at Benchmark Week: Financing the Energy Transition

• November 28, 2023 – LRC at Citi Basic Materials Conference

• November 29, 2023 – LRC at Scotiabank Mining Conference

• December 06, 2023 – LRC at Deutsche Bank 8^th Annual Lithium and Battery Supply Chain Conference

• December 04-08, 2023 – LRC at COP 28 in Dubai

• January 17-19, 2024 – LRC at 27^th Annual CIBC Western Institutional Conference

• January 23-25, 2024 – LRC at TD Cowen 15^th Annual Global Mining Conference

• March 27, 2024 – Q4 2023 results released

• March 28, 2024 – Q4 2023 earnings call

Shareholder Information

The Consolidated Financial Statements and Management’s Discussion can be found on SEDAR+.

Lithium Royalty Corp’s Investor Presentation is available here.

About Lithium Royalty Corp.

LRC is a lithium-focused royalty company with a globally diversified portfolio of 34 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, South America 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 31, 2023 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.

Technical and Third-Party Information

LRC does not own, develop or mine the underlying properties on which it holds royalty interests. As a royalty holder, LRC has limited, if any, access to properties included in its asset portfolio. As a result, LRC is dependent on the owners or operators of the properties and their qualified persons to provide information to LRC or on publicly available information to prepare disclosure pertaining to properties and operations on the properties on which LRC holds a royalty or other similar interests. LRC generally has limited or no ability to independently verify such information. Although LRC does not believe that such information is inaccurate or incomplete in any material respect, there can be no assurance that such third-party information is complete or accurate.

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.

Interim Consolidated Statement of Financial Position

The unaudited condensed consolidated interim financial statements and accompanying notes can be found in our Q3 2023 Quarterly Report available on our website

Interim Consolidated Statements of Income and Comprehensive Income (Loss)

Three and nine months ended September 30, 2023 and 2022

The following table presents interim consolidated statements of income and comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022:

The unaudited condensed consolidated interim financial statements and accompanying notes can be found in our Q3 2023 Quarterly Report available on our website.

Interim Consolidated Statements of Cash Flows

The unaudited condensed consolidated interim financial statements and accompanying notes can be found in our Q3 2023 Quarterly Report available on our website

¹LRC calculates LCETs by dividing royalty income for the quarter by the average spot market price of $33,045 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 $3,340 during the quarter for 6% lithium spodumene, delivered in China. Spot market prices were based on Asian Metal data on Bloomberg.

²Pinnacle Minerals acquisition of underlying mineral claims not yet closed, but LRC already holds a 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 acquired 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231114068010/en/

Contacts

Contact Information for Inquiries:
Jonida Zaganjori
Investor Relations
(647) 792-1100
[email protected]