“Update on ILC following 2018 full year results”
Here is my Chairman’s Statement released with our results on April 30, 2019. It reflects the Board’s view of our current strategy, and is worth a read to know what ILC is currently about.
INTERNATIONAL LITHIUM CORP. CHAIRMAN’S REPORT FOR YEAR ENDED DECEMBER 31, 2018
2018 was a year of considerable progress for International Lithium Corp. (the “Company” or “ILC”), and this has continued into 2019. When I became Chairman and CEO in March 2018, my priorities and those of the Board were to stabilize our finances, rebuild trust with our partners, take a strategic review of our mineral holdings, and uncouple ourselves from the former parent company TNR Gold Corp. Significant progress was made in 2018 and early 2019 with all these objectives.
Our biggest concern in March 2018 was stabilizing our finances given the expected CAD $3.7m of payments due for the Mariana project in 2018, a creditor backlog, and convertibles to repay as well as our overheads. These issues were all successfully dealt with, and we have now raised around CAD $5.0m in equity or convertible funding over the last year despite late 2018 being what has been described as the toughest funding climate for mining companies in many years, if not for a generation. This is 50% more than the company has raised in any previous year, including on IPO.
The overall financial dynamic of the Company is that it has interests in some potentially very valuable lithium producing properties, both hard rock (in Canada and Ireland) and brine (in Argentina). The properties we regard as the most strategic are Raleigh Lake in Ontario, Canada and Mariana in Argentina. These properties are not yet in production and therefore are not yet revenue earning, so consequently the company will continue to need to raise money until either a property goes into production, or until one or more of the properties are sold. It is consequently important that we stay ahead of the funding curve. To that end we are currently fundraising for a further CAD $1.0m of traditional equity finance, having closed CAD $1.88m of equity finance in February to early April 2019, and also having extended the maturity date of CAD $2.34m of our convertibles by a year to June 30, 2020.
On the mining front, we made progress with four of our five mining properties, and we ended the year with a clear strategy. A brief summary is as follows:
- Mariana, Argentina – we kept up with our committed budget contributions in 2018. We had a share of 17.246% in the project with a back in right of 10%, taking us up to a total of 27.246%. The project ended up well under its budget of USD $17m, and we paid a total of CAD $1.71m. During the year a Preliminary Economic Assessment was produced, showing an estimated value for the project of USD $192m, based on assumptions of a mine life of 25 years, and annual production of 10,000 tonnes of Lithium Carbonate equivalent and 80,000 tonnes equivalent of Sulphate of Potash. Clearly this was the consultant’s valuation rather than ours, and is subject to numerous assumptions, but it is an encouraging number. Highlighting the risks however, the financing requirement for the project was estimated at USD $243m, with our pro rata share 17.246% or 27.246% of that number.For the first 6 months of 2019, in which Ganfeng decided to propose a budget of USD $10m, we decided to take a break from contributions so that we could focus on the Raleigh Lake property. Based on calls to date our share in Mariana by end April 2019 will be 15.392%; should further calls be made in May and June 2019 equal to the whole of the budget, our not contributing to Mariana will mean our share reducing to 13.607%, with our back in right taking us back up to a total of 23.607%.
- Raleigh Lake, Ontario – During 2018 we reacquired all our rights to this project without any encumbrances, and we proceeded to increase the size of our claim by a factor of over 3. We now have 3,027 hectares of claims there. We have looked at historical drilling results when a previous operator looking for tantalum found a lot of lithium and some rubidium and caesium, and we have also talked to geologists who were involved in the project at an earlier time. This all makes us very hopeful of the potential of this site, and we will be making aerial drone surveys and drilling of 20 or more holes there in the next few months our top priority.
- Mavis Lake, Ontario – As part of a deal with our partner Pioneer Resources, Pioneer acquired 51% of Mavis Lake under an earn-in. We are not expecting a lot of activity there in 2019, as both we and Pioneer are focused on other projects.
- Avalonia, Ireland – Our partner Ganfeng continued to finance a drilling program at Avalonia, and we made an update to the market on April 12, 2019. We will not need to contribute to the financing of this project for few years.
- Forgan Lake, Ontario – we concluded a deal in September 2018 with Ultra Lithium whereby, subject to contracted progress payments and a minimum expenditure of CAD $500,000, they will acquire 100% of the property over 2 years, with our receiving a royalty of 1.5% on this and a neighbouring property.
On the partner front, we restored our good relations with both Ganfeng Lithium and with Pioneer Resources. Both are shareholders in our Company and we are also a small shareholder in Pioneer Resources. We were able to conclude a transaction for the Mavis Lake and Raleigh Lake properties with Pioneer in the summer to mutual benefit. As Ganfeng’s minority partner on both Mariana and Avalonia, we are to a large extent dependent on their intentions for these projects.
Relationship with former parent TNR Gold Corp. (“TNR”)
We have now almost entirely uncoupled our relationship with TNR. We started 2018 with TNR owning 8.2m shares in the Company and CAD $700,000 of a convertible issued by the Company, a position reduced from 100% pre-IPO and around 20% in early 2016 when TNR owned 18m shares in the Company. In addition, at the beginning of 2018 there were four common directors between ILC and TNR, a position no longer appropriate given TNR’s reduced shareholding in the Company. During the year we reduced the number of common directors to zero through myself resigning from the board of TNR in January 2018, Kirill Klip resigning from the board of the Company in November 2018, and Maurice Brooks and Ross Thompson not standing for re-election to the board of TNR at its November 2018 AGM; this has continued in 2019 with ILC director Anthony Kovacs resigning his management role at TNR in April 2019. In the second half of 2018 we moved to new offices, leaving TNR at what had previously been our office space shared with them. Additionally, by the end of 2018, TNR had sold its holding in the Company down to 2.7m shares, selling 5.5m shares during the year. Following our repayment of the CAD $700,000 convertible to TNR in February 2019, and our own issue of shares and convertible debentures to enable that repayment, TNR’s shareholding or share interest in the Company’s shares is now under 2% of the Company. We are grateful to TNR for its support over the years, and more recently we were also pleased to have helped TNR in that TNR’s sale of ILC shares and recently ILC’s convertible debenture repayment to TNR has provided most of TNR’s liquidity in the last two years. However, the Board and our main shareholders are also very pleased that this significant source of downward pressure on our share price, and drain on our own liquidity, has now largely been removed.
In December we welcomed Anthony Kovacs, our COO, to the board. This was well deserved after several years of valuable contribution to the Company, and his major contribution to the decisions on our properties in 2018. We also welcomed Nick Davies to our board as a Non-executive Director.
Outlook and our plans for 2019
There are many international uncertainties at a macroeconomic level at present including trade wars, European parliamentary elections, U.S. Government shutdown and Brexit. These could all create stock market uncertainty and make funding harder. The asset allocation of risk capital away from mining to cannabis and blockchain technologies will presumably reverse itself at some stage, but this may take some time. We remain convinced however that, with the relentless growth in demand for electric vehicles and electric battery storage, we are set for years if not decades of strong compound growth in demand for batteries. Lithium is a key component of battery technologies, and the demand for batteries will be good for the lithium industry as a whole. Lithium has been described as “the new oil” and we believe the Company is in the right place at the right time.
One of the most important decisions a Board has to make is about the allocation of capital, and at this point we feel that if we are successful in proving the scale of the Raleigh Lake deposit, the investment in that project is likely to bring a bigger gain to shareholder value than investment in any of our other projects. Our key priority for the next few months, and also the first use of new funds as well as working capital, is to conduct enough drilling and magnetic drone survey work at our Raleigh Lake lithium deposit in Ontario, Canada to validate the size of this deposit. If this drilling is successful and delivers on what we are looking for, then our corporate story will be very much stronger and of course the hope is that this will allow the Company to benefit from a significant re-rating. We continue to have confidence in the Mariana project following a successful preliminary economic assessment (PEA) in December 2018. Our partner Ganfeng Lithium has in April 2019 announced publicly that the pre-feasibility and feasibility study of the Mariana Project are expected to complete in 2019, and we will be liaising closely with them on the detail of this over the next few months. Following the results from Raleigh Lake, we will then map out our strategic options for Mariana, Raleigh Lake and other projects, hopefully from a position of strength.
It is our wish to broaden the Company’s investor base and to obtain institutional backing that will allow the Company to break out to the next level.
I would like to thank all our staff for their contribution during the year as well as our advisors, and our shareholders for their support.
April 30, 2019
“Turning Strategy into Reality”
16 July 2018
I recently completed my first 100 days in the job at ILC. Since I became CEO we have raised almost CAD$3m of finance for ILC, almost as much as the firm raised on its IPO in 2011. We have achieved for now my short term goal of getting the company ahead of the funding curve. But it is only the first step.
For some time to come ILC, as a junior mining company, will need to continue to raise equity to keep up with its project financing needs as well as normal operating expenditure. The lithium industry is in an interesting period with almost every company either needing to raise finance or interested in raising money from non core projects to reinvest in its core projects. That gives rise to interesting opportunities, and emphasizes the need to be well funded so that ILC can make its decisions based on good economics rather than on cash flow management. So I am going to be busy with meeting investors in multiple countries, especially in North America and Europe.
I had a very interesting day last week looking at our Irish joint venture’s drilling project in Moylisha, part of the Avalonia concession. The team are doing an excellent job, trying to find seams of pegmatite with spodumene. A fascinating geology lesson I received is that this part of Ireland was once joined up with North America 400 million years ago before the Atlantic Ocean opened up, and that consequently the geology is very similar to that in parts of North Carolina. This is hopefully a promising comparison !
We will be moving to new better offices in Vancouver shortly, and this is another step forward to rebuilding a successful company.
30 March 2018
I accepted the role of Chairman and CEO of ILC on 14 March 2018 at a challenging time. The company under its previous leadership had not taken the funding actions required to fund a significant stake in a major project, let alone in future years several projects. As a result we were behind with our payables on almost every front. The asset backing of the company was great but our liquidity was not. Too much time had been spent on the company’s social media presence, and too little time on some of the basics, the most obvious omission being staying ahead of our funding needs.
We have some wonderful mining assets, Mariana in Argentina owned 17.24% by ILC and 82.76% by Ganfeng Lithium being the most important one. Moreover that stake can be increased to 27.24% in the future at our option on paying a share of project costs.
A company that is in development mode is by definition in fundraising mode, and this will be our priority for the next few months. Having stabilized the finances, we need to strengthen them to be well ahead of our funding needs. We will also improve our infrastructure at the same time. Without sound finances, a good mission statement or corporate strategy is a dream, and it is my and the board’s wish to turn more of the strategy into reality.
Companies have different stages, and a lot has been done by those who have built the company to where it is now since before it went public in 2011. This includes on founding Gary Schellenberg, Executive Co-Chairman and CEO from inception until January 2017, Mike Sieb, President in the early days, Jerry Bella, CFO until January 2017 and Kirill Klip. Kirill was initially Non-Executive Co-Chairman, then also President from March 2012, and then Chairman, CEO and President from January 2017 to March 2018. Of course several others worked hard alongside all of them including our COO Anthony Kovacs. We are grateful to all of them, and it is important to recognise all their achievements and contributions. Those in the team involved in identifying the major lithium assets also deserve special recognition, as do those creating our key partnerships with Ganfeng Lithium and Pioneer Resources. The assets, the partnerships and the people are the key assets of the company.
Every well run company is a bit of an orchestra. Just as an orchestra with only pianists would be somewhat deficient, so equally a company like ILC with only geologists or only financial people would not be optimal. The skills that I bring to the job, other than public company and commercial skills, will include being rigorous about financial analysis of projects and contingent cashflows, and experience of capital markets. Great geologists for identifying projects, and then great financial analysis around those projects and funding of them are, in my view, a good combination which is likely to lead to success in this industry.
I do believe the company can have a very exciting and successful future which is why I have agreed to take on the current challenges having invested a lot of my own money into the company. My priority now is to find others who believe in the goals we have set and who share my personal view of the potential opportunity in the investment.
For further information concerning this news release please contact +1 604-449-6520.
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Cautionary Statement Regarding Forward-Looking Information
Except for statements of historical fact, this news release contains certain “forward-looking information” within the meaning of applicable securities law. Forward-looking information or forward-looking statements in this news release include: the timing and anticipated results of environmental impact studies and pump tests, timing of preliminary economic studies on the Mariana project, the expectation of feasibility studies, lithium recoveries, modeling of capital and operating costs, results of studies utilizing membrane technology, and continued agreement between the Company and Jiangxi Ganfeng Lithium Co. Ltd. regarding the Company’s percentage interest in the Mariana project. Such forward-looking information is based on a number of assumptions and subject to a variety of risks and uncertainties, including but not limited to those discussed in the sections entitled “Risks” and “Forward-Looking Statements” in the interim and annual Management’s Discussion and Analysis which are available at www.sedar.com. While management believes that the assumptions made are reasonable, there can be no assurance that forward-looking statements will prove to be accurate. Should one or more of the risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking information. Forward-looking information herein, and all subsequent written and oral forward-looking information are based on expectations, estimates and opinions of management on the dates they are made that, while considered reasonable by the Company as of the time of such statements, are subject to significant business, economic and competitive uncertainties and contingencies. These estimates and assumptions may prove to be incorrect and are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company assumes no obligation to update forward-looking information should circumstances or management’s estimates or opinions change.