Earnings call transcript: Lithium Royalty Corp Q1 2025 shows mixed results

Lithium Royalty Corp (LRC) reported its first-quarter 2025 financial results, revealing a mixed performance with a slight decline in quarterly royalty revenue and a widened adjusted EBITDA loss compared to the same period last year. Despite these challenges, the company maintains a strong cash position and no debt. The stock price saw a decrease of 2.75%, closing at $5.10, reflecting investor caution amid a broader downturn in lithium prices. According to InvestingPro data, the stock has shown resilience with a beta of -0.21, indicating it often moves counter to market trends. The company’s current valuation suggests it may be slightly overvalued compared to its Fair Value.

Key Takeaways

• Quarterly royalty revenue decreased slightly to $629,000 from $631,000.
• Adjusted EBITDA loss widened to $1.1 million from $662,000.
• The company holds a strong cash position of $32 million with no debt.
• Lithium prices remain significantly lower, impacting revenue potential.
• The stock fell by 2.75% following the earnings announcement.

Company Performance

Lithium Royalty Corp’s performance in Q1 2025 was marked by a slight decline in royalty revenue and a significant increase in adjusted EBITDA loss. The company’s financial health remains robust due to its substantial cash reserves and lack of debt. However, the ongoing downturn in lithium prices poses a challenge, as it affects the profitability of the company’s royalty assets.

Financial Highlights

• Revenue: $629,000, a slight decrease from $631,000 in the previous year.
• Adjusted EBITDA: Loss of $1.1 million, compared to a $662,000 loss last year.
• Cash Position: $32 million, with no debt.
• Partial sale of Tres Cabral royalty for $28 million.

Outlook & Guidance

Looking forward, Lithium Royalty Corp anticipates receiving revenue from the Mariana project in the second half of 2025 and potential revenue from the Tres Cabratas project by Q3/Q4 2025. The company continues to pursue opportunities to acquire additional royalties, which could enhance its future revenue streams.

Executive Commentary

CEO Ernie Ortiz commented, "We believe we are at a cyclical low in the sector, and prices should recover over time." He also emphasized the company’s readiness for market fluctuations, stating, "Our portfolio continues to mature, preparing us well for any market environment." Ortiz highlighted the ongoing demand for lithium driven by electric vehicles and energy storage.

Risks and Challenges

• Lithium Price Volatility: The significant drop in lithium prices could continue to impact revenue.
• Market Competition: Increased competition in the lithium sector may pressure margins.
• Project Delays: Potential delays in project commencements could affect future revenue.
• Regulatory Changes: Changes in environmental regulations could impact operations.
• Global Economic Conditions: Broader economic issues may affect demand for lithium.

Q&A

During the earnings call, analysts inquired about the potential impacts of US tariffs on the EV and energy storage markets. The company highlighted the continued growth of the EV sector in China and Europe and discussed the potential benefits of domestic US mineral manufacturing.

Full transcript - Lithium Royalty Corp (LIRC) Q1 2025:

Conference Operator: Good morning, ladies and gentlemen. Welcome to the Lithium Royalty Corp. First Quarter twenty twenty five Results Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.

This call is being recorded on Wednesday, 04/30/2025. I would now like to turn the conference over to Anita Zaganori, Vice President of Investor Relations at Lithium Royalty Corp. Please go ahead.

Anita Zaganori, Vice President of Investor Relations, Lithium Royalty Corp: Good morning, and welcome to Lithium Royalty Corp’s first quarter twenty twenty five earnings call. Please note that our complete financial results are available on our website, lithiumroyaltycorp.com, under the Investors tab and on CR Plus. This event is being webcast live. A replay of this call will be available on our website. Joining us today are Ernie Ortiz, President and CEO of Lithium Royalty Corp.

And Dominique Barker, Chief Financial Officer at LRC. Ernie will begin with introductory remarks followed by Dominique, who will provide an overview of our financial results. After the presentations, we will transition to a Q and A session, where our executive team will respond to your questions. We would like to remind participants that today’s commentaries may contain forward looking information. For more details and other important notices, please refer to our press release dated 04/30/2025, available on our website and on SEDAR plus Please note that all figures referred to on today’s call are in U.

S. Dollars unless otherwise noted. I will now turn the call over to Ernie.

Ernie Ortiz, President and CEO, Lithium Royalty Corp: Thank you, Anita, and good morning, everyone. In the first quarter of twenty twenty five, LRC revenue was down slightly year on year, driven by the 17% decline in spodumene prices. This is partially offset by the continued ramp up of operations of Sigma Lithium. Our revenue continues to outperform the broader lithium price index. In fact, since LRC’s initial public offering, LRC’s year on year revenue growth has outperformed the reported spotting price index for the majority of times.

This is because of our unique royalty structure with a diversified portfolio of 35 royalties that benefits from various assets ramping up at different times in a secular growing lithium market. In 2023, Sigma lithium commenced production and ramped up throughout 2024. In 2025, Sigma is expected to start production from Phase two, which will add another 250,000 tons of spodumene concentrate at full ramp up. Additionally, Gangsang Lithium officially inaugurated Mariana Lithium project in Salta in February 2025. We expect to receive revenues from the project in the second half of the year.

Sea Jin Mining has guided for the start of production at its Tres Cabratas project in Argentina in the third quarter of this year, highlighting its low cost position in the fast evolving lithium market. Recall, it is a 20,000 ton per annum operation for Phase one with substantial expansion potential given its multi decade asset life. Furthermore, Atlas Lithium has received its DMS plant in Brazil, while Sunnova Global aims to start limited production at its silica mine in British Columbia in the fourth quarter of twenty twenty five. Despite the challenges facing the broader lithium market, our focus on high grade, low cost assets allows many of our largest net asset value contributors to continue advancing into production and cash flow. Our portfolio continues to mature, preparing us well for any market environment given our limited cost base as a royalty company.

Lithium prices have largely remained range bound in 2025, with spodumene prices trading in the $800 to $900 per ton range and lithium carbonate prices in the $10,000 per ton range. These prices are below reinvestment economics for several operators and developers. Prices are expected to improve over time given the robust demand figures still projected in the industry. On another note, a number of our operators have discovered additional commodities on their properties that could accelerate their path to revenue generation with commodities that are enjoying stronger pricing at the moment. This opportunity is most prevalent with Cesium discoveries at some of our assets in the portfolio, including Power Metals Case Lake, Windsom Cermak and Grid Metals Donner Lake project.

To this effect, Power Metals is the most advanced with a mineral resource statement and PEA expected shortly. Power Metals is expected to start production in 2026. LRC holds a 2% gore on the Case Lake project. To expand on this point, this highlights a substantial optionality at our disposal. LRC’s underwriting methodology is intentionally conservative as we do not factor in resource upgrades or production expansions in our going in valuations.

Given that lithium is our primary focus, we also provide no value for other commodities beyond lithium in our initial underwriting. Therefore, any value from additional resource expansions, production expansions or additional commodities are free carried assets to the LRC shareholder. In the quarter, we completed a partial sale of our Tres Cabral’s royalty of Triple Flag for $28,000,000 This solidifies our balance sheet strength and opens up the opportunity to acquire additional assets at distressed valuations. Our pipeline remains strong, and our preference is for assets that have high proximity to cash flow with strong asset qualities. Given the balance sheet strength, we also announced a substantial issuer bid, SIB, as we believe our shares are substantially undervalued in the context of the cash flow growth for the company.

We expect to announce results of the SIB this week. We look forward to driving additional value for shareholders via attractive royalty acquisitions, potential additional share repurchases and continued uncovering of value via our royalty portfolio. I will now talk to Dominique who will discuss our financial results.

Dominique Barker, Chief Financial Officer, Lithium Royalty Corp: Thank you, Ernie. Our royalty revenue this quarter was $629,000 down from $631,000 in the same period last year. We received revenue from two of our royalties. As expected, we’ve had less exposure to QP or quotational pricing adjustments as the price of lithium has remained relatively stable for the past two quarters. G and A was $2,000,000 in the quarter compared to $1,700,000 in the same period last year.

Non cash G and A stock based compensation was $570,000 in the quarter compared to $645,000 in the same period last year. In addition, we had extra expenditures estimated at about a hundred and 58,000 related to the SIP, which we consider nonrecurring. Taking this into account, our cash g and a was 1,200,000.0 this quarter compared to $1,100,000 last quarter and $1,100,000 in the same period last year. LRC’s adjusted EBITDA was a loss of $1,100,000 in the quarter compared to a loss of $662,000 in the same period last year. The increase in loss is primarily due to the ongoing stock based compensation being characterized as recurring rather than one time last year related to the IPO.

We adjust for the IPO compensation, but we consider and consider this portion of stock based compensation as one time. Otherwise, we do not adjust for stock based compensation. With regards to liquidity, we had $32,000,000 of cash at quarter end and no debt. We do expect additional sources of revenue ahead, including from Ganfeng’s Mariana project and Zietin’s Tres Cabrata asset in Argentina, as well as Sigma’s Phase two expansion in Brazil. Additional catalysts this year include Atlas’ continued development at Das Neves, Core Lithium Finis restart study expected in Q2 twenty twenty five, and potential positive impacts from Rio Tinto’s ownership of the Galaxy project in Quebec.

And I would note they had their AGM last night, and there were some fairly positive commentary related to lithium. With that, I’ll pass it back to Ernie for closing remarks.

Ernie Ortiz, President and CEO, Lithium Royalty Corp: Thank you, Dominique. I will now provide an overview of the lithium market. Lithium demand continued at an accelerated pace driven by electric vehicles and energy storage. Real Motion reports that electric vehicle sales grew by 29% year on year for the first quarter of twenty twenty twenty five. This is again driven by China with 36% growth.

China continues to electrify at a rapid pace. Beyond the robust headline figures in the quarter, it is worth highlighting that the substantial expansion ambitions for many of the leading EV and battery makers in China continues. In the quarter, Xiaomi and BYD each raised approximately $5,000,000,000 geared towards expansion. Additionally, CAT is aiming to raise at least $5,000,000,000 in its Hong Kong IPO at some point this quarter. This additional $15,000,000,000 of capital highlights the secular growth dynamics in the sector and continued investments by the leaders in the industry.

The trend in Europe returned to growth, with reported EV sales of 22% compared to the 3% decline registrations in 2024. Many European automakers have introduced more affordable electric vehicles that are resonating with the European consumer. In fact, pure value electric vehicle sales increased by 42% in The U. K. In the quarter, by 39% in Germany, by 72% in Italy, and by 59% in Spain.

Several Chinese EV OEMs have EV plants that are expected to start output in the next six to twelve months, such as VYDs plant in Hungary, that could add additional levers of growth. In North America, EV sales grew by 16% as EV subsidies remain in place for the time being, and similar to Europe, more affordable offerings are introduced. Energy storage is another key growth driver, with sales estimated to have increased by 120% year on year during the quarter. Tesla reported energy storage, growth of 154% year on year. This growth was led by robust underlying demand, but also as a pre buy for customers given the expectation of tariffs.

Despite the imposition of tariffs, many leading industry forecasters still expect for energy storage sales to grow by more than 50% globally in 2025. We are now in the twenty nine months since the peak in prices in November 2022. Prices have now declined by approximately 88% since that peak. In addition, roughly 12% of global supply has been curtailed in the last few quarters. We believe we are at a cyclical low in the sector, and prices should recover over time since current price levels are not supportive of reinvestment while demand is still growing by 25% to 30% per year.

For context, the last lithium downturn lasted for thirty five months, with prices declining by 77% as reported by fast markets. Regardless of market conditions, LRC is well positioned to thrive in any environment. Despite the low prices, many of our assets with the largest contribution to net asset value are proceeding to production and expansions. This should set us up for free cash flow growth even if current prices persist. In addition, our strong debt free balance sheet positions us well to take advantage of the current low price environment.

We are actively pursuing a robust pipeline of opportunities that we believe will lead to compelling accretive acquisitions for our shareholders. Furthermore, we will continue to look at opportunities to buy back shares given the very attractive valuation in the market. Including we are very well positioned as we look ahead for the following reasons: the demand for lithium continues to grow by 25% to 30% per year our marquee assets are progressing to production and will soon deliver substantial revenue to LRC The industry is start to capital, which is creating unique opportunities for LRC given our replenished balance sheet. And our unique position in the industry, a leading royalty company with low overhead, sets us up for substantial operating leverage to a lithium pricing recovery. With With that, I will now pass it back to Eunita for Q and A.

Anita Zaganori, Vice President of Investor Relations, Lithium Royalty Corp: Thank you, Ernie. Operator, we’re now ready to answer questions. Can we please open up the lines for Q and A?

Conference Operator: Thank You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, Our first question comes from Mr. Patrick Cunningham of Citi. Go ahead.

Patrick Cunningham, Analyst, Citi: Hi. Good morning, Ernie and Dominique. How are you assessing potential near term, you know, lithium demand impact on EVs and ESS ESS in the tariff environment now? I mean, you mentioned the pre buy impact in 1Q. I mean, sense that things move significantly lower from here with direct impact of tariffs on China as well as potential recession risk?

Ernie Ortiz, President and CEO, Lithium Royalty Corp: Sure. Thanks, Patrick. So, there is a heightened, level of uncertainty, with the, tariff situation and the potential impact on global growth. So it is still too early to determine the direct impacts. I would say that the direct impact to lithium is minimal on a direct basis.

There’s not many EVs that are traded between China and The U. S. It’s a lot of local demand. For right now, the main sources of EV growth are China and Europe, which so far are still heading in the right direction. In China, they just hosted the Shanghai Auto Show, and the majority of the new models were were EVs.

There hasn’t been any kind of slowdown in EV sales in the last, few weeks from kind of the the public commentary. So for right now, it’s probably too early to tell, but so far, EVs seem to be still well positioned. On the energy storage side, I think that is something that we’re, monitoring more closely because the majority of the batteries that go into North America, in particular, The United States, do come from from Europe. 1 thing that we’ll mention is, from channel checks is that despite the tariffs, the cost for energy storage batteries being imported into The United States are still, very competitive. So potentially, it could slow down the market, but, in the context of a a very fast, growth rate to begin with.

So, I think it’s it’s it’s that’s certainly worth monitoring. There’s a lot of uncertainty so far. The impact seem, manageable, and and the industry is still likely to grow, by double digits. But, of course, we’ll monitor, the the situation and and adjust as needed.

Patrick Cunningham, Analyst, Citi: Very helpful. And and given that, you know, domestic manufacturing critical minerals in The US seems to be a clear area of focus, you know, are there any portfolio companies, you know, either in The US or or those with potential trade agreements down the road, which may stand the benefit? Does this region, you know, look any more attractive from a royalty acquisition standpoint?

Ernie Ortiz, President and CEO, Lithium Royalty Corp: So we do have assets, in The US, mostly in the in the Southwest, Nevada and Arizona. So we are I guess, have some positions there that that could be advantaged and improved with the overall faster permitting regimes and some reports about potentially the US government taking stakes in mining companies. So we welcome any initiatives to help promote a domestic supply chain within The United States. To your other parts of the question, we think Argentina could also be very well positioned in the event that there’s any free trade agreements or additional partnerships with The US. We’ve also seen the United States import export bank, Exxon, take a public kind of interest in some of the Brazilian, ore bodies.

So I think I think for us, the key, hallmarks of an investment haven’t changed. It’s still investing in high grade, low cost assets in a stable geographies. And to the extent that there’s a potential boost from any geopolitical security of supply will, of course, benefit, but the the the key emphasis for us is making sure they’re good assets that can that can generate substantial cash flow to us.

Patrick Cunningham, Analyst, Citi: Great. Thank you, Roni.

Conference Operator: Thank you. Another question comes from Mr. Mohamed Sidibe of National Bank Financial. Please go ahead.

Mohamed Sidibe, Analyst, National Bank Financial: Good morning, Arne and team, and thanks for taking my questions. My first one was just on the timing of revenue for Mariana. So I think you mentioned that we can expect that in the second half of twenty twenty five. So as it relates to Tresco Bratas given that’s coming in, in Q3 twenty twenty five, how confident are you that maybe in Q4 we could see that? Or is it more of a 2026 event, given if I apply the same timing on those?

Thank you.

Ernie Ortiz, President and CEO, Lithium Royalty Corp: Sure. Thanks, Mohammed. So, I think it’s it’s tough to say yet because there’s we have all we have to have visibility. I think the environment continues to shift just given, kind of all the geopolitical and, there’s always delays to projects. So, the public guidance from SeaGen, as you mentioned, is the third quarter production.

I think it depends kind of what, part of third quarter that it begins, whether it’s early or late third quarter, where where that that probably determines whether there could be some shipments, in 2025. So it is something that we’re monitoring. We we do monitor kind of the the export statistics out of Argentina. We’ll continue to do so for Mariana and for the third quarter. And I would say, right now, it’s probably too early to to say, but we do acknowledge that, there is a natural lag between production and shipments, that could move cash flow to, early twenty six.

Although, it’ll depend on kind of what stage of the third quarter that they they they turn on the plant.

Mohamed Sidibe, Analyst, National Bank Financial: Okay. Thanks a lot for for that. And and just secondly, I guess, on your capital allocation, I know that you’re going through your substantive issuer bid right now, which expires, I believe, today. But I just wanted to think about the SIB. Could you provide us with any color on how that’s going?

And secondly, in the post expiration of the SIB, are you planning to be active on your share buyback? I think that will come back and be active again. But just any color on the buybacks and that you have for 2025.

Ernie Ortiz, President and CEO, Lithium Royalty Corp: Yeah. So, yeah, it it it does expire today as far as our current SIB. And as far as some of continued share repurchases or capital allocation, I think it really depends on kind of the results that we get depending on those results, and we’ll announce it to to the market at the appropriate time. We’ll meet as a board and decide on kind of next steps. What I would say generally is that we do think our our share price is, extremely undervalued and is is a good, investment.

At the same time, we always have to judge that versus the opportunity set, which is, increasing as far as pipeline and kind of overall terms and improved valuation. So it’s it’s always something that we’re looking at and comparing it internally, but, I think it really it will it’s gonna depend on, the results tonight, and and, we’ll we’ll we’ll announce it to the market and and provide updates as, as as as we diagnose and analyze those.

Mohamed Sidibe, Analyst, National Bank Financial: Thanks for taking my questions.

Conference Operator: Thank you. At this time, we have no further questions. I’ll turn the call back over to you, Yoneda, for closing remarks.

Anita Zaganori, Vice President of Investor Relations, Lithium Royalty Corp: Thank you to everyone who joined us today. This concludes our first quarter twenty twenty five results conference call and webcast. We expect to release our second quarter twenty twenty five results after market close on 08/05/2025, with a conference call held on August 6 at nine a. M. Eastern Standard.

Thank you for your interest in Lithium Royalty Corp. Goodbye.

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

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