Lithium Americas Corp 6-K, filed Oct 4, 2023
Lithium Americas Corp. (LAC)
About this 6-K
Lithium Americas Corp filed this 6-K on October 4, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of: October, 2023
Commission file number: 001-41788
Lithium Americas Corp.
(Translation of Registrant’s name into English)
400-900 West Hastings Street,
Vancouver, British Columbia,
Canada V6C 1E5
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☐ Form 40-F ☒
EXHIBIT INDEX
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Lithium Americas Corp. | ||
| (Registrant) | ||
| By: | /s/ Jonathan Evans | |
| Name: | Jonathan Evans | |
| Title: | Chief Executive Officer | |
Dated: October 4, 2023
Exhibit 99.1
1397468 B.C. LTD.
FINANCIAL STATEMENTS
For the period from incorporation on January 23, 2023 to June 30, 2023
(Expressed in US Dollars)
Report of Independent Registered Public Accounting Firm
To the Shareholder and Board of Directors of 1397468 B.C. Ltd.
Opinion on the Financial Statements
We have audited the accompanying statement of financial position of 1397468 B.C. Ltd. (the Company) as of June 30, 2023 and the related statements of comprehensive income and changes in equity for the period from incorporation on January 23, 2023 to June 30, 2023, including the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and its financial performance and its cash flows for the period from incorporation on January 23, 2023 to June 30, 2023 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
September 28, 2023
We have served as the Company’s auditor since 2023.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806, ca_vancouver_main_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
1397468 B.C. LTD.
STATEMENTS OF FINANCIAL POSITION
(Expressed in thousands of US dollars)
| June 30, 2023 |
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| Assets |
- | |||
| Liabilities and Shareholder’s Equity |
- | |||
Subsequent Event (note 5)
Approved for issuance on September 28, 2023
On behalf of the Board of Directors:
“Fabiana Chubbs”
Director
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2 |
1397468 B.C. LTD.
STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in thousands of US dollars)
| Period from Incorporation on January 23, 2023, to June 30, 2023 |
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| Revenues |
- | |||
| Expenses |
- | |||
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| Net income before income tax |
- | |||
| Income tax expense |
- | |||
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| Net income |
- | |||
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3 |
1397468 B.C. LTD.
STATEMENTS OF CHANGES IN EQUITY
(Expressed in thousands of US dollars)
| Period from incorporation on January 23, 2023, to June 30, 2023 |
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| Retained earnings, Beginning of period |
- | |||
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| Retained earnings, End of period |
- | |||
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4 |
1397468 B.C. LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCORPORATION ON JANUARY 23, 2023 TO JUNE 30, 2023
(Expressed in thousands of US dollars)
| 1. | BACKGROUND AND BASIS OF PRESENTATION |
1397468 B.C. Ltd. (“New LAC”) was incorporated by Lithium Americas Corp (“Lithium Americas” or “LAC”) under the laws of British Columbia on January 23, 2023, as part of a reorganization of Lithium Americas which will result in the separation of Lithium Americas’ North American and Argentina business units into two independent public companies (the “Separation”) that include: (i) an Argentina focused lithium company owning Lithium Americas’ current interest in its Argentine lithium assets, including the Cauchari-Olaroz project, and (ii) a North America focused lithium company owning the Thacker Pass project and Lithium Americas’ North American investments, which will be re-named “Lithium Americas Corp.” upon completion of the Separation.
The Separation is to be implemented by way of a plan of arrangement under the laws of British Columbia pursuant to an arrangement agreement between Lithium Americas and New LAC (the “Arrangement”) which was approved under a final order obtained from the Supreme Court of British Columbia on August 4, 2023. Under the Arrangement, Lithium Americas will, among other things, contribute its interest in the Thacker Pass project, Lithium Americas’ North American investments in the shares of certain companies, certain intellectual property rights, its receivable or loan to LAC North Americas, and certain amount of cash to New LAC and New LAC will distribute its common shares to shareholders of Lithium Americas in a series of share exchanges.
The Separation will be pro rata to the shareholders of Lithium Americas, so that such holders will maintain the same proportionate interest in Lithium Americas and in New LAC both immediately before and immediately after the Separation.
Upon consummation of the Separation and successful listing of the common shares of New LAC on the Toronto Stock Exchange (“TSX”) and on the New York Stock Exchange (“NYSE”), New LAC and Lithium Americas will be independent publicly traded companies. Listing will be subject to New LAC meeting the usual listing requirements of the TSX and NYSE, receiving approval of the TSX and NYSE and meeting all conditions of listing imposed by the TSX and NYSE.
| 2. | BASIS OF PRESENTATION |
These financial statements are prepared based on International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IFRS”).
| 3. | SIGNIFICANT ACCOUNTING POLICIES |
Functional and Presentation Currency
These financial statements are presented in US dollars. The functional currency of New LAC is the US dollar.
Financial Instruments
Financial assets and liabilities are recognized when New LAC becomes a party to the contractual provisions of the instrument.
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5 |
1397468 B.C. LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCORPORATION ON JANUARY 23, 2023 TO JUNE 30, 2023
(Expressed in thousands of US dollars)
| 4. | SHARE CAPITAL |
Upon New LAC’s incorporation on January 23, 2023, New LAC’s authorized share capital is comprised of an unlimited number of Common Shares without par value and an unlimited number of preference shares without par value (“Preference Shares”). There are no shares of any class issued or outstanding as of June 30, 2023
As part of the Arrangement, among other things: (i) each LAC shareholder will exchange their LAC common shares for LAC class A common shares and LAC preference shares; (ii) each LAC shareholder will then transfer its LAC preference shares to New LAC in exchange for Common Shares; (iii) 1,000,000 Preference Shares will be issued to LAC in exchange for the North American business assets contributed; (vi) all Preference Shares issued to LAC will be redeemed by New LAC in consideration for an aggregate redemption amount, after which all such Preference Shares will be cancelled; and (iii) the notice of articles and articles of New LAC (“Articles”) will be amended to, among other things, eliminate the Preference Shares from the authorized share capital of New LAC such that, following such amendment, New LAC will be authorized to issue only an unlimited number of Common Shares.
| 5. | SUBSEQUENT EVENT |
At the Annual and Special Meeting of Shareholders of LAC held on July 31, 2023, the shareholders of LAC voted in favour of the Separation providing for the reorganization of LAC. Completion of the Separation is subject to customary conditions and approvals, including without limitation, having a registration statement to register New LAC common shares under the U.S. Securities and Exchange Act of 1934 become effective, and the receipt of final approvals by the Supreme Court of British Columbia, the Toronto Stock Exchange and the New York stock exchange.
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6 |
Exhibit 99.2
LAC NORTH AMERICA
CARVE-OUT INTERIM FINANCIAL STATEMENTS
JUNE 30, 2023
(Expressed in US Dollars)
LAC NORTH AMERICA
CARVE-OUT STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(Expressed in thousands of US dollars)
| Note | June 30, 2023 $ |
December 31, 2022 $ |
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| CURRENT ASSETS |
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| Cash and cash equivalents |
4 | 261,820 | 636 | |||||||||
| Accounts Receivables |
12 | 4 | ||||||||||
| Prepaids |
1,575 | 1,297 | ||||||||||
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| 263,407 | 1,937 | |||||||||||
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| NON-CURRENT ASSETS |
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| Property, plant and equipment |
7 | 83,381 | 3,936 | |||||||||
| Exploration and evaluation assets |
8 | 593 | 9,514 | |||||||||
| Investment in Green Technology Metals |
5 | 6,314 | 7,451 | |||||||||
| Investment in Ascend Elements |
6 | 5,000 | 5,000 | |||||||||
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| 95,288 | 25,901 | |||||||||||
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| TOTAL ASSETS |
358,695 | 27,838 | ||||||||||
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| CURRENT LIABILITIES |
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| Accounts payable and accrued liabilities |
14,556 | 9,913 | ||||||||||
| Current portion of long-term liabilities |
751 | 724 | ||||||||||
| GM transaction derivative liability |
9 | 5,098 | — | |||||||||
| Loan from Parent |
10 | 45,353 | 43,572 | |||||||||
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| 65,758 | 54,209 | |||||||||||
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| LONG-TERM LIABILITIES |
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| Other liabilities |
11 | 4,733 | 7,568 | |||||||||
| Reclamation and remediation costs |
640 | 478 | ||||||||||
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| 5,373 | 8,046 | |||||||||||
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| TOTAL LIABILITIES |
71,131 | 62,255 | ||||||||||
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| DIVISIONAL EQUITY |
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| Net parent investment |
538,823 | 226,009 | ||||||||||
| Deficit |
(251,259 | ) | (260,426 | ) | ||||||||
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| TOTAL DIVISIONAL EQUITY |
287,564 | (34,417 | ) | |||||||||
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| TOTAL LIABILITIES AND DIVISIONAL EQUITY |
358,965 | 27,838 | ||||||||||
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Subsequent event (Note 16)
Approved for issuance on September 28, 2023
On behalf of the Board of Directors:
| “Fabiana Chubbs” | “George Ireland” | |
| Director | Director |
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LAC NORTH AMERICA
CARVE-OUT STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(Expressed in thousands of US dollars)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| Note | 2023 $ |
2022 $ |
2023 $ |
2022 $ |
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| EXPENSES |
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| Exploration expenditures |
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| Engineering |
- | 6,412 | 782 | 12,200 | ||||||||||||||||
| Consulting, salaries and other compensation |
- | 2,544 | 2,503 | 4,844 | ||||||||||||||||
| Permitting, environmental and claim fees |
- | 1,582 | 268 | 2,345 | ||||||||||||||||
| Field supplies and other |
- | 352 | 14 | 621 | ||||||||||||||||
| Depreciation |
- | 568 | 196 | 743 | ||||||||||||||||
| Drilling and geological expenses |
- | 566 | 98 | 888 | ||||||||||||||||
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| - | 12,024 | 3,861 | 21,641 | |||||||||||||||||
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| General and Administrative (allocation of corporate costs) |
- | - | - | |||||||||||||||||
| Salaries, benefits and other compensation |
2,401 | 894 | 3,412 | 1,855 | ||||||||||||||||
| Office and administration |
599 | 473 | 968 | 842 | ||||||||||||||||
| Professional fees |
1,577 | 740 | 1,634 | 1,089 | ||||||||||||||||
| Investor relations, regulatory fees and travel |
528 | 407 | 804 | 546 | ||||||||||||||||
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| 5,105 | 2,514 | 6,818 | 4,332 | |||||||||||||||||
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| 5,105 | 14,538 | 10,679 | 25,973 | |||||||||||||||||
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| OTHER ITEMS |
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| Transaction costs |
2,802 | - | 6,830 | - | ||||||||||||||||
| Gain on change in fair value of GM transaction derivative liability |
9 | (19,036 | ) | - | (28,096 | ) | - | |||||||||||||
| Loss on change in fair value of Green Technology Metals’ shares |
5 | 323 | - | 1,137 | - | |||||||||||||||
| Finance cost |
(34 | ) | 1,008 | 335 | 2,004 | |||||||||||||||
| Other income |
(44 | ) | 2 | (52 | ) | (38 | ) | |||||||||||||
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| (15,989 | ) | 1,010 | (19,846 | ) | 1,966 | |||||||||||||||
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| NET (INCOME)/ LOSS |
(10,884 | ) | 15,548 | (9,167 | ) | 27,939 | ||||||||||||||
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3 |
LAC NORTH AMERICA
CARVE-OUT STATEMENTS OF CHANGES IN DIVISIONAL EQUITY
(Unaudited)
(Expressed in thousands of US dollars)
| Net parent investment $ |
Deficit $ |
Divisional equity $ |
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| Balance, December 31, 2021 |
150,942 | (192,628 | ) | (41,686 | ) | |||||||
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| Net parent investment |
33,739 | - | 33,739 | |||||||||
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| Net loss |
- | (27,939 | ) | (27,939 | ) | |||||||
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| Balance, June 30, 2022 |
184,681 | (220,567 | ) | (35,886 | ) | |||||||
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| Balance, December 31, 2022 |
226,009 | (260,426 | ) | (34,417 | ) | |||||||
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| Net parent investment |
312,814 | - | 312,814 | |||||||||
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| Net income |
- | 9,167 | 9,167 | |||||||||
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| Balance, June 30, 2023 |
538,823 | (251,259 | ) | 287,564 | ||||||||
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4 |
LAC NORTH AMERICA
CARVE-OUT STATEMENTS OF CASH FLOWS
(Unaudited)
(Expressed in thousands of US dollars)
| Six Months Ended June 30, | ||||||||||
| Note | 2023 $ |
2022 $ |
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| OPERATING ACTIVITIES |
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| Net income/(loss) |
9,167 | (27,939 | ) | |||||||
| Items not affecting cash and other items: |
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| Equity compensation |
12 | 97 | 583 | |||||||
| Depreciation |
196 | 743 | ||||||||
| Loss on change in fair value of Green Technology Metals shares |
5 | 1,137 | - | |||||||
| Gain on change in fair value of GM transaction derivative liability |
9 | (28,096 | ) | - | ||||||
| Other items |
551 | 19 | ||||||||
| Changes in working capital items: |
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| Decrease /(increase)in receivables, prepaids and deposits |
2,064 | (409 | ) | |||||||
| Decrease /(increase)in accounts payable, accrued liabilities and other liabilities |
(12,336 | ) | 945 | |||||||
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| Net cash used in operating activities |
(27,220 | ) | (26,058 | ) | ||||||
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| INVESTING ACTIVITIES |
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| Additions to property, plant and equipment |
(56,296 | ) | (891 | ) | ||||||
| Additions to exploration and evaluation assets |
(170 | ) | (3,256 | ) | ||||||
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| Net cash used in investing activities |
(56,466 | ) | (4,147 | ) | ||||||
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| FINANCING ACTIVITIES |
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| Net parent investment - capital contributions |
40,285 | 31,351 | ||||||||
| Net parent investment - gross proceeds from GM transaction |
320,148 | - | ||||||||
| Payment of expenses related to the GM transaction |
(15,206 | ) | - | |||||||
| Lease payments |
(357 | ) | (151 | ) | ||||||
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| Net cash provided by financing activities |
344,870 | 31,200 | ||||||||
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| CHANGE IN CASH AND CASH EQUIVALENTS |
261,184 | 995 | ||||||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF THE PERIOD |
636 | 933 | ||||||||
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| CASH AND CASH EQUIVALENTS - END OF THE PERIOD |
261,820 | 1,928 | ||||||||
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5 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 1. | BACKGROUND AND NATURE OF OPERATIONS |
The North American Division of Lithium Americas Corp. (“LAC North America”) represents those North American assets and investments owned directly and indirectly by Lithium Americas Corp (“Lithium Americas,” “LAC” or the “Parent”) that are to be separated from the existing group and spun out to shareholders. As at June 30, 2023, LAC North America principally held the Thacker Pass project, a sedimentary-based lithium property located in the McDermitt Caldera in Humboldt County, Nevada (“Thacker Pass”), which is in the development stage.
On January 23, 2023, 1397468 B.C. Ltd. (“New LAC”) was incorporated by Lithium Americas under the laws of British Columbia, as part of a reorganization of Lithium Americas which will result in the separation of Lithium Americas’ North American and Argentina business units into two independent public companies (the “Separation”) that include: (i) an Argentina focused lithium company owning Lithium Americas’ current interest in its Argentine lithium assets, including the Cauchari-Olaroz project, and (ii) a North America focused lithium company owning Thacker Pass and Lithium Americas’ North American investments, which will be re-named “Lithium Americas Corp.” upon completion of the Separation.
The Separation is to be implemented by way of a plan of arrangement under the laws of British Columbia pursuant to an arrangement agreement to be entered into between Lithium Americas and New LAC (“Arrangement”). Under the Arrangement, Lithium Americas will, among other things, contribute its interest in Thacker Pass, Lithium Americas’ North American investments in the shares of certain companies, certain intellectual property rights, its receivable or loan to LAC North America, the remaining proceeds of an equity investment by General Motors Holdings LLC (“General Motors” or “GM”) designated to be spent on Thacker Pass and a cash transfer of $75 million from Lithium Americas to New LAC pursuant to the Arrangement. Upon completion of the Arrangement, New LAC’s common shares will be held directly by shareholders of Lithium Americas, accomplished through a series of share exchanges.
The Separation will be pro rata to the shareholders of Lithium Americas, so that such holders will maintain the same proportionate interest in Lithium Americas and in New LAC both immediately before and immediately after the Separation.
Upon consummation of the Separation and successful listing of the common shares of New LAC on the Toronto Stock Exchange (“TSX”) and on the New York Stock Exchange (“NYSE”), New LAC and Lithium Americas will be independent publicly traded companies. Listing will be subject to New LAC meeting the usual listing requirements of the TSX and NYSE, receiving approval of the TSX and NYSE and meeting all conditions of listing imposed by the TSX and NYSE. New LAC filed its registration statement on Form 20-F in August 2023, as amended in September 2023, to register New LAC common shares under the U.S. Securities Exchange Act of 1934, as amended (“U.S. Exchange Act”).
On January 30, 2023, LAC North America entered into a purchase agreement with General Motors pursuant to which GM has agreed to make a $650,000 investment (the “Transaction”), the proceeds of which are to be used for the construction and development of Thacker Pass. The Transaction is comprised of two tranches, with the $320,148 first tranche investment (“Tranche 1 Investment”) in the form of GM’s subscription for 15,002 subscription receipts of Lithium Americas, which were automatically converted into 15,002 units comprising an aggregate of 15,002 common shares and 11,891 warrants of Lithium Americas, having been completed on February 16, 2023 and the gross proceeds released from escrow.
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6 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 1. | BACKGROUND AND NATURE OF OPERATIONS (continued) |
Pursuant to agreements with GM, the warrant and second tranche subscription agreement (related to the anticipated second tranche investment of approximately $330,000 by GM) between GM and LAC will be terminated and replaced by corresponding agreements between GM and New LAC (Note 9) such that the proceeds will be received by LAC North America.
In addition, LAC North America is advancing an application process under the U.S. Department of Energy Advanced Technology Vehicles Manufacturing Loan Program, which, if granted, would provide up to 75% of Thacker Pass’ total capital costs for construction. The Parent’s, Division’s and New LAC’s head office and principal address is Suite 300, 900 West Hastings Street, Vancouver, British Columbia, Canada, V6C 1E5.
| 2. | BASIS OF PREPARATION AND PRESENTATION |
The accompanying carve-out interim financial statements have been prepared for the purpose of providing historical information of LAC North America. The carve-out interim financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting. These carve-out interim financial statements should be read in conjunction with LAC North Americas carve-out annual financial statements for the year ended December 31, 2022 (“2022 Carve-out Financials”), which have been prepared in accordance with IFRS. Transactions and balances between LAC North America and the Parent are reflected as related party transactions within these financial statements.
The accompanying carve-out interim financial statements include the assets, liabilities, and results of operations that are specifically identifiable to LAC North America. This includes relevant assets, liabilities and expenses of Thacker Pass, specified investments, transactions and balances arising from the GM funding, as well as certain costs related to the management of LAC North America by Lithium Americas. Such costs have been allocated to LAC North America from the shared corporate expenses of Lithium Americas based on the estimated level of involvement of Lithium Americas management and employees with LAC North America. LAC North America has operated as a division of Lithium Americas and not as a stand-alone company. LAC North America receives services and support from Lithium Americas and is dependent upon Lithium Americas’ ability to perform these services and support functions.
Allocated costs are primarily related to corporate administrative expenses and employment costs of Lithium Americas staff who provide services including accounting and finance, legal, information technology, human resources, marketing, investor relations, contract support, treasury, administrative and other corporate head office services.
Lithium Americas has centralized processes and systems for cash management, payroll, and purchasing, and manages a treasury function and keeps cash balances that are used to finance the activities of LAC North America through periodic cash calls. The results of the Parent’s cash transactions on behalf of LAC North America are reflected either as loan from Parent within liabilities or as net Parent investment within equity in the accompanying balance sheets based on whether the transactions were subject to the formal loan agreement with the Parent or related to amounts attributed to LAC North America from the activities of the Parent.
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7 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 2. | BASIS OF PREPARATION AND PRESENTATION (continued) |
The net parent investment represents Lithium Americas’ interest in the recorded net assets of LAC North America and the cumulative net equity investment by Lithium Americas through the dates presented. The loan from Parent balance will be contributed to the equity of New LAC at the time of closing the Arrangement.
Management believes the assumptions and allocations underlying the carve-out interim financial statements are reasonable and appropriate under the circumstances. The expenses and cost allocations have been determined on a basis considered by Lithium Americas to be a reasonable reflection of the utilization of services provided to or the benefit received by LAC North America during the periods presented relative to the total costs incurred by Lithium Americas. However, the amounts recorded for these transactions and allocations are not necessarily representative of the amount that would have been reflected in the financial statements had LAC North America been an entity that operated independently of Lithium Americas.
The amounts that would have been or will be incurred on a stand-alone basis could differ from the amounts allocated due to economies of scale, management judgment, cash management and financing obtained as a stand-alone company, or other factors.
Consequently, future results of operations, should LAC North America be separated from Lithium Americas, will include costs and expenses that may be materially different than the carve-out historical results of operations, financial position, and cash flows. Accordingly, the financial statements for these periods are not necessarily indicative of the future results of operations, financial position, and cash flows of LAC North America.
Certain transactions of LAC North America have historically been included in tax returns filed by the Parent. The income tax amounts included in these financial statements have been calculated using the separate return method as if LAC North America had included such amounts in its own tax returns. The separate return method applies the accounting guidance for income taxes to the stand-alone financial statements as if LAC North America were a separate taxpayer from the Parent for the periods presented.
| 3. | SIGNIFICANT ACCOUNTING POLICIES |
The preparation of these carve-out interim financial statements requires management to make assumptions, estimates, and judgments that affect the amounts reported in these financial statements and accompanying notes. LAC North America bases its estimates on historical experience and various assumptions that are believed to be reasonable at the time the estimate was made. Accordingly, actual results may differ from amounts estimated in these financial statements and such differences could be material. The amounts presented in these financial statements are not necessarily indicative of the results that may be expected for future years.
The nature and number of significant estimates and judgments made by management in applying the accounting policies and the key sources of estimation uncertainty are substantially the same as those that management applied to the 2022 Carve-out Financials, except as described below.
|
|
8 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 3. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Estimation Uncertainty and Accounting policy judgments
Accounting for the Agreements with General Motors
LAC North America’s accounting for the agreements with General Motors involved judgment, specifically in its assumption that its shareholders will approve an increase to GM’s shareholdings in excess of 20% and the price at which common shares will be issued pursuant to the subscription agreement for the second tranche of GM’s agreement; that in LAC North America’s determination the Offtake Agreement represents an agreement with market selling prices; and that the Offtake is separate from the equity financing provided by GM (see Note 9 and Note 16).
The fair value of the warrant and subscription agreements with GM involved estimation, which was determined using Monte Carlo simulation that required significant assumptions, including expected volatility of LAC’s share price.
Commencement of Development of Thacker Pass
LAC North America determined that the technical feasibility and commercial viability of Thacker Pass had been demonstrated following the release of an independent National Instrument 43-101 feasibility study on January 31, 2023, the release of the “Preliminary Feasibility Study S-K 1300 Technical Report Summary for the Thacker Pass Project Humboldt County, Nevada, USA” with an effective date of December 31, 2022, the receipt of the favorable ruling from the US District Court, District of Nevada (“Federal Court”) for the issuance of the Record of Decision (“ROD”), and the receipt of notice to proceed from the Bureau of Land Management (“BLM”) on February 7, 2023. LAC North America entered into an engineering, procurement and construction management (“EPCM”) agreement and other construction-related contracts. Construction of Thacker Pass, including site preparation, geotechnical drilling, water pipeline development and associated infrastructure has commenced. Accordingly, the capitalized costs of Thacker Pass were transferred to property, plant and equipment from exploration and evaluation assets and capitalization of development costs commenced February 1, 2023.
Concurrent with the transfer of the Thacker Pass assets from exploration and evaluation to property, plant and equipment, LAC North America completed an impairment test of Thacker Pass which compared the carrying value to the recoverable amount. The recoverable amount is the greater of the value in use and the fair value less disposal costs. The fair value less disposal costs is calculated using a discounted cash flow model with feasibility study economics. The significant assumptions that impacted the fair value included future lithium prices, capital cost estimates, operating cost estimates, estimated mineral reserves and resources, and the discount rate. Based on the result of the impairment test, management concluded that there was no impairment.
New IFRS Pronouncements
Amendments to IAS 1 – Presentation of Financial Statements
In October 2022, the IASB issued amendments to IAS 1, Presentation of Financial Statements titled Non-current liabilities with covenants.
|
|
9 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 3. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
These amendments sought to improve the information that an entity provides when its right to defer settlement of a liability is subject to compliance with covenants within 12 months after the reporting period. These amendments to IAS 1 override but incorporate the previous amendments, Classification of liabilities as current or non-current, issued in January 2020, which clarified that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities should be classified as non-current if a company has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendments are effective January 1, 2024, with early adoption permitted. Retrospective application is required on adoption. These amendments are not expected to have a material effect on these carve-out interim financial statements.
Amendment to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies
In February 2021, the IASB issued amendments to IAS 1, Presentation of Financial Statements and the IFRS Practice Statement 2 Making Materiality Judgements to provide guidance on the application of materiality judgments to accounting policy disclosures.
The amendments to IAS 1 replace the requirement to disclose significant accounting policies with a requirement to disclose material accounting policies. Guidance and illustrative examples are added in the Practice Statement to assist in the application of the materiality concept when making judgments about accounting policy disclosures. The amendments were effective January 1, 2023. These amendments did not impact these carve-out interim financial statements.
| 4. | CASH AND CASH EQUIVALENTS |
| June 30, 2023 $ |
December 31, 2022 $ |
|||||||
| Cash and cash equivalents |
261,820 | 636 | ||||||
|
|
|
|
|
|||||
| 261,820 | 636 | |||||||
|
|
|
|
|
|||||
Cash and cash equivalents include the remaining net proceeds of the Tranche 1 Investment.
| 5. | INVESTMENT IN GREEN TECHNOLOGY METALS |
On April 28, 2022, LAC North America entered into an agreement to acquire shares of Green Technology Metals Limited (ASX: GT1) (“Green Technology Metals”), a North American focused lithium exploration and development public company with hard rock spodumene assets in north-western Ontario, Canada, in a private placement for total consideration of $10,000.
As at June 30, 2023, LAC North America holds approximately 13,301 common shares, representing approximately 5% of the issued and outstanding shares of Green Technology Metals with a fair value of $6,314 determined based on the market price of Green Technology Metals’ shares as of such date. A loss on change in fair value of Green Technology Metals Shares of $1,137 was recognized in the statements of comprehensive loss for the six months ended June 30, 2023.
|
|
10 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 6. | INVESTMENT IN ASCEND ELEMENTS |
On July 18, 2022, LAC North America made a $5,000 investment in Ascend Elements, Inc. (“Ascend Elements”), a private US based lithium-ion battery recycling and engineered material company, by way of a subscription for Series C-1 preferred shares. Holders of these shares have a right to a dividend at a rate of 8% per annum of the issue price (only if and when declared by the board of Ascend Elements), preferential rights upon liquidation, a right to convert preferred shares to common shares and other customary preferences.
As at June 30, 2023, LAC North America holds approximately 806 series C-1 preferred shares of Ascend Elements with an estimated fair value of $5,000.
| 7. | PROPERTY, PLANT AND EQUIPMENT |
| Thacker Pass Project $ |
Equipment and machinery $ |
Other1 $ |
Total $ |
|||||||||||||
| Cost |
||||||||||||||||
| As at December 31, 2021 |
— | 1,317 | 3,340 | 4,657 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Additions |
— | 1,265 | 897 | 2,162 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| As at December 31, 2022 |
— | 2,582 | 4,237 | 6,819 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Transfers from E&E (Note 8) |
9,091 | — | — | 9,091 | ||||||||||||
| Additions |
70,861 | 161 | 134 | 71,156 | ||||||||||||
| Disposals |
— | — | (166 | ) | (166 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| As at June 30, 2023 |
79,952 | 2,743 | 4,205 | 86,900 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Thacker Pass Project $ |
Equipment and machinery $ |
Other1 $ |
Total $ |
|||||||||||||
| Accumulated depreciation |
||||||||||||||||
| As at December 31, 2021 |
— | 814 | 549 | 1,363 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Depreciation for the year |
— | 748 | 772 | 1,520 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| As at December 31, 2022 |
— | 1,562 | 1,321 | 2,883 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Depreciation for the period |
— | 284 | 431 | 715 | ||||||||||||
| Disposals |
— | — | (79 | ) | (79 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| As at June 30, 2023 |
— | 1,846 | 1,673 | 3,519 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Thacker Pass Project |
Equipment and machinery $ |
Other1 $ |
Total $ | |||||||||||||
| Net book value |
||||||||||||||||
| As at December 31, 2021 |
— | 503 | 2,791 | 3,294 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| As at December 31, 2022 |
— | 1,020 | 2,916 | 3,936 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| As at June 30, 2023 |
79,952 | 897 | 2,532 | 83,381 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 1 | The “Other” category includes right of use assets with a cost of $3,025 and $1,182 of accumulated depreciation as at June 30, 2023. |
|
|
11 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 8. | EXPLORATION AND EVALUATION ASSETS |
Exploration and evaluation assets relating to Thacker Pass and other projects were as follows:
| $ | ||||
|
|
|
|||
| Exploration and evaluation assets, as at December 31, 2021 |
5,747 | |||
|
|
|
|||
| Additions |
4,120 | |||
| Write off of non-Thacker Pass assets |
(353 | ) | ||
|
|
|
|||
| Exploration and evaluation assets, as at December 31, 2022 |
9,514 | |||
|
|
|
|||
| Additions |
170 | |||
| Transfers to PP&E (Note 7) |
(9,091 | ) | ||
|
|
|
|||
| Total exploration and evaluation assets, as at June 30, 2023 |
593 | |||
|
|
|
|||
Upon commencement of development of Thacker Pass, the capitalized costs of Thacker Pass were transferred from exploration and evaluation assets to property, plant and equipment and LAC North America began to capitalize development costs starting February 1, 2023 (Note 3).
Concurrent with the transfer of the Thacker Pass assets from exploration and evaluation to property, plant and equipment, LAC North America completed an impairment test of Thacker Pass which compared the carrying value to the recoverable amount. The recoverable amount is the greater of the value in use and the fair value less disposal costs. The fair value less disposal costs was calculated using a discounted cash flow model with feasibility study economics. The significant assumptions that impacted the fair value included future lithium prices, capital cost estimates, operating cost estimates, estimated mineral reserves and resources, and the discount rate. Based on the result of the impairment test, management concluded that there was no impairment.
LAC North America has certain commitments for royalty and other payments to be made on Thacker Pass as set out below. These amounts will only be payable if LAC North America continues to hold the subject claims in the future and the royalties will only be incurred if LAC North America starts production from Thacker Pass.
| • | 20% royalty on revenue solely in respect of uranium; |
| • | 8% gross revenue royalty on all claims up to a cumulative payment of $22,000. The royalty will then be reduced to 4% for the life of the project. LAC North America has the option at any time to reduce the royalty to 1.75% upon payment of $22,000. |
| 9. | AGREEMENTS WITH GENERAL MOTORS |
On January 30, 2023, LAC North America entered into an agreement with GM, pursuant to which GM has agreed to make a $650,000 equity investment in two tranches. The proceeds from the Transaction are to be used for the construction and development of Thacker Pass. On February 16, 2023, the first tranche of $320,148 closed, resulting in GM’s purchase of 15,002 common shares of Lithium Americas, with the funds presented as part of the net parent investment in LAC North America. In connection with the first tranche of GM’s investment, Lithium Americas and GM also entered into (a) a warrant certificate and a subscription agreement (“GM Tranche 2 Agreements”), each in relation to a second tranche investment of up to $330,000; (b) an offtake agreement to supply GM with lithium carbonate production from Thacker Pass (the “Offtake Agreement”); and (c) an investor rights agreement.
|
|
12 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 9. | AGREEMENTS WITH GENERAL MOTORS (continued) |
GM Tranche 2 Agreements
Pursuant to the GM Tranche 2 Agreements, upon Separation, the GM Tranche 2 Agreements are terminated and replaced by corresponding agreements between New LAC and GM. The second tranche investment will be implemented either through the exercise of the warrants or a purchase of common shares under the subscription agreement (or replacement New LAC agreements), which would result in the automatic termination of the warrants.
In accordance with the warrant certificate, GM may acquire 11,891 common shares of Lithium Americas at $27.74 per share for an aggregate purchase price of $329,852. The warrants expire in February 2026, except as described below.
Unless terminated earlier, the warrant is exercisable if the contemplated separation of the Argentine and US businesses has not occurred prior to December 31, 2023, Lithium Americas announces separation will not occur, or there has been a change of control of Lithium Americas.
Under the second tranche subscription agreement which expires in August 2024, GM will purchase common shares of Lithium Americas subject to the satisfaction of certain conditions precedent, including the condition that LAC North America secures sufficient funding to complete the development of Phase 1 for Thacker Pass (“the Funding Condition”). The subscription agreement calls for an aggregate purchase price of up to $330,000, with the number of shares to be determined using a conversion price equal to the lower of (a) the 5-day volume weighted average share price (which becomes fixed upon notice that the Funding Condition has been met) and (b) $27.74 per share, subject to approval by Lithium Americas’ shareholders (see Note 16).
Pursuant to the GM Tranche 2 Agreements, GM’s investment is limited to 19.9% of Lithium Americas’ common shares. Lithium Americas is required to seek approval from its shareholders to (a) increase the maximum number of shares that can be held by GM, in which case the maximum will be 30% of issued and outstanding common shares; and (b) authorize the ceiling price of $27.74 per share in the subscription agreement. Upon approval of the ceiling price in the subscription agreement, the warrant is automatically terminated.(see Note 16).
In the event Lithium Americas’ contemplated separation of the Argentine and US businesses is completed before the closing of the second tranche, the warrants and the subscription agreement will be automatically cancelled for 1 common share each and, in their place, new warrant certificate and subscription agreements will be executed by New LAC. The terms of New LAC warrant and subscription agreement will substantially mirror the agreements previously executed by Lithium Americas, subject to the shares and price being adjusted by New LAC value ratio, such that GM’s second tranche investment of up to $330,000 will be made in New LAC.
The GM Tranche 2 Agreements are treated as a single combined derivative since the Agreements may result in the issuance of a variable number of shares for the fixed subscription price, initially measured at fair value and subsequently carried at fair value through profit and loss.
|
|
13 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 9. | AGREEMENTS WITH GENERAL MOTORS (continued) |
LAC North America recorded the GM Tranche 2 Agreements derivative at an initial fair value of $33,194 and the net proceeds of Tranche 1 investment as a contribution from Parent. Financial advisory fees of approximately $16,803 and other transaction costs of $174 were paid in connection with the closing of the first tranche. The $1,760 portion of the transaction costs related to the GM Tranche 2 Agreements derivative were expensed. Transactions costs of $15,217 attributable to the GM Tranche 1 proceeds were recorded in the net parent investment. Financial advisory fees of $6,227 will become payable upon completion of the closing of the second tranche of GM’s investment.
Changes in the value of the GM Tranche 2 Agreements are summarized below:
| $ | ||||
|
|
|
|||
| GM derivative liability |
||||
| On initial recognition as of January 30, 2023 |
(33,194 | ) | ||
| Gain on change in fair value |
28,096 | |||
|
|
|
|||
| As of June 30, 2023 |
(5,098 | ) | ||
|
|
|
|||
The fair value of the derivative as of January 30, 2023 was determined using Monte Carlo simulation, with the following inputs: volatility of 58.34%, share price of $21.99, a risk-free rate of 4.77%, and an expected dividend of 0%. The fair value of the derivative as of June 30, 2023 was estimated with the following inputs: volatility of 46.47%, LAC’s share price of $20.21, a risk-free rate of 5.71%, and an expected dividend of 0%. A gain on change in the fair value of the derivative for the period from issuance to June 30, 2023, of $28,096 was recognized in the statement of comprehensive loss.
Valuation of the derivative is sensitive to changes in Lithium Americas’ (and, following Separation, New LAC’s) share price and the assumed volatility of common shares. The gain was driven by changes in the underlying valuation assumptions, including the decrease as at June 30, 2023, compared to January 30, 2023, of Lithium Americas’ market share price from $21.99 to $20.21, a decrease in volatility assumption from 58.34% to 46.47%, partially offset by an increase in risk-free rate from 4.77% to 5.72%. A reduction/increase of Lithium Americas’ share price by 10% would result in a corresponding reduction/increase of the derivative value by 88% and 129% respectively. A reduction/increase of the volatility assumption by 10% would result in a corresponding reduction/increase of the derivative value by 91% and 104% respectively.
Offtake Agreement
Pursuant to the Offtake Agreement, GM may purchase up to 100% of Thacker Pass Phase 1 production at a price based on prevailing market rates. The term of the arrangement for Phase 1 production is ten years, subject to a five-year extension at GM’s option and other limited extensions. LAC North America has also granted GM a right of first refusal on Thacker Pass Phase 2 production. The volume available under the Offtake Agreement is subject to the receipt of the second tranche of GM’s investment and may be reduced proportionately in certain circumstances if GM’s remaining investment is less than $330,000.
|
|
14 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 10. | LOAN FROM PARENT |
| June 30, 2023 $ |
December 31, 2022 $ |
|||||||
| Loan from Parent |
||||||||
| Loan from Parent |
45,353 | 43,572 | ||||||
|
|
|
|
|
|||||
| 45,353 | 43,572 | |||||||
|
|
|
|
|
|||||
LAC North America entered into a line of credit agreement with Lithium Americas dated effective January 1, 2020, for funding of Thacker Pass expenditures. The line of credit is for $40,000 in total and each drawdown has a maturity of December 31, 2023, and an interest rate of 9% per annum. As at June 30, 2023, LAC North America had drawn $40,000 from the loan from Parent. Interest accrued on the loan as at June 30, 2023 was $5,353.
| 11. | OTHER LIABILITIES |
| June 30, 2023 $ |
December 31, 2022 $ |
|||||||
| Other liabilities |
||||||||
| Lease liabilities |
1,233 | 1,618 | ||||||
| Mining contractor liability |
3,500 | 5,950 | ||||||
|
|
|
|
|
|||||
| 4,733 | 7,568 | |||||||
|
|
|
|
|
|||||
During Q2 2019, LAC North America entered into a mining design, consulting and mining operations agreement with a mining contractor for its Thacker Pass project which included a financing component. In accordance with the agreement, LAC North America received $3,500 from the mining contractor in seven consecutive equal quarterly instalments, with $1,500 received in 2019 and $2,000 received in 2020. These amounts are included in the mining contractor liability balance.
LAC North America will pay a success fee to the mining contractor of $4,675 upon achieving certain commercial mining milestones or repay the $3,500 advance without interest if such commercial mining milestones are not met.
|
|
15 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 12. | EQUITY COMPENSATION |
Equity Incentive Plan
LAC North America’s employees participate in Lithium Americas’ equity incentive plan (“Plan”) in accordance with the policies of the TSX whereby, from time to time, at the discretion of the Lithium Americas’ board of directors, eligible directors, officers, employees and consultants are: (1) granted incentive stock options exercisable to purchase Lithium Americas common shares (“Stock Options”); and (2) awarded deferred share units (“DSUs”) restricted share units (“RSUs”) and performance share units (“PSUs”) that, subject to a recipient’s deferral right in accordance with the Income Tax Act (Canada), convert automatically into Lithium Americas’ common shares upon vesting.
The exercise price of each stock option is based on the fair market price of Lithium Americas common shares at the time of the grant. Stock options are granted for a maximum term of five years.
Restricted Share Units
During the six months ended June, 2023, Lithium Americas granted 127 (2022 – 96) RSUs to Lithium Nevada Corp. (“Lithium Nevada”) employees and consultants. The total estimated fair value of the RSUs was $3,209 (2022 – $2,363) based on the market value of Lithium Americas’ shares on the grant date.
As at June 30, 2023, there was $2,739 (2022 – $1,714) of total unamortized compensation cost relating to unvested RSUs. During the six months ended June 30, 2023, stock-based compensation expense related to RSUs of $70 was charged to operating expenses (2022 – $488).
A summary of changes to the number of outstanding RSUs is as follows:
| Number of RSUs | Weighted average FMV price per share, (US$) |
|||||||
| Balance, RSUs outstanding as at December 31, 2021 |
310 | 6.02 | ||||||
|
|
|
|
|
|||||
| Converted into shares |
(80 | ) | (12.56 | ) | ||||
| Granted |
101 | 23.95 | ||||||
| Forfeited |
(1 | ) | (12.91 | ) | ||||
|
|
|
|
|
|||||
| Balance, RSUs outstanding as at December 31, 2022 |
330 | 10.01 | ||||||
|
|
|
|
|
|||||
| Converted into shares |
(15 | ) | (24.17 | ) | ||||
| Granted |
127 | 25.27 | ||||||
|
|
|
|
|
|||||
| Balance, RSUs outstanding as at June 30, 2023 |
442 | 13.42 | ||||||
|
|
|
|
|
|||||
|
|
16 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 12. | EQUITY COMPENSATION (continued) |
Stock Options
No stock options were granted by Lithium Americas to Lithium Nevada employees during the six months ended June 30, 2023, and 2022. A summary of changes to outstanding stock options is as follows:
| Number of Options |
Weighted Average Exercise Price, (CDN$) |
|||||||
| Balance, stock options outstanding as at December 31, 2021 |
340 | 7.30 | ||||||
|
|
|
|
|
|||||
| Exercised |
(220 | ) | (6.76 | ) | ||||
|
|
|
|
|
|||||
| Balance, stock options outstanding as at December 31, 2022 |
120 | 8.30 | ||||||
|
|
|
|
|
|||||
| Exercised |
(120 | ) | (8.30 | ) | ||||
|
|
|
|
|
|||||
| Balance, stock options outstanding as at June 30, 2023 |
- | - | ||||||
|
|
|
|
|
|||||
The weighted average Lithium Americas share price at the time of exercise of options during the six months ended June 30, 2023, was CDN$32.15 (2022 – CDN$40.62).
During the six months ended June 30, 2023, stock-based compensation expense related to stock options of $Nil was charged to operating expenses (2022 – $Nil).
Performance Share Units
16 PSUs were granted by Lithium Americas to Lithium Nevada employees during the six months ended June 30, 2023 (2022 – 5). As at June 30, 2023, there was $640 of total unamortized compensation cost relating to unvested PSUs (2022—$285). During the six months ended June 30, 2023, equity compensation expense related to PSUs of $11 was charged to operating expenses (2022—$95).
A summary of changes to the number of outstanding PSUs is as follows:
| Number of PSUs | Weighted average FMV price per share, ($) |
|||||||
| Balance, PSUs outstanding as at December 31, 2021 |
113 | 7.31 | ||||||
|
|
|
|
|
|||||
| Granted |
5 | 41.99 | ||||||
|
|
|
|
|
|||||
| Balance, PSUs outstanding as at December 31, 2022 |
118 | 8.79 | ||||||
|
|
|
|
|
|||||
| Granted |
16 | 38.84 | ||||||
|
|
|
|
|
|||||
| Balance, PSUs outstanding as at June 30, 2023 |
134 | 12.38 | ||||||
|
|
|
|
|
|||||
|
|
17 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 13. | RELATED PARTY TRANSACTIONS |
LAC North America entered into the following transactions with related parties:
Funding from Parent company
As described in Note 2, LAC North America is funded via a loan from Lithium Americas (recorded within liabilities (Note 10)) or capital contributions (recorded within net Parent investment in equity). The net Parent investment represents Lithium Americas’ interest in the recorded net assets of LAC North America and the cumulative net equity investment by Lithium Americas through the dates presented.
Allocation of Parent company costs
Certain costs related to LAC North America incurred by the Parent company, Lithium Americas, are allocated to LAC North America and presented as general and administrative expenditures in the carve-out statement of comprehensive loss (Note 2).
| 14. | SEGMENTED INFORMATION |
LAC North America operates in one operating segment and one geographical area. Thacker Pass was in the exploration and evaluation phase and transferred to the development stage effective February 1, 2023. Substantially all the assets and the liabilities of LAC North America relate to Thacker Pass.
| 15. | FINANCIAL INSTRUMENTS |
Financial instruments recorded at fair value on the carve-out statements of financial position and presented in fair value disclosures are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices that are observable for assets or liabilities, either directly or indirectly; and
Level 3 – Inputs for assets and liabilities that are not based on observable market data.
The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified in the lowest level of the hierarchy for which a significant input has been considered in measuring fair value. Common shares and preferred shares acquired as part of the Green Technology Metals and Ascend Elements investments respectively, and the GM Tranche 2 Agreements derivative are measured at fair value on the statement of financial position on a recurring basis.
Cash and cash equivalents, receivables, and loan from Parent are measured at amortized cost on the carve-out statement of financial position. As at June 30, 2023, the fair value of financial instruments measured at amortized cost approximates their carrying value. Green Technology Metals shares are classified at level 1 of the fair value hierarchy (Note 5), the GM Tranche 2 Agreements derivative (Note 9) is classified at level 2 of the fair value hierarchy and Ascend Elements preference shares are classified at level 3 of the fair value hierarchy (Note 6).
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18 |
LAC NORTH AMERICA
NOTES TO THE CARVE-OUT INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in thousands of US dollars, except for per share amounts; shares and equity instruments in thousands)
| 15. | FINANCIAL INSTRUMENTS (continued) |
LAC North America manages risks to minimize potential losses. The main objective of LAC North America’s risk management process is to ensure that the risks are properly identified and that the capital base is adequate in relation to those risks. The principal risks which impact LAC North America’s financial instruments are described below.
Credit Risk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. Financial instruments that potentially subject LAC North America to a concentration of credit risk consist primarily of cash and cash equivalents and receivables. LAC North America’s maximum exposure to credit risk for cash and receivables is the amount disclosed in the consolidated statements of financial position. Exposure to credit loss is limited by placing cash and cash equivalents (including the Tranche 1 Investment proceeds) with two major Canadian banks and investing in US treasury bills and other short-term investments that are guaranteed by the Canadian government or Canadian chartered banks. Expected credit losses estimated to be de minimis.
Liquidity Risk
Liquidity risk is the risk that LAC North America will not be able to meet its financial obligations as they fall due. LAC North America’s approach to managing liquidity is to evaluate current and expected liquidity requirements under both normal and stressed conditions to estimate and maintain sufficient reserves of cash and cash equivalents to meet its liquidity requirements in the short and long term. LAC North America prepares annual budgets, which are regularly monitored and updated as considered necessary. As at June 30, 2023, LAC North America had a cash and cash equivalents of $261,820 to settle current liabilities of $67,601 (Note 1). Current liabilities include the GM Tranche 2 Agreements derivative which will be settled in shares.
| 16. | SUBSEQUENT EVENT |
On July 31, 2023, at the Lithium Americas’ annual, general and special meeting Lithium Americas’ shareholders approved the proposed reorganization of Lithium Americas that will result in the separation of Lithium Americas into Lithium Americas (Argentina) Corp. (“Lithium Argentina”) and New LAC (“Lithium Americas (NewCo)”). Additionally, in connection with second tranche of the $650,000 investment by GM, the Lithium Americas’ shareholders passed two resolutions approving: (a) the ownership by GM and its affiliates of more than 20% of the issued and outstanding shares of Lithium Americas’ (or following the Separation, Lithium Americas (NewCo)); and (b) $27.74 per share (as adjusted for the Separation) as the maximum subscription price at which the second tranche of GM’s investment would be made.
On August 4, 2023, LAC North America also obtained a final order from the Supreme Court of British Columbia approving the plan of arrangement to effect the Separation. In August 2023, 1397468 B.C. Ltd. filed it’s 20-F registration statement to register Lithium Americas (NewCo) common shares under the U.S. Securities Exchange Act of 1934. The Separation remains subject to certain regulatory approvals and closing conditions, The Separation is targeted to become effective in early October 2023.
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19 |
Exhibit 99.3
LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
BACKGROUND
This Management’s Discussion and Analysis (“MD&A”) of the North American Division of Lithium Americas Corp. (“LAC North America”), prepared as of September 28, 2023, should be read in conjunction with LAC North America’s unaudited carve-out interim financial statements and the notes thereto for the three and six months ended June 30, 2023 (“Q2 2023 carve-out financial statements”), the audited carve-out financial statements and notes thereto for the year ended December 31, 2022 (“2022 annual carve-out financial statements”) and the management’s discussion and analysis for the year ended December 31, 2022 (“2022 MD&A”). Refer to Notes 2 and 3 of the 2022 annual carve-out financial statements for disclosure of LAC North America’s significant accounting policies. All amounts are expressed in US dollars, unless otherwise stated. This MD&A contains “forward-looking statements,” and readers should read the cautionary note contained in the section entitled “Forward-Looking Statements” of this MD&A regarding such forward-looking statements.
OUR BUSINESS
LAC North America represents those North American assets and investments owned directly and indirectly by Lithium Americas Corp. (“Lithium Americas,” “LAC” or the “Parent”) that are to be separated from the existing group and spun out to shareholders in conjunction with a reorganization, as discussed below. LAC North America’s principal asset is the Thacker Pass project, a sedimentary-based lithium property located in the McDermitt Caldera in Humboldt County, Nevada (“Thacker Pass”), which is in the development stage as of the date of this MD&A. LAC North America’s assets will also include minority investment ownership interest in the shares of Green Technology Metals Limited (“Green Technology Metals”), a North American focused lithium exploration and development company in Canada and Ascend Elements Inc. (“Ascend Elements”), a private US based lithium-ion battery recycling and engineered material company.
As of the date of this MD&A, LAC North America commenced construction at Thacker Pass and entered into strategic agreements with General Motors Holdings LLC (“GM”) with respect to a $650 million equity investment to finance construction of Phase 1 of Thacker Pass (the “Transaction”). On February 16, 2023, the $320 million first tranche investment of the Transaction (“Tranche 1 Investment”) closed with the subscription by GM for 15,002,243 subscription receipts of Lithium Americas which were automatically converted into 15,002,243 units comprising an aggregate of 15,002,243 common shares and 11,890,848 warrants of Lithium Americas for $21.34 per unit, upon which LAC North America and GM entered into an offtake agreement to supply GM with lithium carbonate production from Thacker Pass and an investor rights agreement. Closing of the $330 million second tranche investment remains subject to regulatory approvals and other closing conditions. The Transaction including the Tranche 1 Investment proceeds have been accounted for as a transaction of LAC North America. See sections “Project Progress” and “Liquidity Outlook” for further details.
PROPOSED REORGANIZATION
On January 23, 2023, 1397468 B.C. Ltd. (“New LAC”) was incorporated under the laws of British Columbia for the purpose of transferring the ownership of LAC North America from Lithium Americas to Lithium Americas shareholders, on a pro-rata basis, pursuant to a court approved plan of arrangement under the Business Corporations Act (British Columbia) (the “Separation”). Upon consummation of the Separation, New LAC will be re-named “Lithium Americas Corp.”
The Separation is to be implemented by way of a plan of arrangement under the laws of British Columbia pursuant to an arrangement agreement entered between Lithium Americas and New LAC (the “Arrangement”). Under the Arrangement, Lithium Americas will, among other things, contribute its interest in Thacker Pass, Lithium Americas’ investment in Green Technology Metals and Ascend Elements, certain intellectual property rights, its receivable or loan to LAC North America, and a cash transfer of $75 million to New LAC. New LAC will distribute its common shares to shareholders of Lithium Americas in a series of share exchanges.
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2 |
LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
The Separation will be pro rata to the shareholders of Lithium Americas, so that such holders will maintain the same proportionate interest in Lithium Americas and in New LAC both immediately before and immediately after the Separation.
Upon consummation of the Separation and successful listing of the common shares of New LAC on the Toronto Stock Exchange (“TSX”) and on the New York Stock Exchange (“NYSE”), New LAC and Lithium Americas will be independent publicly traded companies. Listing will be subject to New LAC meeting the usual listing requirements of the TSX and NYSE, receiving approval of the TSX and NYSE and meeting all conditions of listing imposed by the TSX and NYSE. New LAC’s head office and principal address is Suite 300, 900 West Hastings Street, Vancouver, British Columbia, Canada, V6C 1E5.
PROJECT PROGRESS
Thacker Pass, Nevada, USA
DOE Loan Application and Financing Process
LAC North America continues to work closely with the U.S. Department of Energy (“DOE”) Loans Program Office to advance confirmatory due diligence and term sheet negotiations for the Advanced Technology Vehicles Manufacturing Loan Program (“ATVM Loan Program”), following the receipt of a Letter of Substantial Completion on February 22, 2023.
LAC North America expects the DOE ATVM Loan Program conditional approval process to be completed in 2023 and if approved, to fund up to 75% of eligible capital costs for construction of Phase 1. Development costs incurred by the project may qualify as eligible costs under the ATVM Loan Program as of January 31, 2023. The Letter of Substantial Completion follows LAC North America’s April 2022 application for the DOE ATVM Loan Program. The DOE’s invitation to enter into confirmatory due diligence is not an assurance that DOE will offer a term sheet to the applicant, or that the terms and conditions of a term sheet will be consistent with terms proposed by the applicant. The foregoing matters are wholly dependent on the results of DOE advanced due diligence and DOE’s determination whether to proceed.
General Motors
On January 30, 2023, LAC North America entered into a purchase agreement with GM pursuant to which GM agreed to make a $650 million equity investment in two tranches. The investment from GM is to support LAC North America by creating the foundation for an independent U.S. business focused on Thacker Pass and a North American lithium supply chain.
On February 16, 2023, the Tranche 1 Investment of $320 million closed with GM’s purchase of 15 million common shares of Lithium Americas at $21.34 per share, upon which LAC North America and GM entered into an offtake agreement (the “Offtake Agreement”) whereby GM receives exclusive access to Phase 1 production through a binding supply agreement and a Right of First Offer on Phase 2 production. The second tranche of $330 million is contemplated to be invested into LAC North America following the Separation and other conditions being achieved.
With the combination of expected funding from the ATVM Loan Program, GM’s $650 million equity investment and cash that will be allocated from the Parent to New LAC, LAC North America expects to secure the necessary funding to substantially de-risk Thacker Pass Phase 1 construction.
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3 |
LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
Construction Update
On March 2, 2023, LAC North America announced the start of construction activities at Thacker Pass following receipt of notice to proceed from the Bureau of Land Management (“BLM”). Thacker Pass is expected to create over 1,000 jobs during construction and 500 jobs during operations. Initial production of Phase 1 following mechanical completion is targeted to commence in the second half of 2026.
LAC North America has awarded the engineering, procurement and construction management (“EPCM”) contract to Bechtel, a trusted industry-leading firm that has built more than 25,000 projects for industries and governments in 160 countries on all seven continents, for the design, procurement and execution of Phase 1. Other major construction contracts awarded include:
| • | Aquatech International LLC has been awarded the contract for the magnesium sulfate and lithium carbonate chemical plants. |
| • | EXP Global Inc. has been awarded the contract for the engineering, procurement, construction support, commissioning and start-up services for the sulfuric acid plant. |
| • | MECS, Inc. was awarded the contract for the technology license, engineering and equipment for the sulfuric acid plant including their state-of-the-art MECS® Heat Recovery System, to harness waste heat to generate steam from the sulfuric acid plant, which will subsequently be converted into carbon-free electricity for the processing plant. |
| • | The transload terminal design has been awarded to a contractor. |
LAC North America, Bechtel and the North American Building Trade Unions (“NABTU”) have entered into a memorandum of understanding agreeing to a project labor agreement (“PLA”) for major construction activities for Phase 1 of Thacker Pass. Further, the parties agreed to utilize the form of a National Construction Agreement with a project specific addendum as the PLA for the Thacker Pass project construction.
Construction is progressing on track, including the start of major earthworks construction in mid-June 2023. The water pipelines and ponds required during construction are completed, and the ponds were filled in early-July 2023.
A parcel of land for the workforce hub, which will provide housing for temporary construction workers, was identified and secured. The work force hub is expected to be completed by mid-2024 in advance of peak-construction.
Corporate Development
Separation Process
On May 15, 2023, Lithium Americas’ Board unanimously approved execution of an arrangement agreement providing for the reorganization of Lithium Americas that will result in the separation of Lithium Americas into Lithium Americas (Argentina) Corp. (“Lithium Argentina”) and New LAC (“Lithium Americas (NewCo)”).
On July 31, 2023, at the annual, general and special meeting of Lithium Americas shareholders, 98.85% of the votes cast by shareholders present in person or by proxy at the meeting voted in favor of the Separation. The Separation is targeted to become effective in early October 2023.
In addition, shareholders passed two resolutions in connection with the previously announced $650 million investment by GM. 98.42% of the votes cast by disinterested shareholders were in favor of the ownership by GM and its affiliates of more than 20% of the issued and outstanding shares of Lithium Americas (or following the Separation, Lithium Americas (NewCo)); and 98.40% of the votes cast by disinterested shareholders were in favor of $27.74 per share (as adjusted for the Separation) as the maximum subscription price at which Tranche 2 of GM’s investment would be made.
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4 |
LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
Completion of the Separation remains subject to certain regulatory approvals and closing conditions, including receipt of final approvals by TSX and NYSE, among other things to become effective. LAC North America received advanced tax rulings from both the Canada Revenue Agency and the Internal Revenue Service in July and obtained a final order from the Supreme Court of British Columbia approving the plan of arrangement to effect the Separation on August 4, 2023. New LAC filed its 20-F registration statement in August 2023 to register Lithium Americas (NewCo) common shares under the U.S. Securities Exchange Act of 1934.
SELECTED FINANCIAL INFORMATION
Results of Operations – Net Loss Analysis
Six Months Ended June 30, 2023 versus Six Months Ended June 30, 2022
The following table summarizes the results of operations for the six months ended June 30, 2023 versus the six months ended June 30, 2022:
| Financial results | Six Months Ended June 30, | Change | ||||||||||
| (in US$ million) |
2023 $ |
2022 $ |
$ | |||||||||
| EXPENSES |
||||||||||||
| Exploration expenditures |
||||||||||||
| Engineering |
0.8 | 12.2 | (11.4 | ) | ||||||||
| Consulting, salaries and other compensation |
2.5 | 4.9 | (2.4 | ) | ||||||||
| Permitting, environmental and claim fees |
0.3 | 2.3 | (2.0 | ) | ||||||||
| Field supplies and other |
- | 0.6 | (0.6 | ) | ||||||||
| Depreciation |
0.2 | 0.7 | (0.5 | ) | ||||||||
| Drilling and geological expenses |
0.1 | 0.9 | (0.8 | ) | ||||||||
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| 3.9 | 21.6 | (17.7 | ) | |||||||||
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| General and administrative (allocation of corporate costs) |
||||||||||||
| Salaries, benefits and other compensation |
3.4 | 1.9 | 1.5 | |||||||||
| Office and administration |
1.0 | 0.8 | 0.2 | |||||||||
| Professional fees |
1.6 | 1.1 | 0.5 | |||||||||
| Investor relations, regulatory fees and travel |
0.8 | 0.6 | 0.2 | |||||||||
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| 6.8 | 4.4 | 2.4 | ||||||||||
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| 10.7 | 26.0 | (15.3 | ) | |||||||||
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| OTHER ITEMS |
||||||||||||
| Transaction costs |
6.8 | - | 6.8 | |||||||||
| Gain on change in fair value of GM transaction derivative liability |
(28.1 | ) | - | (28.1 | ) | |||||||
| Loss on change in fair value of Green Technology Metals’ shares |
1.1 | - | 1.1 | |||||||||
| Finance cost |
0.3 | 1.9 | (1.6 | ) | ||||||||
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| (19.9 | ) | 1.9 | (21.8 | ) | ||||||||
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| NET (INCOME)/LOSS |
(9.2 | ) | 27.9 | (37.1 | ) | |||||||
Net income during the six months ended June 30, 2023 versus net loss during the six months ended June 30, 2022, is primarily attributable to:
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5 |
LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
| • | a decrease in exploration expenditures related to commencement of construction of Thacker Pass and capitalization of a majority of the project costs starting February 1, 2023; and |
| • | gain on change in fair value of the derivative liability with respect to a warrant agreement and a subscription agreement with GM (“GM Tranche 2 Agreements”) of $28.1 million driven primarily by a decrease in market value of LAC’s shares and volatility assumptions for the six months ended June 30, 2023 versus inception. |
Higher net income was partially offset by:
| • | transaction costs incurred during the six months ended June 30, 2023 mainly associated with the GM transaction, and the Separation; |
| • | higher allocation of corporate costs due to an increase in salaries, other compensation costs, office and administration expenditures for the six months ended June 30, 2023; and |
| • | a loss on change in fair value of investment in Green Technology Metals. |
Expenses
Exploration and evaluation expenditures for the six months ended June 30, 2023 of $3.9 million (2022 – $21.6 million) include Thacker Pass exploration expenditures for the month of January 2023 i.e., prior to the commencement of construction. The decrease in expenditures is related to commencement of construction of Thacker Pass and capitalization of a majority of the project costs from February 1, 2023.
General and administrative expenses for the six months ended June 30, 2023, were $6.8 million (2022 – $4.4 million) and include the allocation of corporate costs. Insurance, legal and consulting fees higher as a result of increased corporate activities. Salaries and benefits increased mainly due to an increase in the number of employees to support growth of the LAC North America’s operations, increases in remuneration of employees and directors due to an increase in operations.
Other Items
Gain on change in fair value of the GM Tranche 2 Agreements derivative liability of $28.1 million was driven by changes in the underlying valuation assumptions, including the decrease as at June 30, 2023 compared to January 30, 2023, of the market price of LAC’s shares from $21.99 to $20.21, a decrease in volatility assumption from 58.34% to 46.47%, partially offset by an increase in risk-free rate from 4.77% to 5.72%.
Transaction costs for the six months ended June 30, 2023, were $6.8 million (2022 – $Nil) and relate to transaction costs associated with the evaluation of the Separation, and General Motors warrant agreement. A loss of $1.1 million (2022—$Nil) was recognized on change in fair value of investment in Green Technology Metals for the six months ended June 30, 2023. Finance costs for the six months ended June 30, 2023, were $0.3 million (2022 – $1.9 million) which is comprised mainly of interest expense on the loan from Parent.
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6 |
LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
Three Months Ended June 30, 2023 versus Three Months Ended June 30, 2022
The following table summarizes the results of operations for the three months ended June 30, 2023 (“Q2 2023”) versus the three months ended June 30, 2022 (“Q2 2022”):
| Financial results | Three Months Ended June 30, | Change | ||||||||||
| (in US$ million) |
2023 $ |
2022 $ |
$ | |||||||||
| EXPENSES |
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| Exploration expenditures |
||||||||||||
| Engineering |
- | 6.4 | (6.4 | ) | ||||||||
| Consulting, salaries and other compensation |
- | 2.5 | (2.5 | ) | ||||||||
| Permitting, environmental and claim fees |
- | 1.6 | (1.6 | ) | ||||||||
| Field supplies and other |
- | 0.3 | (0.3 | ) | ||||||||
| Depreciation |
- | 0.6 | (0.6 | ) | ||||||||
| Drilling and geological expenses |
- | 0.6 | (0.6 | ) | ||||||||
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| - | 12.0 | (12.0 | ) | |||||||||
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| General and administrative (allocation of corporate costs) |
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| Salaries, benefits and other compensation |
2.4 | 0.9 | 1.5 | |||||||||
| Office and administration |
0.6 | 0.5 | 0.1 | |||||||||
| Professional fees |
1.6 | 0.7 | 0.9 | |||||||||
| Investor relations, regulatory fees and travel |
0.5 | 0.4 | 0.1 | |||||||||
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| 5.1 | 2.5 | 2.6 | ||||||||||
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| 5.1 | 14.5 | (9.4 | ) | |||||||||
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| OTHER ITEMS |
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| Transaction costs |
2.8 | - | 2.8 | |||||||||
| Gain on change in fair value of GM transaction derivative liability |
(19.1 | ) | - | (19.1 | ) | |||||||
| Loss on change in fair value of Green Technology Metals’ shares |
0.3 | - | 0.3 | |||||||||
| Finance cost |
- | 1.0 | (1.0 | ) | ||||||||
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| (16.0 | ) | 1.0 | (17.0 | ) | ||||||||
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| NET (INCOME)/LOSS |
(10.9 | ) | 15.5 | (26.4 | ) | |||||||
Net income during Q2 2023 versus net loss during Q2 2022, is primarily attributable to:
| • | a decrease in exploration expenditures related to commencement of construction of Thacker Pass and capitalization of majority of the project costs upon commencement of construction on February 1, 2023; and |
| • | gain on change in fair value of the derivative liability with respect GM Tranche 2 Agreements of $19.1 million driven primarily by a decrease in market value of LAC’s shares and volatility assumptions for Q2 2023. |
Higher net income was partially offset by:
| • | transaction costs incurred during Q2 2023 mainly associated with the GM transaction, and the Separation; |
| • | higher allocation of corporate costs due to an increase in salaries, other compensation costs, office and administration expenditures during Q2 2023; and |
| • | a loss on change in fair value of investment in Green Technology Metals. |
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7 |
LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
Expenses
Exploration and evaluation expenditures during Q2 2023 of $Nil (2022 – $12 million). The decrease in expenditures is related to commencement of construction of Thacker Pass and capitalization of a majority of the project costs commencing February 1, 2023.
General and administrative expenses during Q2 2023 were $5.1 million (2022 – $2.5 million) and include the allocation of corporate costs. Insurance, legal and consulting fees were higher as a result of increased corporate activities. Salaries and benefits increased mainly due to an increase in the number of employees to support the growth of the LAC North America’s operations, increases in remuneration of employees and directors due to an increase in operations.
Other Items
Gain on change in fair value of the GM Tranche 2 Agreements derivative liability of $19.1 million was driven by changes in the underlying valuation assumptions, including the decrease at June 30, 2023 compared with March 31, 2023, of the market price of the LAC’s shares from $21.76 to $20.21, and a decrease in the volatility assumption from 56.32% to 46.47%, partially offset by an increase in risk-free rate from 4.49% to 5.72%.
Transaction costs for Q2 2023 were $2.8 million (2022 – $Nil) relate to transaction costs associated with the evaluation of the Separation, and General Motors investment. A loss of $0.3 million (2022- $Nil) was recognized on change in fair value of investment in Green Technology Metals during Q2 2023. Finance costs during Q2 2023 were $Nil (2022 – $1.0 million) which is comprised mainly of interest expense on the loan from Parent.
LIQUIDITY AND CAPITAL RESOURCES
| Cash Flow Highlights | Six Months Ended June 30, | |||||||
| (in US$ million) |
2023 $ |
2022 $ |
||||||
| Cash used in operating activities |
(27.2 | ) | (26.1 | ) | ||||
| Cash used in investing activities |
(56.5 | ) | (4.1 | ) | ||||
| Cash provided by financing activities |
344.9 | 31.2 | ||||||
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| Change in cash and cash equivalents |
261.2 | 1.0 | ||||||
| Cash and cash equivalents - beginning of the period |
0.6 | 0.9 | ||||||
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| Cash and cash equivalents - end of the period |
261.8 | 1.9 | ||||||
As at June 30, 2023, LAC North America had cash and cash equivalents of $261.8 million (2022 – $1.9 million) which includes the remaining net proceeds of the GM Tranche 1 Investment.
Liquidity Outlook
On January 30, 2023, LAC North America entered into a purchase agreement with GM pursuant to which GM agreed to make a $650 million equity investment in two tranches. Proceeds from the investment, including from GM Tranche 1 Investment of approximately $320 million which closed on February 16, 2023, will be used for the construction and development of Thacker Pass. The GM Tranche 2 is contemplated to be invested into LAC North America following the Separation and upon other conditions being achieved.
LAC North America continues to advance its formal application under the ATVM Loan Program submitted in April 2022 to the DOE for partial funding of Thacker Pass project development. Further to the Letter of Substantial Completion received from the DOE, LAC North America is proceeding with the confirmatory due diligence and term
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8 |
LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
sheet negotiations process. The ATVM Loan Program is designed to provide funding to U.S. companies engaged in the manufacturing of advanced technologies vehicles and components used in those vehicles. If LAC North America is offered a loan by the DOE, it expects funding from the ATVM Loan Program to provide up to 75% of the Thacker Pass project’s eligible capital costs for construction of Phase 1. DOE’s invitation to enter into due diligence is not an assurance that DOE will offer a term sheet to the applicant, or that the terms and conditions of a term sheet will be consistent with terms proposed by the applicant. The foregoing matters are wholly dependent on the results of DOE advanced due diligence and DOE’s determination whether to proceed.
With the combination of expected funding from the ATVM Loan Program, GM’s $650 million equity investment and cash that will be allocated from the Parent to New LAC, LAC North America expects to secure the necessary funding to substantially de-risk Thacker Pass Phase 1 construction.
Over the long-term, LAC North America expects to meet its obligations and fund the development of Thacker Pass through its financing plans described above; however, due to the conditions associated with such financing, there can be no assurance that LAC North America will successfully complete all of its contemplated financing plans. Except as disclosed, LAC North America does not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, its liquidity and capital resources either materially increasing or decreasing at present or in the foreseeable future. LAC North America does not engage in currency hedging to offset any risk of currency fluctuations.
Operating Activities
Cash used in operating activities during the six months ended June 30, 2023 was $27.2 million (2022 – $26.1 million). The significant components of operating activities are discussed in the Results of Operations section above.
Investing Activities
Cash used in investing activities during the six months ended June 30, 2023 was $56.5 million (2022 – $4.1 million). During six months ended June 30, 2023, LAC North America spent $56.3 million on additions to PP&E including construction costs related to Thacker Pass.
Financing Activities
Funding from the Parent
LAC North America is funded, in part, via a loan from Lithium Americas (recorded within liabilities) or capital contributions (recorded within net parent investment in equity). The net parent investment represents Lithium Americas’ interest in the recorded net assets of LAC North America and the cumulative net equity investment by Lithium Americas through the dates presented. The net parent investment from Lithium Americas funds during the six months ended June 30, 2023 was $40.3 million (2022 – $31.2 million).
General Motors Investment
On January 30, 2023, LAC North America entered into an agreement with GM, pursuant to which GM has agreed to make a $650 million investment in Lithium Americas, the proceeds of which are to be used for the construction and development of Thacker Pass. On February 16, 2023, the first tranche of $320 million was closed, resulting in GM’s purchase of 15 million common shares of LAC and the gross proceeds released from escrow. The second tranche of $330 million is contemplated to be invested into LAC North America following the Separation and other conditions being achieved.
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LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
RELATED PARTY TRANSACTIONS
Funding from Parent
LAC North America is partially funded via loans from Lithium Americas (recorded within liabilities) or capital contributions (recorded within net parent investment in equity). The net parent investment represents Lithium Americas’ interest in the recorded net assets of LAC North America and the cumulative net equity investment by Lithium Americas through the dates presented.
Allocation of Parent Costs
Certain costs related to LAC North America incurred by the parent company, Lithium Americas, are allocated to LAC North America and presented as general and administrative expenditures in the carve-out statement of comprehensive loss. Allocated costs for the six months ended June 30, 2023, totaled $6.8 million (2022—$4.4 million).
| General and Administrative (allocation of corporate costs) | Six Months Ended June 30, | Change | ||||||||||
| (in US$ million) |
2023 $ |
2022 $ |
$ | |||||||||
| Salaries, benefits and other compensation |
3.4 | 1.9 | 1.5 | |||||||||
| Office and administration |
1.0 | 0.8 | 0.2 | |||||||||
| Professional fees |
1.6 | 1.1 | 0.5 | |||||||||
| Investor relations, regulatory fees and travel |
0.8 | 0.6 | 0.2 | |||||||||
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| Total |
6.8 | 4.4 | 2.4 | |||||||||
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Allocated costs for Q2 2023 totaled $5.1 million (2022—$2.5 million).
| General and Administrative (allocation of corporate costs) | Three Months Ended June 30, | Change | ||||||||||
| (in US$ million) |
2023 $ |
2022 $ |
$ | |||||||||
| Salaries, benefits and other compensation |
2.4 | 0.9 | 1.5 | |||||||||
| Office and administration |
0.6 | 0.5 | 0.1 | |||||||||
| Professional fees |
1.6 | 0.7 | 0.9 | |||||||||
| Investor relations, regulatory fees and travel |
0.5 | 0.4 | 0.1 | |||||||||
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| Total |
5.1 | 2.5 | 2.6 | |||||||||
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CONTRACTUAL OBLIGATIONS
As at June 30, 2023, LAC North America had the following contractual obligations (undiscounted):
| (in US$ million) |
2023 $ |
2024 $ |
2025 and later $ |
Total $ |
||||||||||||
| Accounts payable and accrued liabilities |
14.6 | - | - | 14.6 | ||||||||||||
| Obligations under office leases¹ |
0.4 | 0.8 | 1.0 | 2.2 | ||||||||||||
| Other obligations¹ |
0.0 | 8.2 | - | 8.2 | ||||||||||||
| Loans from Parent |
45.3 | - | - | 45.3 | ||||||||||||
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| Total |
60.3 | 9.0 | 1.0 | 70.3 | ||||||||||||
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¹Include principal and interest/finance charges.
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LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
LAC North America’s commitments including royalties, and option payments are disclosed in Note 8 of Q2 2023 carve-out financial statements, most of which will be incurred in the future if LAC North America starts production from Thacker Pass.
FINANCIAL INSTRUMENTS
Financial assets and liabilities are recognized when LAC North America becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and LAC North America has transferred substantially all risks and rewards of ownership.
All of LAC North America’s financial instruments are classified into financial assets and liabilities measured at amortized cost, other than the shares acquired as part of the investment in Green Technology Metals, Ascend Elements and the GM Tranche 2 Agreements derivative liability which are carried at fair value. All financial instruments are initially measured at fair value plus, in the case of items measured at amortized cost, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.
Financial assets are measured at amortized cost if they are held for the collection of contractual cash flows where those cash flows solely represent payments of principal and interest. LAC North America’s intent is to hold these financial assets in order to collect contractual cash flows. The contractual terms give rise to cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding.
LAC North America assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
Cash and cash equivalents, receivables, and loan from Parent are measured at amortized cost on the carve-out statement of financial position.
LAC North America manages risks to minimize potential losses. The main objective of LAC North America’s risk management process is to ensure that the risks are properly identified and that the capital base is adequate in relation to those risks. The principal risks which impact LAC North America’s financial instruments are described below.
Credit Risk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. Financial instruments that potentially subject LAC North America to a concentration of credit risk consist primarily of cash and cash equivalents and receivables. LAC North America’s maximum exposure to credit risk for cash and receivables is the amount disclosed in the consolidated statements of financial position. Exposure to credit loss is limited by placing cash and cash equivalents (including the Tranche 1 Investment proceeds) with two major Canadian banks and investing in US treasury bills and other short-term investments that are guaranteed by the Canadian government or Canadian chartered banks. Expected credit losses estimated to be de minimis.
Liquidity Risk
Liquidity risk is the risk that LAC North America will not be able to meet its financial obligations as they fall due. LAC North America’s approach to managing liquidity is to evaluate current and expected liquidity requirements under both normal and stressed conditions to estimate and maintain sufficient reserves of cash and cash equivalents to meet its liquidity requirements in the short and long term. LAC North America prepares annual budgets, which are regularly monitored and updated as considered necessary. As at June 30, 2023, LAC North America had cash and cash equivalents of $261,820 to settle current liabilities of $67,601. Current liabilities include the GM Tranche 2 Agreements derivative which will be settled in shares.
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LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
DECOMMISSIONING PROVISION AND RECLAMATION BOND
At June 30, 2023, the carrying value of the liability for decommissioning at Thacker Pass that arose to date as a result of exploration and construction activities is $0.6 million. LAC North America has a $1.7 million reclamation bond to the BLM that was guaranteed by a third-party insurance company. The current approved reclamation cost estimate for the October 15, 2021 Thacker Pass plan of operations is $47.6 million, reflecting the full build out of the project. Financial assurance of $13.7 million was placed with the BLM in February 2023 prior to initiating construction with the remaining amount to be placed as construction activities progress.
ESTIMATION UNCERTAINTY AND ACCOUNTING POLICY JUDGMENTS
Please refer to LAC North America’s 2022 annual carve-out financial statements, for Critical Accounting Estimates and Judgements disclosure and Accounting Policies disclosure. The nature and amount of significant estimates and judgements made by management in applying LAC’s accounting policies and the key sources of estimation uncertainty as well as accounting policies applied during the six months ended June 30, 2023, were substantially the same as those that management applied to 2022 annual carve-out financial statements, other than as described below.
Accounting for the Agreements with General Motors
LAC North America’s accounting for the agreements with General Motors, involved judgment, specifically in its initial assumption that its shareholders would approve an increase to GM’s shareholdings in excess of 20% and the price at which common shares would be issued pursuant to the subscription agreement for the second tranche of GM’s agreement; that in LAC North America’s determination the Offtake Agreement represents an agreement with market selling prices; and that the Offtake is separate from the equity financing provided by GM.
The fair value of the warrant and subscription agreements with GM involved estimation, which was determined using Monte Carlo simulation that required significant assumptions, including expected volatility of LAC’s share price.
Commencement of Development of Thacker Pass
LAC North America determined that the technical feasibility and commercial viability of Thacker Pass had been demonstrated following the release of an independent National Instrument 43-101 feasibility study on January 31, 2023, the release of the “Preliminary Feasibility Study S-K 1300 Technical Report Summary for the Thacker Pass Project Humboldt County, Nevada, USA” with an effective date of December 31, 2022, the receipt of the favorable ruling from the US District Court, District of Nevada (“Federal Court”) for the issuance of the Record of Decision (“ROD”), and the receipt of notice to proceed from BLM on February 7, 2023. LAC North America entered into an EPCM agreement and other construction-related contracts. Construction of Thacker Pass, including site preparation, geotechnical drilling, water pipeline development and associated infrastructure has commenced. Accordingly, the capitalized costs of Thacker Pass from exploration and evaluation assets were transferred to property, plant and equipment and began to capitalize development costs starting February 1, 2023.
Concurrent with the transfer of the Thacker Pass assets from exploration and evaluation to property, plant and equipment, LAC North America completed an impairment test of Thacker Pass which compared the carrying value to the recoverable amount. The recoverable amount is the greater of the value in use and the fair value less disposal costs. The fair value less disposal costs is calculated using a discounted cash flow model with feasibility study economics. The significant assumptions that impacted the fair value included future lithium prices, capital cost estimates, operating cost estimates, estimated mineral reserves and resources, and the discount rate. Based on the result of the impairment test, management concluded that there was no impairment.
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LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
NEW IFRS PRONOUNCEMENTS
Amendments to IAS 1 – Presentation of Financial Statements
In October 2022, the IASB issued amendments to IAS 1, Presentation of Financial Statements titled Non-current liabilities with covenants. These amendments sought to improve the information that an entity provides when its right to defer settlement of a liability is subject to compliance with covenants within 12 months after the reporting period. These amendments to IAS 1 override but incorporate the previous amendments, Classification of liabilities as current or non-current, issued in January 2020, which clarified that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities should be classified as non-current if a company has a substantive right to defer settlement for at least 12 months at the end of the reporting period. The amendments are effective January 1, 2024, with early adoption permitted. Retrospective application is required on adoption. These amendments are not expected to have a material effect on Q2 2023 carve-out financial statements.
Amendment to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies
In February 2021, the IASB issued amendments to IAS 1, Presentation of Financial Statements and the IFRS Practice Statement 2 Making Materiality Judgements to provide guidance on the application of materiality judgments to accounting policy disclosures. The amendments to IAS 1 replace the requirement to disclose significant accounting policies with a requirement to disclose material accounting policies. Guidance and illustrative examples are added in the Practice Statement to assist in the application of the materiality concept when making judgments about accounting policy disclosures. The amendments are effective January 1, 2023. These amendments did not impact the Q2 2023 carve-out financial statements.
FORWARD-LOOKING STATEMENTS
This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as “forward-looking information”). These statements relate to future events or LAC North America’s future performance. All statements, other than statements of historical fact, may be forward-looking information. Forward looking information generally can be identified by the use of words such as “seek,” “anticipate,” “plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “propose,” “potential,” “targeting,” “intend,” “could,” “might,” “should,” “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. In particular, this MD&A contains forward-looking information, including, without limitation, with respect to the following matters: statements under “Liquidity Outlook”, development of the Thacker Pass Project; expectations regarding accessing funding from the ATVM Loan Program, including the expected amount, timing and outcome of the loan application; anticipated timing to resolve, and the expected outcome of, any complaints or claims made or that could be made concerning the environmental permitting process in the United States for the Thacker Pass Project, including current lawsuits involving the Record of Decision for the project, and the transfer application for certain water rights for the project; successful development of the Thacker Pass Project, the expected timetable for completing Tranche 2 of the GM Transaction; the ability to complete Tranche 2 of the GM Transaction on the terms and timeline anticipated, or at all; the receipt of required stock exchange and regulatory approvals, authorizations and court rulings, and the securing of sufficient funding to complete the development of Phase 1 of the Thacker Pass Project, required for Tranche 2 of the GM Transaction; the expected benefits of the GM Transaction; the expected timetable for completing the Separation (including timing
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13 |
LAC NORTH AMERICA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED JUNE 30, 2023
(Expressed in US dollars, unless stated otherwise)
of advance tax rulings from the CRA and the IRS in connection with same); the ability of the Company to complete the Separation on the terms and timeline anticipated, or at all; the receipt of Board of Directors and required third party, stock exchange and regulatory approvals required for the Separation; the expected holdings and assets of the entities resulting from the Separation. Forward-looking information does not take into account the effect of transactions or other items announced or occurring after the statements are made. Forward-looking information is based upon a number of expectations and assumptions and is subject to a number of risks and uncertainties, many of which are beyond the LAC North America’s control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Although LAC North America believes that the assumptions and expectations reflected in such forward-looking information are reasonable, LAC North America can give no assurance that these assumptions and expectations will prove to be correct. Since forward-looking information inherently involves risks and uncertainties, undue reliance should not be placed on such information. LAC North America’s actual results could differ materially from those anticipated in any forward-looking information as a result of the risk factors set out herein and in LAC’s latest annual information form (“AIF”) and its management information circular dated June 16, 2023 (“Circular”) available on SEDAR. All forward-looking information contained in this MD&A is expressly qualified by the risk factors set out in the LAC’s latest AIF and the Circular. Such risk factors are not exhaustive. LAC North America does not undertake any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law. All forward-looking information contained in this MD&A is expressly qualified in its entirety by this cautionary statement.
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