Lithium Americas Corp. (TSX: LAC) (NYSE:
LAC) ("Lithium Americas" or the "Company") has announced
its financial and operating results for the year ended December 31,
2018.
This news release should be read in conjunction
with Lithium Americas’ audited consolidated financial statements
and management's discussion and analysis ("MD&A") for the year
ended December 31, 2018, which are available on Lithium Americas’
website and SEDAR.
HIGHLIGHTS
Cauchari-Olaroz:
On April 1, 2019 the Company entered into a
definitive transaction agreement whereby Ganfeng Lithium Co., Ltd.
(“Ganfeng”) has agreed to subscribe, through a wholly-owned
subsidiary, for 141 million newly issued shares of Minera Exar S.A.
(“Minera Exar”), the holding company for the Cauchari-Olaroz
lithium brine project, for cash consideration of US$160 million
(such transaction, the “Project Investment”). As a result of the
Project Investment, Ganfeng will increase its direct and indirect
interest in the Cauchari-Olaroz project from 37.5% to 50%, with
Lithium Americas holding the remaining 50% interest (each subject
to the rights of JEMSE (the Government of Jujuy) to acquire an
approximate 8.5% interest in Minera Exar). Closing of the
transaction remains subject to Ganfeng shareholder and regulatory
approvals, the consent of BCP Innovation Pte. Ltd. in its capacity
as lender pursuant to the Company’s senior credit facility, the
Company’s shareholder approval and other customary closing
conditions.
Concurrently herewith, the Company updated the
Measured and Indicated mineral resource at its Cauchari-Olaroz
project to 17.9 million tonnes of lithium carbonate equivalent
(“LCE”) at 581 mg/L average grade and the Inferred mineral resource
to 5.1 million tonnes of LCE at 602 mg/L. The updated Measured and
Indicated mineral resource has not been used to update the
assumptions in the Company’s detailed feasibility study, see
discussion below.
The updated NI 43-101 resource report discloses
an approximate 53% increase in the Measured and Indicated mineral
resource from the Company’s 2018 resource estimate and establishes
Cauchari-Olaroz as the second largest known brine lithium resource
in the world as of the date hereof.
On October 31, 2018, the Company completed a
series of transactions (the “Transaction”) pursuant to which
Lithium Americas increased its interest in Minera Exar from 50% to
62.5% and Ganfeng acquired the remaining 37.5% interest.
Lithium Americas and Ganfeng continue to work
with Minera Exar to optimize its Cauchari-Olaroz project (the
“Project”) with the goal of producing the highest quality battery
grade lithium carbonate for the lowest cost. Minera Exar is
undertaking a feasibility study in respect of an increase in the
stated production capacity of the Project from 25,000 tpa to an
aggregate of 40,000 tpa of lithium carbonate, as well as to advance
certain permitting, design and other development planning
activities at Cauchari-Olaroz.
Development activities are continued on schedule
with the advancement of engineering and construction, including the
following:
- Two evaporation ponds are completed and an additional four
ponds are under construction. The filling of the first pond with
brine commenced in October 2018. A total of seven wells are
currently pumping brine to the ponds and three more wells are under
construction. Filling of the second pond is expected to start in
April 2019.
- Engineering is continuing and is on track to support the
procurement and construction activities. Requests for quotations
for most of the long lead equipment items were issued and firm
proposals are under evaluation. The first plant construction
package was awarded and the contractor mobilized to perform the
work. Procurement is advancing on schedule for equipment related to
pond operations.
- A total of US$57 million was advanced to Minera Exar in 2018
(including US$34 million by the Company) in the form of equity
contributions and loans to fund the construction. An additional
US$60 million was advanced to Minera Exar subsequent to the year
ended December 31, 2018 (including US$37.5 million by the
Company).
- Minera Exar has increased the size of its team to support
operations and construction activities. There are currently more
than 200 full-time Minera Exar employees. Currently 476 people are
working at the site, 172 are Minera Exar employees and 304 are
contractors. Current camp capacity at the site accommodates 554
people and an additional 128 beds will be added in early 2019 in
preparation for construction activities.
- Initial Stage 1 capital cost estimate of US$425 million, on a
100% basis and before value-added taxes (“VAT”), remains
unchanged.
- Construction continued in accordance with the schedule despite
a heavier than usual rain season in the region in February 2019.
Dilution to the ponds is not expected to have a major impact at
this stage of the project.
Lithium Nevada:
- On August 2, 2018, the Company filed the preliminary
feasibility study (“PFS”) for the Thacker Pass lithium project
(“Thacker Pass”).
- Water rights were secured during 2018 and are expected to be
sufficient for all of Phase 1 production and a portion of Phase 2
(as defined in the PFS). These water rights will be subject to a
prescribed regulatory process to transfer the point of the
diversion and manner of use prior to the start of production.
- The permitting process for Thacker Pass is underway, with
environmental baseline data collection complete and a conceptual
Mine Plan of Operations submitted to the Bureau of Land Management
(“BLM”).
- An exploration program was completed in 2018 and included new
surface geological mapping, expansion drilling at the proposed pit
area and exploration of new target areas.
- A pilot plant and laboratory has been constructed and
commissioned in Reno, Nevada to optimize the process (predominantly
to reduce the consumption of sulfuric acid), prepare tailings
samples for stability and geochemical analysis and to provide feed
samples to vendors who will design the equipment and provide
performance guarantees. The Company is considering the
production of lithium hydroxide directly from lithium sulfate to
provide added flexibility to market demand.
- The Company intends to prepare a NI 43-101 compliant
feasibility study detailing the status of the permitting process
and outcomes of the 2018 exploration program and pilot plant
testing in due course, along with other applicable updates (such as
the permitting process).
- The Company is evaluating potential partnership and financing
scenarios for Thacker Pass.
RheoMinerals:
- The sales of RheoMinerals for the year ended December 31, 2018
were US$4.8 million (2017 – US$4.3 million). Sales for the three
months ended December 31, 2018 were US$1.5 million (2017 - US$0.5
million).
- As a result of lower than expected sales, the Company
recognized US$11.6 million impairment of Organoclay property, plant
and equipment. The Company is reviewing RheoMinerals’ business plan
with the aim to make the business profitable.
Finance:
- As at December 31, 2018, the Company had US$41.6 million in
cash and cash equivalents.
- As part of the Transaction, Minera Exar repaid US$25 million of
its outstanding indebtedness to the Company.
- The Company has a US$205 million credit facility to finance its
share of capital expenditures in Minera Exar. Since the start of
2018, the Company has drawn US$55 million under this credit
facility (US$17.5 million of which was drawn in 2018). As part of
the Transaction, Ganfeng also provided LAC an additional US$100
million unsecured, limited recourse, subordinated loan facility,
which is undrawn at the date of this news release, increasing LAC’s
overall credit availability to US$250 million (excluding drawdowns
to date).
Corporate:
- In August 2018, the Company appointed Mr. Jonathan (Jon) Evans
as President and Chief Operating Officer. Jon brings over 20 years
of executive operations experience to his new role, including five
years as a general manager of the Lithium Division at FMC Corp. Due
to the executive appointment, Jon resigned as a director of Lithium
Americas.
Updated Cauchari-Olaroz Mineral Resource
On April 1, 2019, the Company published the
technical report dated March 31, 2019, with an effective date of
March 1, 2019, entitled “NI 43-101 Technical Report Updated Mineral
Resource Estimate for the Cauchari-Olaroz Project, Jujuy Province,
Argentina” (“Cauchari TR”). Included in the Cauchari TR is an
updated Mineral Resource estimate for the Cauchari-Olaroz Project
as summarized in the table below, reported on a 100% project equity
basis. LAC no longer reports a potassium Mineral Resource on the
project.
Mineral Resources
The Mineral Resource estimate below is expressed
relative to a lithium grade cut-off of greater than or equal to 300
mg/L.
Updated Mineral Resource Estimate for
Lithium |
|
Category |
|
Average Lithium Grade (mg/L) |
|
Brine (m3) |
|
Lithium Metal |
|
LCE (tonnes) |
|
Measured |
|
587 |
|
1.11E+09 |
|
651,100 |
|
3,465,700 |
Indicated |
|
580 |
|
4.70E+09 |
|
2,726,300 |
|
14,511,500 |
Measured + Indicated |
|
581 |
|
5.81E+09 |
|
3,377,400 |
|
17,977,200 |
Inferred |
|
602 |
|
1.59E+09 |
|
957,400 |
|
5,096,000 |
Notes: |
(1) The Mineral Resource estimate has an effective date
of February 13, 2019. |
(2) Mineral Resources have a cut-off grade of 300 mg/L of
lithium. |
(3) Mineral Resources are not Mineral Reserves and do not
have demonstrated economic viability. There is no certainty that
all or any part of the Mineral Resource will be converted to
Mineral Reserves. |
(4) LCE is calculated based on the following conversion
factor: mass of LCE = 5.322785 x mass of lithium metal. |
|
The updated resource provided above constitutes
a change of -1% for total average lithium concentration of Measured
+ Indicated (585 mg/L vs. 581mg/L) and a change of +53% for total
LCE Measured + Indicated (11,752,000 tonnes LCE vs. 17,977,200
tonnes LCE). The increase in overall mass can be attributed to the
expansion and deepening of the Resource Evaluation Area based on
exploration results obtained in 2017 and 2018. The decline in total
average concentration can be attributed to the updated Resource
estimate affected by the 2017 and 2018 range of samples collected
in SdO and Archibarca areas of the Cauchari-Olaroz Project. When
spatially averaged with the lithium concentration of SdC samples,
which essentially dominated the prior estimate, the updated
estimate has a relatively small percentage decrease in the overall
concentration of lithium.
Technical Information
Detailed scientific and technical information on
the Cauchari-Olaroz Project can be found in the Cauchari TR that
was filed with the securities regulatory authorities in each of the
provinces of Canada on March 31, 2019. The Cauchari TR has an
effective date of March 1, 2019 and was prepared by Ernest Burga,
P.Eng., David Burga, P.Geo., Wayne Genck, P.Eng. and Daniel Weber,
P.G., RM-SME, each of whom is a “qualified person” for the purposes
of NI 43-101.
Financial Results:
The following selected financial information is
presented in thousands of US dollars, shares and other equity
instruments in thousands, unless otherwise stated and except in
relation to per share amounts.
The following table summarizes the key items
that resulted in the decrease in net loss for the year ended
December 31, 2018 versus the year ended December 31, 2017, as well
as certain offsetting items:
Financial results |
Years ended December 31, |
|
Change |
|
|
2018 |
|
2017 |
|
|
|
|
$ |
|
$ |
|
$ |
|
Organoclay sales |
|
4.843 |
|
4.29 |
|
553 |
|
Cost of sales |
|
(6,800 |
) |
(6,103 |
) |
(697 |
) |
Exploration
expenditures |
|
(10,015 |
) |
(4,339 |
) |
(5,676 |
) |
Organoclay research and
development |
|
(578 |
) |
(423 |
) |
(155 |
) |
General and
administrative expenses |
|
(9,419 |
) |
(7,296 |
) |
(2,123 |
) |
Share of loss in Joint
Venture |
|
(347 |
) |
(4,850 |
) |
4.503 |
|
Stock-based
compensation |
|
(4,616 |
) |
(11,412 |
) |
6.796 |
|
Gain on increase of
interest in Joint Venture |
|
6.104 |
|
- |
|
6.104 |
|
Impairment of
Organoclay property, plant and equipment |
|
(11,580 |
) |
- |
|
(11,580 |
) |
Transaction costs |
|
(974 |
) |
- |
|
(974 |
) |
Foreign exchange
gain/(loss) |
|
3.828 |
|
(3,759 |
) |
7.587 |
|
Other
income |
|
1.287 |
|
642 |
|
645 |
|
Net Loss |
|
(28,267 |
) |
(33,250 |
) |
4.983 |
|
Net loss for the year ended December 31, 2018
was $28,267 compared to $33,250 for the year ended December 31,
2017. The decrease in the net loss was mainly attributable to the
one-time gain on increase of interest in Joint Venture, lower loss
from the Joint Venture (as most costs were capitalized in the year
ended December 31, 2018, but expensed during the first two quarters
of 2017), lower stock-based compensation and higher foreign
exchange gain partially offset by an impairment charge on
Organoclay property, plant and equipment, transaction costs, higher
exploration expenses at the Thacker Pass project and higher general
and administrative expenses.
Organoclay Sales and Cost of
Sales
The organoclay sales during the year ended
December 31, 2018 were $4,843 (2017 - $4,290), with related
production costs of $5,681 (2017 - $5,339) and depreciation expense
of $1,119 (2017 - $764) resulting in gross loss of $1,957 (2017 -
$1,813).
Expenses
Exploration expenditures during the year ended
December 31, 2018 of $10,015 (2017 – $4,339) increased mostly due
to drilling, permitting and engineering activities at the Thacker
Pass project.
Organoclay research and development costs are
relatively consistent from period to period and include costs of
operating the research and development team and lab for new
organoclay product development.
Loss from the Joint Venture during the year
ended December 31, 2018 of $347 (2017 – $4,850) represents the
Company’s share of the Joint Venture losses for the Cauchari-Olaroz
project. In July 2017, the Joint Venture’s Cauchari-Olaroz project
entered the development phase. Effective July 1, 2017, all costs
directly attributable to the project are being capitalized. The
Company’s share of the Joint Venture losses decreased during the
year ended December 31, 2018 compared to the same period of 2017 as
the majority of costs incurred during the year ended December 31,
2018 were capitalized as project development costs.
Stock-based compensation during the year ended
December 31, 2018 of $4,616 (2017 - $11,412) is a non-cash expense
and consists of the $3,189 (2017 – $4,423) estimated fair value of
stock options, the $946 (2017 – $6,989) fair market value of RSUs,
and the $481 (2017 – nil) fair value of PSUs vested during the
period. During the year ended December 31, 2018, the Company
granted 90 stock options, 246 RSUs of which 197 RSUs were granted
in lieu of salaries recorded in accrued liabilities, 699 PSUs to
its employees and officers and 87 DSUs to its independent directors
in lieu of directors’ fees. Higher stock-based compensation in 2017
was mainly due to a one-time bonus granted to certain executives of
the Company in connection with the successful completion of the
Ganfeng and Bangchak financings.
Included in General and Administrative expenses
during the year ended December 31, 2018 of $9,419 (2017 –
$7,296) are:
- Office and administrative expenses of $1,331 (2017 – $743)
include Vancouver, Reno, and Toronto office rent, insurance, IT,
telephone, and other related expenses and RheoMinerals’ general
office expenses. The increase in this category is mainly due to
higher directors’ and officers’ insurance and compliance costs as a
result of the NYSE listing.
- Professional fees of $1,247 (2017 – $926) consist of legal
fees of $571 (2017 – $ 436), consulting fees of $412
(2017 – $256), public relations fees of $34 (2017 – $95),
and accounting fees of $230 (2017 – $139). Professional fees
were higher during the year ended December 31, 2018 due to
increased activities at corporate and Lithium Nevada.
- Salaries and benefits of $4,410 (2017 – $3,746) increased
due to hiring of additional employees in 2018, employee bonuses
accrued in Q2 2018, and an increase in directors’ fees.
- Regulatory and filing fees of $826 (2017 – $403) increased
due to the costs of listing the Company on the NYSE and the filing
of the base shelf prospectus in 2018.
Other Items
During the year ended December 31, 2018 the
Company recognized a foreign exchange gain of $3,828 (2017 – loss
of $3,759). The gain was due to the strengthening of the US dollar
against the Canadian dollar and a higher US dollar denominated cash
balance during the year ended December 31, 2018. The Company holds
most of its cash in US currency in the parent company with Canadian
dollar functional currency.
Other income during the year ended December 31,
2018 was $1,287 compared to other income of $642 in 2017. Included
in other income during the year ended December 31, 2018 are $702 in
interest income on cash, $796 interest income on the loans to the
Joint Venture and $353 of proceeds received by RheoMinerals from
Delmon, partially offset by $338 of interest expense on the senior
credit facility and $232 of withholding tax on loan interest
payments to the Company from Minera Exar. Included in other income
in 2017 was $410 of Delmon proceeds, $400 in interest income on
cash and $240 in interest income on the loans to the Joint Venture
partially offset by $400 of equipment write-offs at
RheoMinerals.
Qualified Person:
The scientific and technical information in this
news release has been reviewed and approved by Dr. Rene LeBlanc, a
Qualified Person for purposes of NI 43-101 by virtue of his
experience, education and professional association. Mr.
LeBlanc is the Chief Technical Officer of the Company. Information
on the Company’s data verification and QA / QC procedures is
contained in Lithium Americas’ current technical reports for the
Cauchari-Olaroz lithium project and the Thacker Pass lithium
project, available at www.sedar.com.
About Lithium
Americas:
Lithium Americas, together with Ganfeng Lithium,
is developing the Caucharí-Olaroz lithium brine project, under
construction in Jujuy, Argentina. In addition, Lithium Americas
owns 100% of the Thacker Pass lithium project located in Nevada,
the largest known lithium deposit in the United States. The Company
trades on both the Toronto Stock Exchange and on the New York Stock
Exchange, under the ticker symbol “LAC”.
For further information contact:Lithium Americas
Corp.Investor RelationsSuite 300 – 900 West Hastings
StreetVancouver, BC, V6C 1E6Telephone:
778-656-5820Email: ir@lithiumamericas.comWebsite:
www.lithiumamericas.com
Forward-looking
statements:
This news release contains “forward-looking
information” and “forward-looking statements” (which we refer to
collectively as forward-looking information) under the provisions
of applicable securities legislation. All statements, other than
statements of historical fact, are forward-looking information.
Examples of forward-looking information in this news release
include, among other things: the expected benefits from the Project
Investment, including successful closing and timing thereof;
successful development of the Caucharí-Olaroz and Thacker Pass
projects, including timing, anticipated production, and results
thereof, the Company’s ability to successfully fund such
development, further optimization of Caucharí-Olaroz project,
whether the resource update for Cauchari-Olaroz will ever be
developed into reserves, including information and underlying
assumptions related thereto, success of the Thacker Pass pilot
plant, the results of any future feasibility study at Thacker Pass,
results of partnership and financing options at Thacker Pass, and
the results of the Company’s review of the RheoMinerals business
plan.
Forward-looking information may involve known
and unknown risks, assumptions and uncertainties which may cause
the Company’s actual results or performance to differ materially.
This information reflects the Company’s current views with respect
to future events and is necessarily based upon a number of
assumptions that, while considered reasonable by the Company today,
are inherently subject to significant uncertainties and
contingencies. These assumptions include, among others, successful
closing of the Project Investment, including satisfaction of
conditions precedent thereto and timing thereof; forecast demand
for lithium products, the Company’s ability to fund, advance and
develop its projects, including results therefrom, accuracy of
Mineral Resources and Mineral Reserves, including whether resources
will ever be developed into reserves, accuracy of current budget
and construction estimates, maintenance of a positive business
relationship with Ganfeng Lithium, and a stable and supportive
legislative and regulatory environment. Forward-looking information
also involves known and unknown risks that may cause actual results
to differ materially, these risks include, among others, risks
inherent in transactions similar to the Project Investment,
including successful completion of all conditions precedent
thereto; inherent risks in development of capital intensive mineral
projects (including as co-owners), variations in Mineral Resources
and Mineral Reserves, recovery rates and lithium pricing, changes
in project parameters and funding thereof, changes in legislation
or governmental policy, title risk, cost overruns, operational
risks and general market and industry conditions. Additional risks,
assumptions and other factors are set out in the Company’s
management discussion and analysis and most recent annual
information form, copies of which are available on SEDAR at
www.sedar.com.
Although the Company has attempted to identify
important risks and assumptions, given the inherent uncertainties
in such forward-looking information, there may be other factors
that cause results to differ materially. Forward-looking
information is made as of the date hereof and the Company does not
intend, and expressly disclaims any obligation to, update or revise
the forward-looking information contained in this news release,
except as required by law. Accordingly, readers are cautioned not
to place undue reliance on forward-looking information.
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