Lithium Royalty Corp.

Good morning, ladies and gentlemen. Welcome to the Lithium Royalty Corp. First Quarter 2025 Results Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct the -and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, April 30, 2025. I would now like to turn the conference over to Yonita Zaganori, Vice President of Investor Relations at Lithium Royalty Corp. Please go ahead.

Good morning and welcome to Lithium Royalty Corp.'s First Quarter 2025 Earnings Call. Please note that our complete financial results are available on our website, lithiumroyaltycorp.com, under the Investors tab, and on CR+. This event is being webcast live. A replay of this call will be available on our website. Joining us today are Ernie Ortiz, President and CEO of Lithium Royalty Corp, and Dominique Barker, Chief Financial Officer at LRC. Ernie will begin with introductory remarks, followed by Dominique, who will provide an overview of our financial results. After the presentations, we will transition to a Q&A session, where our executive team will respond to your questions. We would like to remind participants that today's commentaries may contain forward-looking information. For more details and other important notices, please refer to our press release dated April 30, 2025, available on our website and on CDAR+. Please note that all figures referred to on today's call are in U.S. dollars unless otherwise noted. I will now turn the call over to Ernie.

Thank you, Anita, and good morning, everyone. In the first quarter of 2025, LRC revenue was down slightly -on-year, driven by the 17% decline in spot-dueing prices. It was partially offset by the continued ramp-up of operations of Sigma Lithium. Our revenue continues to outperform the broader lithium price index. In fact, since LRC's initial public offering, LRC's -on-year revenue growth has outperformed the report's spot-dueing price index for the majority of times. This is because of our unique royalty structure with a diversified portfolio of 35 royalties that benefits from various assets ramping up at different times in a secular growing lithium market. In 2023, Sigma Lithium commenced production and ramped up throughout 2024. In 2025, Sigma is expected to start production from phase 2, which will add another 22,000 tons of spot-dueing concentrate at full ramp-up. Additionally, Gangfeng Lithium officially inaugurates Mariana Lithium project in Salta in February 2025. We expect to receive revenues from the project in the second half of the year. Cigene Mining has guided by the startup production at its Tres Cabradas project in Argentina in the third quarter of this year, highlighting its low-cost position in the fast-evolving lithium market. Recall, the ,000-tonne random operation for phase 1 was substantial expansion potential given its multi-decade asset life. Furthermore, Atlas Lithium has received its DMS grant in Brazil, while Sunova Global accessed our limited production at its Silicon Mine in British Columbia in the fourth quarter of 2025. Despite the challenges facing the broader lithium market, our focus on high-grade, low-cost assets allows many of our largest net asset value contributors to continue advancing into production and cash flow. Our portfolio continues to mature, preparing us well for any market environment given our limited cost base as a royalty company. Lithium prices have largely remained range-bound in 2025, with spot-dueing prices trading in the $800 to $900 per tonne range and lithium carbonate prices in the $10,000 per tonne range. These prices are below reinvestment economics for several operators and developers. Prices are expected to improve over time given the robust demand figures still projected in the industry. On another note, a number of our operators have discovered additional commodities on their properties that could accelerate their path to revenue generation with commodities that are enjoying stronger pricing at the moment. This opportunity is most prevalent with cesium discoveries at some of our assets in the portfolio, including PowerMetal's Case Lake, Winsome Cermak, and GridMetal's Donner Lake project. To this effect, PowerMetal is the most advanced with a minimal resource statement and PEA expected shortly. PowerMetal is expected to start production in 2026. LRC holds a 2% gore on the Case Lake project. To expand on this point, this highlights a substantial optionality at our disposal. LRC's underwriting methodology is intentionally conservative as we do not factor in resource upgrades or production expansions in our going-in valuations. Given that lithium is our primary focus, we also provide no value for other commodities beyond lithium in our initial underwriting. Therefore, any value from additional resource expansions, production expansions, or additional commodities are free carried assets to the LRC shareholder. In the quarter, we completed a partial sale of our Tres Cabras Royalty, a triple-flag, for $28 million. This solidifies our balance sheet strength and opens up the opportunity to acquire additional assets at distressed valuations. Our pipeline remains strong, and our preference is for assets that have high proximity to Casla with strong asset qualities. Given the balance sheet strength, we also announced a substantial issuer bid, SIV, as we believe our shares are substantially undervalued in the context of the cash flow growth for the company. We expect to announce results of the SIV this week. We look forward to driving additional value for shareholders through attractive royalty acquisitions, potential additional share-you purchases, and continued uncovering of value via our Royalty portfolio. I will now talk to Dominique, who will discuss our financial results.

Thank you, Ernie. Our Royalty revenue this quarter was $629,000, down from $631,000 in the same period last year. We received revenue from two of our royalties. As expected, we've had less exposure to QP or Quotational Pricing adjustments, as the price of lithium has remained relatively stable for the past two quarters. DNA was $2 million in the quarter, compared to $1.7 million in the same period last year. Non-cash G&A stock-based compensation was $570,000 in the quarter, compared to $645,000 in the same period last year. In addition, we had extra expenditures estimated at about $158,000 related to the SIV, which we consider non-recurring. Taking this into account, our cash G&A was $1.2 million this quarter, compared to $1.1 million last quarter, and $1.1 million in the same period last year. LRC's adjusted EBITDA was a loss of $1.1 million in the quarter, compared to a loss of $662,000 in the same period last year. The increase in loss is primarily due to the ongoing stock-based compensation being characterized as recurring, rather than one time last year related to the IPO. We adjust for the IPO compensation, and consider this portion of stock-based compensation as one time. Otherwise, we do not adjust for stock-based compensation. With regards to liquidity, we had $32 million of cash at quarter end and no debt. We do expect additional sources of revenue ahead, including from Ganfeng's Mariana project and Zichen's Trex Cabrata asset in Argentina, as well as Sigma's Phase II expansion in Brazil. Additional catalysts this year include Atlas's continued development at Das Neves, Core Lithium Finis Restart Study expected in Q2 2025, and potential positive impacts from Rio Tinto's ownership of the Galaxy project in Quebec. I would note they had their AGM last night, and there were some fairly positive commentary related to lithium. With that, I'll pass it back to Ernie for closing remarks.

Thank you, Dominique. I will now provide an overview of the lithium market. Lithium demand continued at an accelerated pace driven by electric vehicles and energy storage. RealMotion reports that electric vehicle sales grew by 29% year on year for the first quarter of 2025. This is again driven by China with 36% growth. China continues to electrify at a rapid pace. Beyond the robust headline figures in the quarter, it is worth highlighting that the substantial expansion ambitions for many of the leading EV and battery makers in China continues. In the quarter, Xiaomi and BYD each raised approximately $5 billion geared towards expansion. Additionally, CATL is aiming to raise at least $5 billion in its Hong Kong IPO at some point this quarter. This additional $15 billion of capital highlights the secular growth dynamics in the sector and continued investments by the leaders in the industry. The trend in Europe returned to growth with reported EV sales of 22% compared to the 3% decline in EV registrations in 2024. Many European automakers have introduced more affordable electric vehicles that are resonating with the European consumer. In fact, pure battery electric vehicle sales increased by 42% in the UK in the quarter, by 39% in Germany, by 72% in Italy, and by 59% in Spain. Several Chinese EV OEMs have EV plants that are expected to start output in the next 6-12 months such as BYD's plant in Hungary that could add additional levels of growth. In North America, EV sales grew by 16% as EV subsidies remain in place for the time being and similar to Europe, more affordable offerings are introduced. Energy storage is another key growth driver with sales estimated to have increased by 120% -on-year during the quarter. Tesla reported energy storage growth of 154% -on-year. This growth was led by robust underlying demand but also as a pre-buy for customers given the expectation of tariffs. Despite the imposition of tariffs, many leading industry forecasters still expect for energy storage sales to grow by more than 50% globally in 2025. We are now in the 29th month since the peak in prices in November 2022. Prices have now declined by approximately 88% since that peak. In addition, roughly 12% of global supply has been curtailed in the last few quarters. We believe we are at a cyclical low in the sector and prices should recover over time since current price levels are not supportive of reinvestment while demand is still growing by -30% per year. For context, the last lithium downturn lasted for 35 months with prices declining by 77% as reported by fast markets. Regardless of market conditions, LRC is well positioned to thrive in any environment. Despite the low prices, many of our assets with the largest contribution to net asset value are proceeding to production and expansion. This should set us up for free cash flow growth even if current prices persist. In addition, our strong debt-free balance sheet positions as well to take advantage of the current low-price environment. We are actively pursuing a robust pipeline of opportunities that we believe will lead to compelling and creative acquisitions for our shareholders. Furthermore, we will continue to look at opportunities to buy back shares given the very exact evaluation in the market. Including, we are very well positioned to look ahead for the following reasons. The demand for lithium continues to grow by -30% per year. Our marquee assets are progressing to production and will soon deliver substantial revenue to LRC. The industry is stocked for capital, which is creating unique opportunities for LRC given our replanished balance sheet. And our unique position in the industry, a leading royalty company with low overhead, sets us up for substantial operating leverage to a lithium pricing recovery. With that, I will now pass it back to Eunita for Q&A.

Thank you, Ernie. Operator, we're now ready to answer questions. Can we please open up the lines for Q&A?

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for our first question. Our first question comes from Mr. Patrick Cunningham of Citi. Please go ahead.

Hi, good morning, Ernie and Dominique. How are you assessing potential near-term lift and demand impacts on EVs and ESS in the tariff environment now? You mentioned the pre-buy impact in 1-2. Any sense that things move significantly lower from here with direct impacts of tariffs on China as well as potential recession risk?

Thanks, Patrick. There is a heightened level of uncertainty with the tariff situation and the potential impact on global growth. It still truly determines direct impacts. I would say that the direct impact to lithium is minimal on a direct basis. There are not many EVs that are traded between China and the US. It's a lot of local demand. For right now, the main sources of EV growth are China and Europe, which so far are still heading in the right direction. In China, they just hosted the Shanghai Auto Show and the majority of the new models were EVs. There hasn't been any kind of slowdown in EV sales in the last few weeks from the public commentary. So for right now, it's probably too early to tell, but so far, EVs seem to be still well-positioned. On the energy storage side, I think that is something that we're monitoring more closely because the majority of the batteries that go into North America, in particular the United States, do come from Europe. One thing that we'll mention from China checks is that despite the tariffs, the cost for energy storage batteries being imported into the United States are still very competitive. Potentially it could slow down the market, but in the context of a very fast growth rate to begin with. I think that's certainly worth monitoring. There's a lot of uncertainty so far. The impacts seem manageable and the industry is still likely to grow by double digits, but of course, we'll monitor the situation and adjust as needed.

Very helpful. Given that domestic manufacturing critical minerals in the US seem to be a clear area of focus, are there any portfolio companies either in the US or those with potential trade agreements down the road which may stand to benefit? Does this region look any more attractive from a royalty acquisition standpoint?

We do have aspects in the US, mostly in the southwest, Nevada and Arizona. We have some positions there that could be advantaged and improved with the overall faster pre-mining regimes and some reports that potentially the US government taking stakes in mining companies. We welcome any initiatives to help promote a domestic supply chain within the United States. To all the parts of the question, we think Argentina could also be very well positioned in the event that there's any free trade agreements or additional partnerships with the US. We've also seen the United States Import-Export Bank, Exum, take a public interest in some of the Brazilian ore bodies. I think for us, the key hallmarks of an investment haven't changed. It's still investing in high-grade, low-cost assets in a stable geography and to the extent there's a potential boost from any geopolitical security of supply will of course benefit. But the key emphasis for us is making sure they're good assets that can generate substantial capital to us.

Great. Thank you,

Ernie. Thank you. Another question comes from Mr. Mohammed Sidibe of National Bank Financial. Please go ahead.

Good morning, Ernie and team, and thanks for taking my question. My first one was just on the timing of revenue for Mariana. I think you mentioned that we can expect that in the second half of 2025. As it relates to Tres Cabradas, given that's coming in in Q3 2025, how confident are you that maybe in Q4 we could see that or is it more of a 2026 event given if I apply the same timing on those? Thank you.

Sure. Thanks, Mohammed. I think it's tough to say yet. While we do have visibility, I think the environment continues to shift just given all the geopolitical and there's always delays to projects. The public guidance from CJIN, as you mentioned, is third quarter production. I think it depends on what part of third quarter that it begins, whether it's early or late that determines whether there could be some shipments in 2025. It is something that we're monitoring. We do monitor the export statistics out of Argentina. We'll continue to do so for Mariana and for the third quarter. I would say right now it's probably too early to say, but we do acknowledge that there is a natural lag between production and shipments that could move cash flow to early 2026, although it will depend on what stage of the third quarter they turn on the plant.

Okay. Thanks a lot for that. Secondly, I guess on your capital allocation, I know that you're going through your substantive issuer bid right now, which expires I believe today, but I just wanted to think about the SIB. Could you provide us with any color and how that's going? Secondly, post expiration of the SIB, are you planning to be active on your share buyback? I think that will come back and be active again, but do you see any color on the buybacks that you have for 2025?

It does expire today as far as the current SIB. As far as continued share purchases or capital allocation, I think it really depends on the results that we get. Depending on those results, and we will announce it to the market at the appropriate time, we'll meet as a board and decide on next steps. What I would say generally is that we do think our share price is extremely undervalued and is a good investment. At the same time, we always have to judge that versus the opportunity set, which is increasing as far as pipeline and overall terms and improved valuation. It's always something that we're looking at and comparing it internally, but I think it's going to depend on the results tonight, and we'll announce it to the market and provide updates as we diagnose and analyze those.

Thanks for taking my questions.

Thank you. As a reminder, if you wish to ask a question, please press star one. At this time, we have no further questions. I'll turn the call back over to you, Yonita, for closing remarks.

Thank you to everyone who joined us today. This concludes our first quarter 2025 results conference call and webcast. We expect to release our second quarter 2025 results after market close on August 5, 2025, with a conference call held on August 6 at 9 a.m. Eastern Standard. Thank you for your interest in lithium royalty quartz.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.