LSC Lithium Reports Second Quarter 2017 Financial Results

 

(All dollar amounts are in U.S. dollars unless otherwise indicated. This release should be read in conjunction with the Company's unaudited condensed interim consolidated Financial Statements for the quarter ended February 28, 2017 and the Management's Discussion and Analysis found on the Company's website or on SEDAR.)

TORONTO, April 28, 2017 /CNW/ - LSC Lithium Corporation (the "Company" or "LSC") (TSXV: LSC) today reported its second quarter ended February 28, 2017 financial results.

FIRST QUARTER FINANCIAL AND OPERATING HIGHLIGHTS

The following tables summarize the financial results for the quarter ended February 28, 2017.

Financial

• Net loss of $1.8 million and a total comprehensive loss of $1.9 million for the quarter.
• Cash used in operations of $0.5 million.
• As LSC is an exploration stage company, there was no revenue in either the current or comparative periods.

The significant components of the expenses incurred during the quarter ended February 28, 2017 were as follows:

• Management fees of $0.4 million, which consisted of payments made to certain key management personnel;
• Employee benefits, including salaries and wages, of $0.3 million;
• Travel of $0.1 million, which consisted of transportation, accommodation, and meals;
• Professional fees of $0.8 million, which consisted of audit, legal, and tax fees;
• Regulatory and related fees of $0.1 million which consisted of transfer agent, listing, and filing fees;
• Loss on the revaluation of warrant liability of $0.2 million; and
• Foreign exchange gain of $0.3 million on cash and cash equivalents held in Canadian dollars.

Operational

• LSC raised gross proceeds of $5.5 million by way of a private placement of units and completed its financing of subscription receipts for aggregate gross proceeds of C$40.0 million. The financing was completed in three tranches.
• LSC entered into a strategic relationship with Enirgi Group Corporation ("Enirgi Group") for the exploration and development of lithium projects in Argentina. LSC has exclusive access to Enirgi Group's DXP Technology in Argentina with the objective of fast-tracking its portfolio of prospective lithium rich salars into production.
• LSC announced the closing of a qualifying transaction involving the reverse take-over by way of amalgamation.

OUTLOOK

LSC continues to focus on exploration and development of our major development properties located in the provinces of Salta and Jujuy, Argentina. Specifically, LSC is currently focused on its exploration program on the salar de Pozuelos property in Salta province, Argentina (the "Pozuelos Property"). LSC previously announced its pending acquisition of the Property by way of the exercise of an option to acquire 100% of the issued and outstanding shares of LitheA Inc. ("LitheA") from BMC Global Limited ("BMC").The completion of the acquisition is subject to TSX Venture Exchange ("TSXV") approval.

LSC and Enirgi Group are strategically cooperating on lithium development in Argentina pursuant to a Relationship Agreement (defined below) whereby, among other things, the parties will examine the most economic solution to process LSC's brines which may include supplying LSC's brines for processing at Enirgi Group's planned future regional processing facility at the Salar del Rinc??n in Salta, Argentina. LSC expects to be able to begin shipping brine from the Property for testing at Enirgi Group's demonstration plant on the Salar del Rinc??n, following its anticipated commissioning, in the second half of this year. LSC's major development properties are located in close proximity to Enirgi Group's Salar del Rinc??n Project. The Pozuelos property is located approximately 80km from the Salar del Rinc??n.

DISCUSSION OF OPERATIONS

The following is a discussion of operations for the quarter ended February 28, 2017.

Pre-RTO Capital Raising

On December 7 and December 12, 2016, the Company completed a private placement of 5,623,327 units at a price of C$1.30 each for gross proceeds of $5.5 million, each unit consisting of one common share of LSC and one common share purchase warrant of LSC. Each common share purchase warrant of LSC is exercisable for one common share of LSC at an exercise price of C$1.50 per share for a period ending 18 months from the closing date.

On February 10, 2017 Dajin Corp. exercised 384,615 share purchase warrants issued by LSC Lithium at an exercise price of C$1.30 each for a total consideration of C$0.5 million.

Strategic Relationship with Enirgi Group Corporation

On December 12, 2016 Lithium S Corporation S.A. ("Lithium Argentina"), a wholly owned subsidiary of LSC, and ADY Resources Limited ("ADY", a wholly-owned subsidiary of Enirgi Group) entered into a purchase agreement (the "ADY Tenement Purchase Agreement") pursuant to which on December 22, 2016 ADY sold, and Lithium Argentina purchased, ADY's 100% undivided interest in certain mineral rights in the Provinces of Jujuy and Salta, Argentina including interests in Salar Pastos Grandes, Salar Rio Grande, Arizaro, Pocitos, Cauchari and Salar Salinas Grande (the "ADY Tenements") in consideration for 4,504,130 common shares of LSC Lithium Subco Inc. ("LSC Lithium"), a wholly owned subsiary of LSC, with a fair value of C$1.30 per common share for a total value of $4.3 million.

On December 12, 2016 Lithium Argentina and ADY entered into a tenement purchase pursuant to which Lithium Argentina agreed to purchase ADY's interest in certain mineral rights located in the Province of Jujuy in consideration for 80,714 common shares of LSC Lithium with a fair value of C$1.30 per common share for a total value of $0.1 million.

On December 12, 2016, the Company entered into a memorandum of understanding with Enirgi Group respecting their future lithium processing and marketing arrangements which will be formalized at a later date pursuant to definitive documentation.

On December 12, 2016, the Company entered into a side letter agreement with Enirgi Group ("Side Letter Agreement"). Under the terms of the Side Letter Agreement, subject to approval of the TSXV, Enirgi will have the one-time right, to be exercised at the time the LSC exercises its proportionate shareholding interest option to purchase all of the issued shares of LitheA, to subscribe for such number of common shares of LSC at a price equal to C$1.30 per common share of LSC such that, after such subscription, its pro rata interest in LSC shall not exceed 20%.

On December 12, 2016 Lithium Argentina and ADY Resources Limited, Sucursal Argentina ("ADY Argentina") entered into a mining management support agreement ("Mining Management Support Agreement") on December 12, 2016. Under the terms of the Mining Management Support Agreement, ADY Argentina may provide management support services to Lithium Argentina in Argentina relating to the management of day to day operations of Lithium Argentina, as may be mutually agreed upon by Lithium Argentina and ADY Argentina from time to time and to the extent that ADY Argentina can reasonably provide the services.

On December 22, 2016 LSC Lithium entered into a relationship agreement ("Relationship Agreement") with Enirgi Group on December 22, 2016. Under the Relationship Agreement, Enirgi Group will be entitled to nominate that number of individuals equal to fifty percent (50%) of the total number of directors of LSC for appointment or election as a director of LSC. Enirgi Group shall also be entitled to nominate the CEO of LSC for ultimate review and approval by the board of directors of LSC. The Relationship Agreement provides for strategic cooperation between Enirgi Group and LSC.

On December 22, 2016, each of Angstrom Capital Ltd., Iso Capital Ltd., Modulus Capital Ltd., Regent Mercantile Holdings Limited, Juan Carlos Grosso, Analogue Capital Ltd., David Dattels, Graham Dattels, Smoke Rise Holdings Limited, Tudorcroft Investments Inc., Enirgi Group and LSC entered into a voting and support agreement on December 22, 2016 ("Voting and Support Agreement").

On December 22, 2016, LSC Lithium and ADY entered into a mining data purchase agreement concurrently with the transfer of the ADY Tenements pursuant to the ADY Tenement Purchase Agreement. Under the terms of the mining data purchase agreement, ADY transferred to LSC Lithium its records, files, reports, data and documents directly relating to the mining data and all work done thereon (which may include maps, drill logs and other drilling data, core tests, pulps, reports, surveys, assays, analyses, production reports, operations, technical, and other material information developed by or on behalf of ADY or, where it is available, a previous holder of the ADY Tenements).LSC Lithium issued to ADY 10,822,181 common shares of LSC Lithium as consideration for the mining data with a fair value of C$1.30 per common share for a total value of $10.4 million.

On December 22, 2016, LSC and Enirgi Group entered into a management support agreement (the "Head Office Management Support Agreement"). Pursuant to the terms of the Head Office Management Support Agreement, Enirgi Group and LSC agreed to share the premises located at 3001-1 Adelaide Street East, Toronto, Ontario, Canada M5C 2V9 as well as certain employee resources on a cost plus ten percent (10%) basis. Under the Head Office Management Support Agreement, Enirgi Group will provide management support services to LSC, as may be mutually agreed upon by LSC and Enirgi Group from time to time and to the extent that Enirgi Group can reasonably provide such services.

Other Property Acquisitions

Pursuant to an agreement entered into on September 15, 2016, as amended on December 21, 2016, Lithium S acquired the mining rights known as Maria Clara and Blas in the Province of Jujuy, Argentina from Mario Angel Blas Moncholi for a total consideration of $0.3 million.

Qualifying Transaction Involving the Reverse Take-Over by Way of Amalgamation

On February 22, 2017, LSC announced the closing of a qualifying transaction involving the acquisition of all the issued and outstanding common shares of LSC Lithium by way of the Amalgamation.Prior to the closing of the Amalgamation, LSC Lithium completed its financing of 30,769,231 subscription receipts (the "Subscription Receipts") at a price of C$1.30 each for aggregate gross proceeds of C$40.0 million. The financing was completed in three tranches. At the closing of the Amalgamation, the holders of the Subscription Receipts received 30,769,231 common shares of LSC. In connection with the Subscription Receipts agent commissions and finder's fees, an additional 1,545,450 warrants to purchase LSC common shares exercisable at a price of C$1.30 per share for a period of 12 months following the applicable closing were issued.

Pursuant to the Amalgamation, (i) each outstanding LSC Lithium common share was exchanged for LSC common shares on a one-for-one basis, and (ii) each outstanding LSC Lithium warrant was exchanged for LSC warrants on a one-for-one basis on the same terms and conditions as contained in the LSC Lithium warrants. In addition, the Relationship Agreement, Head Office Management Services Agreement, Side Letter Agreement and Voting and Support Agreement were assigned from LSC Lithium to LSC.

SUBSEQUENT EVENTS

The following is a discussion of significant transactions entered into subsequent to the quarter ended February 28, 2017.

Exercise of Option to Purchase LitheA

On March 15, 2017 the Company announced that it has delivered notice of exercise of its option to acquire 100% of the issued and outstanding share capital of LitheA from BMC. LitheA's principal asset is the Pozuelos Property located in the Province of Salta, Argentina.The consideration payable by the Company upon the exercise of the LitheA Option will be approximately $44.0 million, of which $38.5 million will be payable to BMC (in exchange for all of the outstanding shares of LitheA) and $5.5 million (plus interest) will be payable to a beneficial shareholder of BMC (in exchange for a $5.5 million promissory note issued by LitheA to such shareholder). The $38.5 million payment will be satisfied, as to $14.3 million plus interest at the rate of 24% per annum from November 14, 2016 by a cash payment and/or the assignment of all or part of the BMC Loan and as to the balance by the issuance of common shares of LSC Lithium (valued at $0.964 each). The payment of the $5.5 million (plus interest at the rate of 12% per annum from November 14, 2016) will be satisfied as to cash in the amount of any accrued and unpaid interest, and the balance either in cash and/or through the issuance of common shares of LSC Lithium (valued at $0.964 each) at the option of the lender.The Company expects to close the acquisition on or before June 29, 2017, subject to receipt of TSXV approval.

Concurrently, under the LitheA Put/Call Agreement, Enirgi Group elected to convert its $5.0 million loan principal into LSC Shares and the beneficial owner of BMC has agreed to convert $3.0 million of his loan principal into LSC shares, on closing of the acquisition of Lithea.

A fee of $500,000 is payable to an employee of LitheA for introducing the opportunity, upon the successful completion of the acquisition. The Company will seek to pay such fee in LSC shares, subject to regulatory approval.

Grid Note with LitheA

Pursuant to a secured promissory grid note (the "Note") entered into on December 22, 2016, LitheA has $600,000 outstanding under a loan facility from the Company. The loan has been primarily used by LitheA to advance due diligence and exploration work on the Pozuelos Property. On March 14, 2017, the LSC board of directors approved increasing the Note to $2.0 million.Any amounts outstanding under the Note at the closing of the acquisition of LitheA will become an inter-company debt of LSC.

Transaction with Orocobre Limited

On March 28, 2017, the Company entered into an agreement among LSC, its Argentine subsidiary, Orocobre, South American Salars SA ("SAS") and Borax Argentina SA ("BA") pursuant to which LSC will acquire all tenements and other mineral rights held by Orocobre, SAS and BA located in the Salinas Grandes Salar, in Salta and Jujuy provinces, Argentina, covering approximately 32,727 hectares.The purchase consideration includes:

• a cash payment of $4.0 million;
• issuance of three non-interest bearing promissory notes to Orocobre on behalf of SAS (individually a "Promissory Note" and collectively, the "Promissory Notes"), each in the amount of $1.0 million, the first one being due on the first anniversary of the closing date, the second one being due on the second anniversary of the closing date and the third one being due on the third anniversary of the closing date (and such third Promissory Note shall be subject to adjustment in accordance with the agreement);
• the granting of a 2% royalty on the brine concentrate produced from the Salinas Grandes tenements; and
• the transfer of LSC's Olaroz tenements to BA.

The closing is subject to the satisfaction of certain conditions precedent and is expected to occur in the fourth quarter of fiscal 2017.

Transaction with Advantage Lithium

On March 28, 2017 the Company entered into an agreement with Advantage Lithium pursuant to which LSC will be granted the right to purchase Advantage Lithium's option over the 1,471 hectare Stella Marys Project located in the Salinas Grandes Salar in Salta province, Argentina in return for a 2% royalty on the brine concentrate produced from the Company's Salinas Grandes tenements, payment of $0.7 million in cash and 256,520 shares in LSC.

The closing is subject to the satisfaction of certain conditions precedent and is currently expected to occur in the fourth quarter of 2017.

LIQUIDITY AND CAPITAL RESOURCES

The Company is in the process of assessing viable mineral properties, assets or businesses and therefore has no regular cash flow. To date, the Company has not earned significant revenues and is in the acquisition stage. The Financial Statements have been prepared on a going concern basis which assumes that the Company will be able to raise the capital required and discharge its liabilities in the normal course of business for the foreseeable future. Accordingly, the Financial Statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The continuing operations of the Company are dependent upon its ability to raise adequate financing to sustain such operations in future.

As at February 28, 2017, the Company had a working capital position of $24.1 million. The Company has sufficient capital resources to meet current financial obligations.Additional capital may be required in the longer term.The ability to raise additional finances may be impaired, or such financing may not be available on favorable terms, due to conditions beyond the control of the Company, such as continued uncertainty in the capital markets.

In particular, the Company will need to maintain sufficient working capital to meet its commitments to acquire LitheA and purchase the mining tenements from Orocobre and Advantage Lithium, as well as to meet its obligations under its exploration programs on its properties. The anticipated acquisition of LitheA in the third quarter is expected to have the most significant impact on LSC's working capital. Enirgi Group has agreed to convert its $5.0 million loan principal into LSC shares and the shareholder of BMC has agreed to convert $3.0 million of its $5.5 million loan principal into LSC shares. However, the exact allocation of the total purchase price for LitheA between cash and LSC shares will depend, in large part, on whether the other lenders elect to receive cash and/or LSC shares which will be determined no later than two weeks prior to the closing date. LSC's working capital may also be impacted depending on whether the finder's fee can be paid in LSC shares and whether Enirgi decides to exercise its top-up right to subscribe for more LSC shares.

SHARES ISSUED AND OUTSTANDING

As of the date hereof, the Company's shares, stock options and warrants to purchase the Company's shares issued and outstanding are as follows:

On February 22, 2017 a total of six million stock options were issued to employees and directors of the Company whereby one third of the options granted become exercisable at any time after the first anniversary date, one third at any time after the second anniversary date and the balance at any time after the third anniversary date. The options have an exercise price of C$1.30 for a term of five years.No other stock options are issued and outstanding.

CLARIFICATION REGARDING CERTAIN DISCLOSURE

As a result of a review by staff of the Ontario Securities Commission, we are issuing the following clarification with respect to our disclosure of potential future production rates of the Company contained in a presentation on the Company's website (the "Presentation").

LSC had included in the Presentation disclosure with respect to potential future production in lithium carbonate equivalent tonnes per annum on certain of its properties.This disclosure was intended to be conceptual in nature and readers were cautioned that such estimates were contingent on the occurrence of a number of factors.

As these potential future production estimates were not based on current resources and supported by a technical report, National Instrument 43-101 ("NI 43-101)" does not permit such disclosure.Accordingly, the Company has made the necessary amendments to the Presentation to ensure compliance with NI 43-101 requirements and has removed all references to potential future production from the Presentation.

MANAGEMENT'S DISCUSSION AND ANALYSIS AND CONSOLIDATED FINANCIAL STATEMENTS

LSC's unaudited condensed interim consolidated financial statements and MD&A for the three and six months ended February 28, 2017 will be filed today and will be available on SEDAR at www.sedar.com and on the Company's website at www.lsclithium.com.

ABOUT LSC LITHIUM CORPORATION:

LSC has amassed a large portfolio of tenements on prospective lithium rich salars in Northern Argentina. LSC's six major development plays are on the salars Pozuelos (pending completion of the acquisition), Pastos Grandes, Salinas Grandes (Salta), Salinas Grandes (Jujuy), Rio Grande and Jama, all of which are located in the "Lithium Triangle," an area at the intersection of Argentina, Bolivia and Chile where the world's most abundant lithium brine deposits are found. After completion of announced acquisitions, LSC will hold a land package portfolio totaling approximately 300,000 hectares, which represents extensive lithium prospective tenement holdings in Argentina.

Forward-Looking Statements

Certain statements in this news release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this news release, such statements use such words as "will", "may", "could", "intends", "potential", "plans", "believes", "expects", "projects", "estimates", "anticipates", "continue", "potential", "predicts" or "should" and other similar terminology. These statements reflect current expectations regarding future events and operating performance and speak only as of the date of this news release.

Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the risk factors set forth under "Risk Factors" in the MD&A .Although the forward-looking statements contained in this news release are based upon what management of the Company believes are reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward looking statements include, among other things, statements relating to: uncertainties relating to receiving mining, exploration, environmental and other permits or approvals in Argentina; proposed exploration activities and costs for the mineral exploration projects; the continued growth of the lithium industry; anticipated results and time frames of exploration activities and work programs; ability to maintain sufficient working capital; ability to classify mineral resources in conformance with NI 43-101; availability of additional financing and the Company's ability to obtain additional financing on satisfactory terms; ability to retain key executive and senior management; the exercise of options to acquire interests in mineral projects, including the exercise of the LitheA Option; expected closing of the transactions with Advantage Lithium; Orocobre and LitheA; future performance and successful application, use and licensing of Enirgi's DXP Technology; the timing of testing brines at Enirgi's demonstration plant at the Salar del Rinc??n; the ability to achieve production at any of the Company's mineral exploration properties; the timing and ability of Enirgi to construct a regional processing facility at Salar del Rincon; and the ongoing strategic relationship with Enirgi.

In particular, the forward-looking statements assume factors that could cause actual events, performance or results to differ materially from those set forth in the forward-looking statements, which include, but are not limited to: risks around final commissioning of Enirgi Group's demonstration plant; the risksaround timing, permitting, funding and construction of a regional processing facility at the Salar del Rinc??n by Enirgi Group and the ability of LSC to fast-track production from its own properties by supplying brine to such a facility; risks relating to proposed acquisitions including TSXV approvals; volatility in the market price for minerals; uncertainty of whether there will ever be production at the Company's mineral exploration properties; geological, technical, drilling or processing problems; liabilities and permitting and development risks, including environmental liabilities and risks, inherent in mineral extraction operations; fluctuations in currency exchange and interest rates; incorrect assessments of the value of acquisitions; unanticipated results of exploration activities; competition for, amongst other things, capital, undeveloped lands and skilled personnel; lack of availability of additional financing; unpredictable weather conditions; the requirement for, and the Company's ability to obtain future funding on favourable terms or at all, to fund exploration, development and operations; the economy generally and stock market volatility; receipt of and timeliness of government or regulatory approvals; and other risks detailed from time to time in the Company's ongoing quarterly and annual filings with applicable securities regulators, and those which are discussed under the heading "Risk Factors" in the MD&A.

The Company's actual results could differ materially from those anticipated in these forward-looking statements and information as a result of both known and unknown risks, including the risk factors set forth under "Risk Factors" in the MD&A. The factors set forth under the heading "Risk Factors" in the MD&A should not be construed as exhaustive. Readers should not place undue reliance on forward-looking statements as the plans, intentions or expectations upon which they are based might not occur. Readers are cautioned that the foregoing lists of factors are not exhaustive. Each of the forward-looking statements contained in this news release is expressly qualified by this cautionary statement. These forward-looking statements are made as of the date of this news release and are expressly qualified in their entirety by this cautionary statement. Subject to applicable securities laws, the Company does not assume any obligation to update or revise them to reflect new events or circumstances.

Neither the TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.The TSX Venture Exchange Inc. has neither approved nor disapproved the contents of this news release.

SOURCELSC Lithium Corporation

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