Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
This Management Discussion and Analysis (“MD&A”) of Lithium Americas Corp. (“Lithium Americas”, the “Company”, or “LAC”), prepared as of November 12, 2021, should be read in conjunction with the Company’s unaudited condensed consolidated interim financial statements and the notes thereto for the nine months ended September 30, 2021 (“Q3 2021 financial statements”), and the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 (“2020 annual financial statements”). Refer to Notes 2 and 3 of the Q3 2021 financial statements and Notes 2 and 3 of the 2020 annual financial statements for disclosure of the Company’s significant accounting policies. All amounts are expressed in US dollars, unless otherwise stated. References to CDN$ are to Canadian dollars. 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.
Lithium Americas Corp. is a Canadian-based resource company focused on the advancement of two significant lithium projects: the Caucharí-Olaroz project (“Caucharí-Olaroz”), located in Jujuy Province of Argentina, and the Thacker Pass project (“Thacker Pass”), located in north-western Nevada, USA. Caucharí-Olaroz is a lithium brine project and is owned by a legal entity in Argentina, Minera Exar S.A. (“Minera Exar”). Thacker Pass is a sedimentary-based lithium property located in the McDermitt Caldera in Humboldt County, Nevada, and is wholly owned by the Company’s subsidiary, Lithium Nevada Corp. (“Lithium Nevada”).
The Company’s head office and principal address is Suite 300, 900 West Hastings Street, Vancouver, British Columbia, Canada, V6C 1E5. The Company trades in Canada on the Toronto Stock Exchange (“TSX”) and in the United States on the New York Stock Exchange (“NYSE”) under the symbol “LAC”. The Company operates in the United States through its wholly owned subsidiary, Lithium Nevada. In Argentina and the Netherlands, the Company operates through equity investees Minera Exar and Exar Capital B.V. respectively, which are governed by a shareholders’ agreement between the Company and Ganfeng Lithium Co. Ltd. (“Ganfeng”) (together the “Caucharí Partners”) that provides Ganfeng with a 51% and the Company with a 49% interest. The Caucharí Partners collectively own 91.5% of Minera Exar (Caucharí-Olaroz) and 100% of Exar Capital B.V. (a Netherlands entity that provides funding to Minera Exar). Additional information relating to the Company, including the Company’s Annual Information Form (“AIF”), is available on SEDAR at www.sedar.com.
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
Caucharí-Olaroz
| • | Construction activities at Caucharí-Olaroz continue to advance, targeting first production by mid-2022 on the initial 40,000 tonnes per annum (“tpa”) lithium carbonate equivalent (“LCE”) operation. |
| • | As of September 30, 2021, $519 million has been spent or 81% of the $641 million budget, with the majority of remaining budget committed. |
| • | Over 1,200 workers are on site, with over 97% of the total workforce having received at least their first COVID-19 vaccine dose and over 60% have received two doses. |
| • | In early October, commissioning of the lime plant started to lime concentrated brine to support production ramp up. The project has sufficient brine inventory to support production ramp up. |
| • | Development planning for a second stage expansion of at least 20,000 tpa LCE continues to advance. |
Thacker Pass
| • | Phase 1 of the Feasibility Study was increased to target 40,000 tpa lithium carbonate (from 30,000-35,000 tpa). A potential Phase 2 expansion scenario to target total capacity of 80,000 tpa is being incorporated. |
| • | Updated the Measured and Indicated (“M&I”) Resource estimate to 13.7 million tonnes (“Mt”) LCE at 2,231 parts per million lithium (“ppm Li”). |
| • | Early-works construction expected to commence in H1 2022, includes site access, site preparation, water line and additional infrastructure to condense and de-risk the overall construction schedule. |
| • | Discussions continue with potential strategic partners and customers. |
| • | An integrated pilot plant to support increased scale and ongoing optimization work and to provide product samples for potential customers is expected to be operational in the first half of 2022. |
Corporate
| • | As at September 30, 2021, the Company had $134 million in available credit, with $146 million drawn from the $205 million senior credit facility and $25 million drawn from its $100 million unsecured, limited recourse, subordinated loan facility. This available credit is expected to fully fund the Company’s share of the remaining capital expenditure at Cauchari-Olaroz. |
| • | In July, the Company completed a strategic investment in Arena Minerals Inc. (TSX-V: AN) of $5 million for an approximate 12.9% equity interest (14.6% on a fully diluted basis). |
| • | In early September, the Company was approved as an IRMA (Initiative for Responsible Mining Assurance) Pending Member which means that the Company commits to have the proposed project audited against the new draft IRMA Ready Standard for exploration and development within 12 months of its availability for application. |
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
| • | In September, the Company was recognized on TSX30 2021 ranking as one of the top 30 performers on the TSX. |
| • | On October 1, 2021 Jose Francesconi joined the team and is responsible for overseeing projects and technical services in Argentina. Mr. Francesconi brings over thirty years of execution experience for large capital projects and was previously the Operations Director, Argentina for Worley, and the Associate Engineering Director of Dow Engineering. |
| • | On November 1, the Company submitted an unconditional offer to acquire all outstanding shares of Millennial Lithium Corp. (“Millennial”) at a price of C$4.70 per share, payable in Lithium Americas common shares and cash of C$0.001 per Millennial share for total consideration of approximately US$400 million. |
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
PROJECT PROGRESS IN Q3 2021
Caucharí-Olaroz, Jujuy Province, Argentina
FIGURE A COMMISSIONING OF THE LIME PLANT COMMENCED IN OCTOBER TO SUPPORT PRODUCTION RAMP-UP
FIGURE B FOCUS IS ON CONSTRUCTION OF THE CHEMICAL AND PROCESSING PLANTS
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
COVID-19
As of the date of this MD&A, mining and construction activities are permissible in the Province of Jujuy, subject to meeting certain health protocols and other requirements. National authorities have lifted a number of restrictions, particularly limitations on international travel. COVID restrictions and requirements continue to impact the team’s ability to resume full construction activities as they limit the ability of certain service providers and the workforce to travel to and from the site and the ability to use full construction camp capacity.
The vaccination campaign is progressing in the Province of Jujuy and in Argentina in general. To date, over 97% of our total site workers have received their first vaccination and over 60% have received two doses of the vaccine.
Health and Safety
The Total Recordable Incident Frequency rate (“TRIFR”) for Caucharí-Olaroz for the nine months ending September 30, 2021 was 4.69 per 200,000 hours worked. As of the end of October, the project team has achieved 3 million total man hours without a lost time injury incident.
Construction Progress
Evaporation Ponds and Production Wells
Earthworks for the 12 km2 of planned solar evaporation ponds are 100% complete, and liner installation is approximately 96% complete. Currently, there are 39 production wells drilled and one in progress. As of the date of this MD&A, approximately 18.5 million cubic meters (“m3”) of brine have been pumped into the ponds for initial evaporation and process testing. Commissioning of liming of concentrated brine to support ramp-up started in October 2021.
Infrastructure
| • | The access roads and platforms for the wells are 100% complete. |
| • | Construction of the warehouse buildings is 100% complete. |
| • | Gas pipeline construction is 100% complete. |
| • | Lime plant construction was completed and commissioning started in October 2021. |
| • | The 33 kV power line is more than 94% complete and the 13.2 kV distribution line is 100% complete. |
| • | Construction of the water pipeline is over 87% complete. |
Lithium Carbonate Plant
| • | Critical, long-lead-time equipment is currently under fabrication or has been delivered to site, reducing supply chain risks. |
| • | Solvent extraction (SX) plant, including equipment installation, is over 70% complete. |
| • | Solid-liquid separation (SSL) plant is over 80% complete. The filter presses were installed in early July. |
| • | Potassium chloride (KCl) plant is over 60% complete. |
| • | The civil works contractors are at site working on the rest of the lithium carbonate plant (the dilution plant, purification, carbonation and substation). |
Capital Expenditures
| • | As of September 30, 2021, $519 million has been spent or 81% of the $641 million budget, with the majority of remaining budget committed. |
JEMSE Arrangement
On April 4, 2021, Jujuy Energia y Mineria Sociedad del Estado (“JEMSE”), a mining investment company owned by the government of Jujuy Province in Argentina, completed the exercise of its right to acquire an 8.5% equity interest in Minera Exar. JEMSE will reimburse its $23.5 million pro rata (8.5%) share of the equity financing to fund construction of the Caucharí-Olaroz project to the Caucharí Partners (Lithium Americas and Ganfeng) through the assignment of one-third of the dividends otherwise payable to JEMSE in future periods. In addition, JEMSE’s right
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
to future dividends is subordinate to Minera Exar’s obligation to service its debt, including intercompany loan repayments and interest, used by the Caucharí Partners to finance construction.
The Caucharí Partners are responsible for funding 100% of Caucharí-Olaroz construction costs and are to receive 100% of the output of Caucharí-Olaroz proportionate to their respective 49%/51% interests. All decisions with respect to the Caucharí-Olaroz project require approval of the Caucharí Partners.
Project Financing and Liquidity
As of September 30, 2021, the Company’s 49% share of the remaining capital is fully funded from $134 million of undrawn credit and loan facilities provided by Ganfeng and BCP Innovation Pte Ltd. See further details on the project financings in the section entitled “Liquidity and Capital Resources” below and in the above sections under “Our Business”, and “Highlights”.
COVID-19
The Company has abided by all state-wide COVID-19 restrictions and protocols. Our staff continue to work from Company offices or home in compliance with social distancing practices.
Partnership Process and Feasibility Study
Partnership Process
The Company expects to provide an update on timing of the Feasibility Study by early 2022, to align with the strategic partnership process and ongoing engineering work.
Lithium Americas has retained Greenhill & Co. to act as financial advisor for the Thacker Pass strategic partnership process.
Feasibility Study for Phases 1 and 2
Lithium Americas continues to advance the ongoing Feasibility Study targeting an increased initial production capacity to 40,000 tpa of lithium carbonate (“Phase 1”) from 30,000-35,000 tpa, previously. The increased target capacity reflects optimizations to the mine plan and leaching efficiencies, maintaining the same proposed 3,000 tonnes per day (“tpd”) sulfuric acid plant and water usage.
In addition, the Company plans to include an expansion scenario to target total capacity of 80,000 tpa of lithium carbonate. The addition of a 40,000 tpa expansion (“Phase 2”), is designed to demonstrate Thacker Pass’ ability to scale production and align with potential customers’ and partners’ longer-term demands. The Phase 2 expansion scenario would entail additional time required to amend and meet permitting requirements beyond Phase 1.
The Company is continuing to optimize engineering to complete the capital cost estimate which is expected to substantially increase due to increased production capacity, incorporation of Phase 2 as well as the impact of inflationary pressure, permit requirements and an increase in purification processing equipment to produce high quality lithium carbonate.
To meet potential customer and partner needs, the Company continues to also advance engineering to consider an option for a 20,000 tpa lithium hydroxide chemical conversion plant.
Process Engineering and Design
Mine Plan and Processing Optimization
Over the past year, Lithium Americas has grown the engineering and technical team and continues to further optimize the mine plan and process. Optimization work is focused on maximizing lithium carbonate production in Phase 1 without increasing the size of the proposed 3,000 tpd sulfuric acid plant or water usage. Improvements
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
include a mine plan focused on the illite clay and processing technologies to increase yield. When compared to smectite clay, illite clay displays higher leaching efficiencies and generally has higher lithium concentrations, as well as contains fewer impurities such as magnesium and calcium. Work is ongoing towards improving lithium recovery from smectite clay. Process changes completed include ore beneficiation, magnesium sulfate crystallization and improvements to the lithium carbonate circuit.
The Company is targeting total Phase 2 production capacity of 80,000 tpa within the same mining footprint as the permitted pit boundary. The team is advancing the mine engineering and combining the Phase 1 optimization and process improvements to achieve this increased production level.
Lithium Technical Development Center Collaboration with UNR
Working in collaboration with University of Nevada, Reno (“UNR”), the existing process testing facility will be relocated to a new facility in Reno and expanded to run the full Thacker Pass flowsheet to produce lithium carbonate samples. This Lithium Technical Development Center will also perform tests on other lithium deposits such as spodumene and brine. The integrated pilot plant is expected to be in operation in the first half of 2022 to support ongoing optimization work, confirm certain assumptions in the design and operational parameters and provide product samples for potential customers.
Regulatory and Permitting
Federal Permits
The Record of Decision (“ROD”) was received in January 2021 from the Bureau of Land Management (“BLM”). The total disturbance footprint for Thacker Pass under the ROD amounts to approximately 5,695 acres. Meanwhile the boundaries of Thacker Pass Plan of Operations lands consist of 17,933 acres of land, encompassing both the project and exploration area.
In February 2021, claims were filed against the BLM to appeal the issuance of the ROD. Injunction requests over the Company’s plan to begin cultural assessment and pre-construction work were denied in Q3 2021, and subsequently, a motion to reconsider was denied on November 8, 2021. A court hearing on the appeal is expected to take place in Q1 2022.
State Permits
In October 2021, Nevada Department of Environmental Protection (“NDEP”) made a preliminary determination to issue three remaining key state-level permits with a 30-day public comment period. Preliminary determination for the Class II Air Quality Operating Permit was released on October 18, and for the Water Pollution Control and Mine Reclamation Permits on October 28. The Company expects to have final versions of these permits by year end.
The Water Pollution Control Permit will initially limit mining operations to areas lying above the regional water table. The Company contemplates that the expected Phase 1 will focus on extracting ore from a proposed ‘west-pit area’ that is near surface and above the water table. During the early stages of mining, additional studies will be performed on operational field conditions to determine the best water management options before mining extends below the water table. The Company expects that, as part of long-term mine planning, it will be most efficient from both an economic and environmental management perspective to extract ore from deeper sources and will accordingly seek formal state authorization of a final mitigation approach for mining below the water table.
The Company expects that early-works on the water line could begin as early as in Q1 2022, once permits are received. Other early-works are expected to begin in H1 2022, including site access, site preparation and additional infrastructure, to condense and de-risk the overall construction schedule.
Water Rights
A decision on the Company’s water rights transfer application by the state engineer to transfer the Company’s existing water rights, which is expected to provide sufficient water for all of Phase 1, is anticipated by Q1 2022.
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
Environmental and Social Responsibility
Respecting the rights, culture, aspirations and interests of the local communities directly affected by the development and operation of Thacker Pass and working collaboratively towards mutually beneficial relationships remains a key priority for the Company. The Company continues to engage with local tribal and community members to keep them informed of plans for the project, identify and resolve issues, and provide employment and training opportunities that will be available prior to proposed construction and operations.
Fort McDermitt Paiute and Shoshone Tribe Benefits Agreement
The Company has presented a benefits agreement to the Fort McDermitt Paiute and Shoshone Tribe.
Community Engagement
Through engagement with the community, the Company continues to enthusiastically participate in the Negotiating Work Group (“Work Group”) along with selected members of the Thacker Pass Concerned Citizens Group (“TPCCG”). The purpose of the Work Group is to develop agreements supported by scientific data and community buy-in to guide the construction and operations of Thacker Pass. The Work Group focuses its discussions on identifying solutions that protect the safety and well-being of community members. The Work Group continues to meet approximately every two weeks, and the Company is committed to quickly resolving community issues and building healthy relations for years to come.
The Company partnered with Cashman Equipment-Winnemucca to host a two-day Heavy Equipment Operator Training in Fort McDermitt. Fort McDermitt tribal members and residents of McDermitt and Orovada learned safety pre-check and how to safely operate a loader, excavator, dump truck and dozer. Participants earned Level 1 Operators Certification for each of the four pieces of equipment they trained on.
Socioeconomic and Environmental Study with UNR
Lithium Americas has a long-standing relationship with UNR, originally partnering with UNR’s Department of Agriculture, Veterinary and Rangeland Sciences to establish the Great Basin Sagebrush Restoration Fund in 2017. The Company has recently formalized a relationship with the Department of Mining and Metallurgical Engineering at UNR’s Mackay School of Earth Sciences and Engineering to assess the socioeconomic and environmental footprint for Thacker Pass. Professor Ehsan Vahidi, Ph.D. will run the two-year program, which will include development of a life cycle inventory database, quantifying the environmental performance of lithium production from claystone ore and analysis of socioeconomic impacts from activity at Thacker Pass with other lithium production facilities around the world.
Updated Mineral Resource Estimate
On October 7, 2021 the Company announced an expanded and updated Mineral Resource estimate for Thacker Pass of 13.7 million tonnes (Mt) of lithium carbonate equivalent grading 2,231 parts per million (“ppm”) lithium of measured and indicated (“M&I”), and 4.4 Mt of lithium carbonate equivalent (“LCE”) grading 2,112 ppm of inferred resources. The updated Mineral Resource estimate incorporates the Southwest Basin area of the project, change in cut-off grade and additional drilling since the 2018 M&I resource of 6.0 Mt LCE at 2,917 ppm Li and inferred resource of 2.3 Mt at 2,932 ppm. Lithium Americas affirms that the updated Mineral Resource estimate in its October 7, 2021 news release filed on SEDAR does not constitute a material change and does not affect the integrity of the Resources and Reserves used in the preliminary feasibility study for Thacker Pass, “Technical Report on the Pre-Feasibility Study for the Thacker Pass Project, Humboldt County, Nevada, USA dated effective date August 1, 2018 (the “PFS”). The PFS remains the current technical report for Thacker Pass.
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
SELECTED FINANCIAL INFORMATION
Selected consolidated financial information is presented as follows:
(in US$ millions) | 2021 |
| 2020 |
| 2019 |
| ||||||||||||||||||
| Q3 |
| Q2 |
| Q1 |
| Q4 |
| Q3 |
| Q2 |
| Q1 |
| Q4 |
| ||||||||
| $ |
| $ |
| $ |
| $ |
| $ |
| $ |
| $ |
| $ |
| ||||||||
Total assets |
| 716.2 |
|
| 708.6 |
|
| 707.9 |
|
| 326.7 |
|
| 232.6 |
|
| 319.6 |
|
| 326.1 |
|
| 293.8 |
|
Property, plant and equipment |
| 3.5 |
|
| 1.6 |
|
| 1.8 |
|
| 1.9 |
|
| 1.8 |
|
| 214.5 |
|
| 188.7 |
|
| 158.9 |
|
Working capital |
| 476.1 |
|
| 499.4 |
|
| 512.8 |
|
| 141.7 |
|
| 69.4 |
|
| 39.8 |
|
| 70.6 |
|
| 73.6 |
|
Total liabilities |
| 188.7 |
|
| 165.0 |
|
| 146.0 |
|
| 136.0 |
|
| 131.3 |
|
| 175.6 |
|
| 175.4 |
|
| 134.2 |
|
Expenses |
| (16.6 | ) |
| (13.0 | ) |
| (8.8 | ) |
| (8.1 | ) |
| (5.7 | ) |
| (6.5 | ) |
| (10.3 | ) |
| (5.3 | ) |
Net loss for the period |
| (17.2 | ) |
| (19.3 | ) |
| (9.9 | ) |
| (9.7 | ) |
| (6.5 | ) |
| (6.0 | ) |
| (14.0 | ) |
| (6.2 | ) |
Basic and diluted loss per common share |
| (0.14 | ) |
| (0.16 | ) |
| (0.09 | ) |
| (0.10 | ) |
| (0.07 | ) |
| (0.07 | ) |
| (0.16 | ) |
| (0.07 | ) |
Notes:
| 1. | Quarterly amounts added together may not equal to the total reported for the period due to rounding or reclassifications. |
Changes in the Company’s total assets, working capital, liabilities and results were driven mainly by financings, transactions, increases in loans and contributions to Caucharí-Olaroz, expenses in the period and the Company’s share of results of Caucharí-Olaroz.
In Q1 2021, total assets and working capital increased primarily due to the $377 million in net proceeds raised from the underwritten equity offering.
In Q4 2020, total assets and working capital increased primarily due to $97 million in net proceeds from an at-the-market equity program.
In Q3 2020, total assets, property, plant and equipment and liabilities decreased primarily as a result of derecognizing the Company’s 50% share of Minera Exar’s assets and liabilities and Exar Capital’s borrowings, partially offset with $40 million in cash received upon repayment of loans as part of the transaction with Ganfeng which closed on August 26, 2020 (“2020 Caucharí Transaction”).
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
Results of Operations – Net Income Analysis
Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
The following table summarizes the key items that resulted in an increase in the loss for the nine months ended September 30, 2021 (“9m 2021”) versus the nine months ended September 30, 2020 (“9m 2020”), as well as certain offsetting items:
|
|
|
|
|
| |||||
Financial results |
| Nine Months Ended September 30, |
| Change |
| |||||
| 2021 |
| 2020 |
|
|
|
| |||
|
| $ |
| $ |
| $ |
| |||
Exploration and evaluation expenditures |
|
| (25.9 | ) |
| (13.0 | ) |
| (12.9 | ) |
General and administrative |
|
| (7.2 | ) |
| (5.0 | ) |
| (2.2 | ) |
Equity compensation |
|
| (3.2 | ) |
| (4.2 | ) |
| 1.0 |
|
Loss on JEMSE transaction |
|
| (4.7 | ) |
| - |
|
| (4.7 | ) |
Share of loss of Cauchari-Olaroz project |
|
| (1.9 | ) |
| (0.4 | ) |
| (1.5 | ) |
Gain on Cauchari-Olaroz transactions |
|
| - |
|
| 0.3 |
|
| (0.3 | ) |
Share of loss of Arena Minerals |
|
| (0.2 | ) |
| - |
|
| (0.2 | ) |
Transaction costs |
|
| (0.1 | ) |
| (1.2 | ) |
| 1.1 |
|
Foreign exchange gain/(loss) |
|
| 0.1 |
|
| (0.2 | ) |
| 0.3 |
|
Finance costs |
|
| (8.8 | ) |
| (1.2 | ) |
| (7.6 | ) |
Finance and other income |
|
| 5.3 |
|
| 0.5 |
|
| 4.8 |
|
Income/(loss) from discontinued operations |
|
| 0.1 |
|
| (0.9 | ) |
| 1.0 |
|
Tax expense |
|
| - |
|
| (1.2 | ) |
| 1.2 |
|
Net loss |
|
| (46.5 | ) |
| (26.5 | ) |
| (20.0 | ) |
Higher net loss during the nine months of 2021 is primarily attributable to:
| - | an increase in Thacker Pass exploration and evaluation expenditures related to feasibility study preparation; |
| - | the loss on the JEMSE transaction; |
| - | an increase in general and administrative expenses due to an increase in insurance, legal and consulting fees; |
| - | increased finance costs (finance costs were capitalized in the comparative period and capitalization ceased upon closing the 2020 Caucharí Transaction in Q3 2020); and |
| - | share of loss on the Caucharí-Olaroz project (as the Company transitioned to equity accounting for the investment in the project upon closing the 2020 Caucharí Transaction in Q3 2020). |
Higher expenses were partially offset by:
| - | a decrease in equity compensation due to the timing of annual equity grants; |
| - | a decrease in transaction costs following closing of the 2020 Caucharí Transaction; and |
| - | a foreign exchange gain versus a loss in the comparative period due to a change in the functional currency of the Company from the Canadian dollar to the US dollar and higher finance income from interest on cash at bank and loans to Exar Capital. |
Effective January 1, 2021, the functional currency of Lithium Americas changed from the Canadian dollar to the US dollar as a result of the significant US dollar proceeds from equity offerings and increasing US dollar denominated expenditures and borrowings. The change in functional currency was accounted for on a prospective basis, with no impact of this change on prior year comparative information.
Expenses
Exploration and evaluation expenditures for the nine months ended September 30, 2021, of $25.9 million (2020 – $13.0 million) include expenditures incurred for the Thacker Pass project. The increase in the Company’s exploration expenditures is mostly due to higher feasibility study-related costs incurred during Q2-Q3 2021 and the timing of permitting and other expenditures on the project.
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
Equity compensation for the nine months ended September 30, 2021 of $3.2 million (2020 - $4.2 million) is a non-cash expense and consists of $1.2 million (2020 - $2.9 million) fair market value of RSUs, and the $2.0 million (2020 - $1.3 million) fair value of PSUs vested during the period. Lower equity compensation during the nine months ended September 30, 2021 was mainly due to the timing of equity awards.
Included in General and Administrative expenses during the nine months ended September 30, 2021, of $7.2 million (2020 - $5.0 million) are:
| - | Office and administrative expenses of $2.1 million (2020 - $0.9 million), which increased as a result of higher insurance costs due to tight insurance market conditions. |
| - | Professional fees of $1.8 million (2020 - $0.8 million) consisting mainly of legal fees of $0.4 million (2020 - $0.3 million), and consulting fees of $1.2 million (2020 - $0.4 million). Professional fees were higher due to increased corporate activities. |
| - | Salaries and benefits of $2.4 million (2020 - $2.8 million) decreased mainly due to the timing of annual bonus payments. |
Other Items
Finance and other income during the nine months ended September 30, 2021 was $5.3 million (2020 - $0.5 million) and includes mainly interest income on the Company’s loans to Exar Capital and cash and cash equivalents.
Three Months Ended September 30, 2021 versus Three Months Ended September 30, 2020
The following table summarizes the key items that resulted in an increase in net loss for the three months ended September 30, 2021 (“Q3 2021”) versus the three months ended September 30, 2020 (“Q3 2020”), as well as certain offsetting items:
|
|
|
|
|
| |||||
Financial results |
| Three Months Ended September 30, |
| Change |
| |||||
(in US$ million) |
| 2021 |
| 2020 |
|
|
|
| ||
|
| $ |
| $ |
| $ |
| |||
Exploration and evaluation expenditures |
|
| (12.4 | ) |
| (3.3 | ) |
| (9.1 | ) |
General and administrative |
|
| (2.3 | ) |
| (1.4 | ) |
| (0.9 | ) |
Equity compensation |
|
| (0.9 | ) |
| (0.7 | ) |
| (0.2 | ) |
Share of loss of Cauchari-Olaroz project |
|
| (0.9 | ) |
| (0.4 | ) |
| (0.5 | ) |
Gain on Cauchari-Olaroz transactions |
|
| - |
|
| 0.3 |
|
| (0.3 | ) |
Share of loss of Arena Minerals |
|
| (0.2 | ) |
| - |
|
| (0.2 | ) |
Transaction costs |
|
| - |
|
| (0.5 | ) |
| 0.5 |
|
Foreign exchange (loss)/gain |
|
| (0.1 | ) |
| 0.8 |
|
| (0.9 | ) |
Finance costs |
|
| (3.4 | ) |
| (1.2 | ) |
| (2.2 | ) |
Finance and other income |
|
| 3.0 |
|
| 0.4 |
|
| 2.6 |
|
Loss from discontinued operations |
|
| - |
|
| (0.2 | ) |
| 0.2 |
|
Tax expense |
|
| - |
|
| (0.3 | ) |
| 0.3 |
|
Net loss |
|
| (17.2 | ) |
| (6.5 | ) |
| (10.7 | ) |
Higher net loss in Q3 2021 is primarily attributable to:
| - | an increase in Thacker Pass exploration and evaluation expenditures related to feasibility study preparation; |
| - | an increase in general and administrative expenses due to an increase in insurance, legal and consulting fees; |
| - | increased finance costs (finance costs were capitalized in the comparative period and capitalization ceased upon closing the 2020 Caucharí Transaction in Q3 2020); |
| - | the share of loss on the Caucharí-Olaroz project (as the Company transitioned to equity accounting for the investment in the project upon closing the 2020 Caucharí Transaction); and |
| - | foreign exchange loss. |
12 |
LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
Higher costs in Q3 2021 were partially offset by a higher finance income.
Expenses
Exploration and evaluation expenditures for Q3 2021 of $12.4 million (2020 – $3.3 million) include expenditures incurred for the Thacker Pass project. The increase in the Company’s exploration and evaluation expenditures is mostly due to higher feasibility study-related costs incurred during Q3 2021 and the timing of permitting and other expenditures on the project.
Equity compensation for Q3 2021 of $0.9 million (2020 - $0.7 million) is a non-cash expense and consists of the $0.3 million (2020 - $0.3 million) fair market value of RSUs, and $0.6 million (2020 - $0.4 million) fair value of PSUs vested during the period.
General and Administrative expenses during Q3 2021 were $2.3 million (2020 - $1.4 million), an increase due to increased corporate activities.
Other Items
Finance and other income during the Q3 2021 was $3.0 million (2020 - $0.4 million) and includes mainly interest income on the Company’s loans to Exar Capital and cash and cash equivalents.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow Highlights |
| Nine Months Ended September 30, |
| |||||
| 2021 |
|
| 2020 |
| |||
|
| $ |
|
| $ |
| ||
Cash used in operating activities |
|
| (36.7 | ) |
|
| (23.8 | ) |
Cash used in investing activities |
|
| (56.8 | ) |
|
| (27.2 | ) |
Cash provided by financing activities |
|
| 427.4 |
|
|
| 39.4 |
|
Effect of foreign exchange on cash |
|
| 0.1 |
|
|
| (0.1 | ) |
Change in cash and cash equivalents |
|
| 334.0 |
|
|
| (11.7 | ) |
Cash and cash equivalents - beginning of the period |
|
| 148.1 |
|
|
| 83.6 |
|
Cash and cash equivalents - end of the period |
|
| 482.1 |
|
|
| 71.9 |
|
As at September 30, 2021, the Company had cash and cash equivalents of $482.1 million and working capital of $476.1 million, compared to cash and cash equivalents of $71.9 million and working capital of $69.4 million (excluding assets held for sale of $4.0 million) as at September 30, 2020.
During the nine months ended September 30, 2021, the Company drew $50.1 million from the $205 million senior credit facility to fund the Company’s share of Caucharí-Olaroz project construction expenses, with $59 million remaining undrawn as at September 30, 2021. In addition, as at September 30, 2021, $75 million remains undrawn under the Company’s $100 million unsecured, limited recourse, subordinated loan facility available for the Company’s general corporate purposes.
Lithium Americas’ share of outstanding construction costs for Caucharí-Olaroz is expected to be fully-funded with the $134.4 million in available credit and loan facilities as at September 30, 2021. The Company has flexibility to use its own funds for its share of outstanding construction costs for Caucharí-Olaroz, subject to the use of proceeds restrictions of the recent equity offerings.
Thacker Pass project permitting and feasibility study costs are expected to be funded from available cash on hand. The Company continues to evaluate partnership and financing opportunities for Thacker Pass to advance and de-risk the project. Proceeds from closing the 2020 Caucharí Transaction, the at-the-market equity program (“ATM
13 |
LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
Program”) and the Underwritten Public Offering (as defined below) are expected to provide the Company with sufficient financial resources to fund Thacker Pass expenditures and general and administrative expenditures until financing of Thacker Pass is complete or at least for the next eighteen to twenty-four months.
The timing and the amount of expenditures for Thacker Pass are within the control of the Company due to its direct and sole ownership. Pursuant to the agreements governing the Caucharí-Olaroz project, decisions regarding capital budgets for the project require agreement between Lithium Americas and its partner, Ganfeng.
The Company continues to develop its projects and does not generate revenues from operations. The Company’s capital resources are determined by the status of the Company’s projects, and its ability to compete for investor support of its projects. The Company’s access to future financing is always uncertain. There can be no assurance that the Company will be successful in having continued access to significant equity and/or debt funding. Except as disclosed, the Company 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. The Company does not engage in currency hedging to offset any risk of currency fluctuations.
Cash used in operating activities during the nine months ended September 30, 2021, was $36.7 million compared to $23.8 million during the nine months ended September 30, 2020. The significant components of operating activities are discussed in the Results of Operations section above.
Investing activities used net cash of $56.8 million during the nine months ended September 30, 2021, compared to $27.2 million during the nine months ended September 30, 2020. During the nine months ended September 30, 2021, payments for property, plant and equipment were $0.4 million (2020 – $61.3 million); payments in the comparative period included the Company’s 50% share of the capital expenditures on the Caucharí-Olaroz project before closing the 2020 Caucharí Transaction. During the nine months ended September 30, 2021, the Company provided $52.9 million in loans to Exar Capital, invested $4.8 million in common stock of Arena Minerals, contributed $1.6 million to its investment in the Caucharí-Olaroz project and received $4.0 million net proceeds from disposal of assets held for sale.
ATM Program and Underwritten Public Offering
ATM Program
As of September 30, 2021, the Company used approximately $17.9 million of $96.8 million net proceeds from the ATM Program for general corporate and working capital purposes.
Underwritten Public Offering
On January 22, 2021, the Company closed an underwritten public offering (the “Underwritten Public Offering”) of 18.2 million common shares, including 2.3 million common shares under an over-allotment option, at a price of $22.00 per share, for approximate gross proceeds to the Company of $400 million. Total net proceeds of the offering, after deducting underwriters’ fees and other expenses, were approximately $377 million.
As of September 30, 2021, the Company used approximately $30.5 million of the net proceeds from the Underwritten Public Offering including $22.1 million on pre-construction and engineering costs on Thacker Pass Project and $8.4 million on interest expense on Senior Credit Facility. The balance of funds has not been deployed to date.
Although the Company intends to expend the net proceeds from the Underwritten Public Offering as set forth above, there may be circumstances where, for sound business reasons, a reallocation of funds may be prudent or
14 |
LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
necessary, and may vary materially from that set forth above. In addition, management of the Company will have broad discretion with respect to the actual use of the net proceeds from the Underwritten Public Offering.
The actual amount that the Company spends in connection with each of the intended uses of proceeds may vary significantly from the amounts specified above, and will depend on a number of factors, including those listed under the heading “Risk Factors” in the offering prospectus supplement and the accompanying prospectus (available under the Company profile on www.sedar.com and www.edgar.com) and set out in the documents incorporated by reference therein.
Senior Credit Facility and Limited Recourse Loan Facility
During the nine months ended September 30, 2021, the Company received $50.1 million from its drawdowns under the $205 million senior credit facility with $59 million undrawn as at September 30, 2021. During the comparative period ended September 30, 2020 the company drew $36.7 million under its facilities including $12 million under the senior facility and $24.7 million under the limited recourse loan facility. Subsequent to quarter end, the Company drew an additional $7.4 million under the $205 million senior credit facility to fund development expenditures at Caucharí-Olaroz.
As at September 30, 2021, the Company had $75.3 million undrawn and available from the $100 million unsecured, limited recourse, subordinated loan facility (the “Limited Recourse Loan Facility”) provided by Ganfeng, repayable from 50% of Minera Exar’s cash flows and bearing an interest rate of 6-month LIBOR plus 5.5% (subject to an aggregate maximum per annum rate of 10%).
INVESTMENT IN ARENA MINERALS
On July 26, 2021, the Company acquired 42.9 million common shares and 21.5 million share purchase warrants of Arena Minerals Inc. (TSX-V: AN) (Arena Minerals) in a private placement for total consideration of CDN$6 million (US$4.8 million). Each warrant entitles the holder to acquire one common share of Arena Minerals at CDN$0.25 for a period of 24 months from the date of issuance. Pursuant to the agreement, Lithium Americas has the right (i) to participate in future Arena Minerals financings to maintain its pro rata ownership interest in Arena Minerals if the Company maintains at least a 7.5% interest in Arena Minerals; and (ii) to appoint a nominee to the Arena Minerals board of directors if the Company maintains at least a 10% interest in Arena Minerals. On September 30, 2021, the Company owned approximately 12.6% of the issued and outstanding shares of Arena Minerals.
Issued and outstanding securities of the Company as at the date of this MD&A were as follows:
Common Shares issued and outstanding | 120.2 million |
Restricted Share Units (RSUs) | 2.4 million |
Deferred Share Units (DSUs) | 0.2 million |
Stock Options | 1.7 million |
Performance Share Units (PSUs) | 1.1 million |
Fully diluted number of common shares | 125.6 million |
Each of the classes of convertible securities is convertible to Common Shares on a one-for-one basis, except for PSUs. The number of shares issuable upon vesting of PSUs depends on the performance of the Company’s shares compared to a prescribed peer group of companies and can vary from zero to up to two times the number of PSUs granted.
15 |
LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
Minera Exar, the Company’s equity accounted investee, entered into the following transactions with companies controlled by the family of its President, who is also a director of Lithium Americas:
| - | Los Boros Option Agreement, entered into with Grupo Minero Los Boros on March 28, 2016, for the transfer to Minera Exar of title to certain mining properties that comprised a portion of the Caucharí-Olaroz project (refer to Note 6 of the Company’s Q3 2021 unaudited condensed consolidated interim financial statements filed on SEDAR). |
| - | Expenditures under the construction services contract for the Caucharí-Olaroz project with Magna Construcciones S.R.L., were $6.7 million during the nine months ended September 30, 2021 (on a 100% basis). |
During the nine months ended September 30, 2021, Minera Exar paid director’s fees to its President, who is also a director of the Company, of $54 thousand (2020 - $55 thousand) (on a 100% basis). During the nine months ended September 30, 2021, the Company paid $0.6 million, of which $0.3 million was paid in cash and $0.3 million in RSUs, to a former director and its former President, South American Operations pursuant to an employment agreement that has since been replaced with a 12-month advisory consulting agreement with a monthly fee of $14 thousand.
The amounts due to related parties arising from the above transactions are unsecured, non-interest bearing and have no specific terms of payment.
Transactions with Ganfeng, a related party of the Company by virtue of its position as a shareholder and a lender to the Company, are disclosed in Notes 6, 8 and 16 of the Company’s financial statements for the nine months ended September 30, 2021 filed on SEDAR.
Compensation of Key Management
Key management includes the directors of the Company and the executive management team. The remuneration of directors and members of the executive management team was as follows (in USD millions):
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||
|
| $ |
|
| $ |
| ||
Equity compensation |
|
| 1.7 |
|
|
| 3.0 |
|
Salaries, bonuses, benefits and directors' fees included in general and administrative expenses |
|
| 1.3 |
|
|
| 2.0 |
|
Salaries, bonuses and benefits included in exploration and evaluation expenditures |
|
| 0.3 |
|
|
| 0.4 |
|
Salaries and benefits capitalized to Investment in Cauchari-Olaroz project |
|
| 0.6 |
|
|
| 0.9 |
|
|
|
| 3.9 |
|
|
| 6.3 |
|
Amounts due to directors and the executive management team as at September 30, 2021 include $0.2 million due to the independent directors for Q3 2021 directors’ fees (in USD millions):
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
|
| $ |
|
| $ |
| ||
Total due to directors and executive team |
|
| 0.2 |
|
|
| 1.7 |
|
16 |
LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
As at September 30, 2021, the Company had the following contractual obligations (undiscounted, in USD million):
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 and later |
|
| Total |
| |||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Credit facility¹ |
|
| - |
|
|
| 12.3 |
|
|
| 13.1 |
|
|
| 159.7 |
|
|
| 185.1 |
|
Accounts payable and accrued liabilities |
|
| 6.2 |
|
| - |
|
| - |
|
| - |
|
|
| 6.2 |
| |||
Obligations under office leases¹ |
|
| 0.1 |
|
|
| 0.6 |
|
|
| 0.6 |
|
|
| 1.3 |
|
|
| 2.6 |
|
Other obligations¹ |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5.7 |
|
|
| 5.7 |
|
Total |
|
| 6.3 |
|
|
| 12.9 |
|
|
| 13.7 |
|
|
| 166.7 |
|
|
| 199.6 |
|
¹ Credit and loan facilities, Obligations under office leases and Other obligations include principal and interest/finance charges.
2 Amounts added together may not equal to the total reported for the period due to rounding
The Company’s commitments related to construction activities, royalties, option payments and annual fees to the aboriginal communities are disclosed in Note 6 of the Company’s financial statements for the nine months ended September 30, 2021 and Notes 5 and 7 of the Company’s 2020 annual financial statements (filed on SEDAR), most of which will be incurred in the future if the Company continues to hold the subject property, continues construction or starts production.
Financial assets and liabilities are recognized when the Company 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 the Company has transferred substantially all risks and rewards of ownership.
All of the Company’s financial instruments are classified into financial assets and liabilities measured at amortized cost. All financial instruments are initially measured in the statement of financial position at fair value plus 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. The Company’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.
The Company 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.
The Company and its subsidiaries, as well as its investee Minera Exar, may from time to time make short-term investments into Argentinian government securities, financial instruments guaranteed by Argentinian banks and other Argentine securities. These investments may or may not realize short term gains or losses.
For additional details about the Company’s financial instruments please refer to the Note 15 “Financial instruments” of the Company’s financial statements for the nine months ended September 30, 2021 available on SEDAR.
OFF-BALANCE SHEET ARRANGEMENTS
The Company’s off-balance sheet arrangements related to its exploration and evaluation assets are disclosed in Note 6 of the Company’s financial statements for the nine months ended September 30, 2021.
17 |
LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
DECOMMISSIONING PROVISION AND RECLAMATION BOND
The carrying value of the liability for decommissioning that arose to date as a result of exploration activities is $0.3 million for Thacker Pass, as at September 30, 2021. The Company’s $1.4 million reclamation bond payable to the BLM was guaranteed by a third-party insurance company.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Please refer to the Company’s annual MD&A for the year ended December 31, 2020, 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 the Company’s accounting policies and the key sources of estimation uncertainty as well as accounting policies applied during the nine months ended September 30, 2021, were substantially the same as those that management applied to the consolidated financial statements as at and for the year ended December 31, 2020, other than as described below.
COVID-19 Uncertainty
In March 2020, the World Health Organization declared a global pandemic related to COVID-19. Many countries, including Canada, the United States and Argentina, where the Company operates, announced mandatory emergency measures and restrictions on businesses and individuals to mitigate the spread of the virus. The outbreak and the related mitigation measures have had and will continue to have an adverse impact on global economic conditions as well as on the Company’s activities. The effects of the pandemic will ultimately depend on many factors that are out of the Company’s control, including but not limited to, the severity, extent and duration of the pandemic or any resurgences in the future, the availability of approved vaccines and the timing for completion of vaccine distribution programs around the globe, and the extent, duration and ongoing impacts of supply chain disruptions and inflationary pressures on the Company, its suppliers and contractors.
In the first nine months of 2021 construction activities at the Caucharí-Olaroz lithium project advanced while strictly complying with COVID-19 protocols developed by Minera Exar and approved by authorities in Jujuy province where the project is located. Construction costs related to the Caucharí-Olaroz lithium project continue to be capitalized in accordance with the Company’s policy, including costs arising from construction of the project during the pandemic such as testing and quarantining of employees, rental of additional camp facilities in order to comply with social distancing requirements, and other additional contractors’ costs as a result of COVID-19 restrictions.
Functional Currency
Items included in the financial statements of the Company and each of the Company’s subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). Effective January 1, 2021, the functional currency of Lithium Americas changed from the Canadian dollar to the US dollar as a result of the significant US proceeds from equity offerings and increasing amounts of expenditures and loans denominated in US dollars. The change in functional currency was accounted for on a prospective basis, with no impact of this change on prior year comparative information.
Long-Term Receivable from JEMSE
In Q2 2021 JEMSE completed the exercise of its ownership right to an 8.5% interest in Minera Exar. As consideration for this interest, JEMSE will reimburse its $23. 5 million pro rata (8.5%) share of the equity financing for the construction of the Cauchari-Olaroz project to the Company and Ganfeng through the assignment of one-third of the dividends otherwise payable to JEMSE in future periods. As a result of JEMSE exercising its right, the Company recognized a reduction in its ownership interest in Minera Exar in exchange for a long-term receivable from JEMSE with an estimated initial fair value of $5.8 million. The fair value of the long-term receivable from JEMSE was calculated by discounting the Company’s share of JEMSE’s future payments, assuming payments start after 5 years and a 10% discount rate. Estimation of the timing of payment is based on the status of construction and expected cash flows of Minera Exar.
18 |
LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
On November 1, the Company submitted an unconditional offer to acquire all outstanding shares of Millennial Lithium Corp. (“Millennial”) at a price of C$4.70 per share, payable in Lithium Americas common shares and cash of C$0.001 per Millennial share for total consideration of approximately US$400 million. The Board of Directors of Millennial has determined that the offer constitutes a “superior proposal” as defined by an existing agreement dated September 28, 2021 between Millennial and Contemporary Amperex Technology Co., Ltd. (“CATL”). CATL has a right to match the offer made by the Company until 4:30 pm Pacific Time on November 16, 2021. See the respective news releases issued by the Company and Millennial on November 1, 2021 for further details.
RISKS AND UNCERTAINTIES
For risks and uncertainties faced by the Company, please refer to the following disclosure documents filed on the Company’s profile on SEDAR at www.sedar.com and EDGAR at www.edgar.com: annual MD&A for the year ended December 31, 2020 in the section entitled “Risks and Uncertainties”, as well as the Annual Information Form for the year ended December 31, 2020 in the section entitled “Risk Factors”.
CHANGES IN DIRECTORS AND MANAGEMENT
There were no changes to the Company’s directors and management in Q3 2021. Subsequent to quarter end, on October 1, 2021 Jose Francesconi joined the team and is responsible for overseeing development and construction of Company projects in Latin America, including the Caucharí-Olaroz project. Prior to joining Lithium Americas, Mr. Francesconi was the Operations Director, Argentina for Worley, a global engineering services firm, and served as a board member representative for Argentina. Prior to that, he was the Associate Engineering Director of Dow Engineering, part of the Dow Chemical group, and held various leadership roles with Dow Chemical. Mr. Francesconi holds a degree in chemical engineering from Universidad Nacional del Sur in Argentina.
TECHNICAL INFORMATION AND QUALIFIED PERSON
Detailed scientific and technical information on the Caucharí-Olaroz project can be found in the NI 43-101 technical report titled “Updated Feasibility Study and Reserve Estimation to Support 40,000 tpa Lithium Carbonate Production at Caucharí-Olaroz Salars, Jujuy Province, Argentina” that was filed on SEDAR. The technical report has an effective date of September 30, 2020, and was prepared by Ernest Burga, P.Eng., David Burga, P.Geo., Daniel Weber, P.G., RM-SME, Anthony Sanford, Pr.Sci.Nat., and Marek Dworzanowski, CEng, PrEng., each of whom is a “Qualified Person” for the purposes of NI 43-101.
Detailed scientific and technical information on the Thacker Pass project can be found in the NI 43-101 technical report dated August 1, 2018, entitled “Technical Report on the Pre-Feasibility Study for the Thacker Pass project, Humboldt County, Nevada, USA” that was filed on SEDAR. The Thacker Pass technical report has an effective date of August 1, 2018, and was prepared by Reza Ehsani, P.Eng., Louis Fourie, P.Geo., Andrew Hutson, FAusIMM, BE (Mining), Daniel Peldiak, P.Eng., Rob Spiering, P.Eng., John Young, B.Sc., SME-RM and Ken Armstrong, P.Eng., each of whom is a “Qualified Person” for the purposes of NI 43-101.
Copies of both reports are available on the Company’s website at www.lithiumamericas.com and on the Company’s SEDAR profile at www.sedar.com.
The scientific and technical information in this MD&A has been reviewed and approved by Dr. Rene LeBlanc, a “Qualified Person” for purposes of NI 43-101 by virtue of his experience, education and professional association. Dr. LeBlanc is the Chief Technical Officer of the Company.
19 |
LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed under securities legislation is recorded, processed, summarized and reported within the time periods specified by securities regulators and include controls and procedures designed to ensure that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed under securities legislation is accumulated and communicated to the issuer’s management, including its certifying officers, as appropriate to allow timely decisions regarding required disclosure. The Company’s management designed the disclosure controls and procedures to provide reasonable assurance that material information relating to the Company, including its consolidated subsidiaries, is made known to them on a timely basis. The Company’s management believes that any disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.
CHANGES TO INTERNAL CONTROLS OVER FINANCIAL REPORTING
National Instrument 52-109 requires public companies in Canada to disclose in their MD&A any change in internal controls over financial reporting (“ICFR”) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, ICFR.
Many of our corporate office staff and site administrative staff continued to work remotely in the third quarter of 2021. We continue to retain documentation in electronic form as a result of remote work, consistent with our practices in 2020. There have been no significant changes in our internal controls during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, ICFR.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Until June 30, 2021, as a U.S. listed public company with less than $1.07 billion in gross revenue, the Company qualified as an “emerging growth company” (“EGC”) under the Jumpstart Our Business Startups Act, or the JOBS Act. As an EGC, the Company was exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002, which generally requires that a public company’s registered public accounting firm provide an attestation report relating to management’s assessment of internal control over financial reporting, as defined in Rules 13a‐15(f) and 15d-15(e) under the U.S. Exchange Act.
The status of an EGC is retained until the earliest of (a) the last day of the fiscal year in which a company has annual gross revenues of $1.07 billion or more; (b) the last day of the fiscal year following the fifth anniversary of the date of the first sale of the company’s common stock pursuant to an effective registration statement under the Securities Act of 1933; (c) the date on which the company has, during the previous three-year period, issued more than $1 billion in nonconvertible debt; or (d) the date on which the company is deemed to be a “large accelerated filer”, as defined in Rule 12b-2 under the U.S. Exchange Act.
As a result of the increase in the Company’s market capitalization, as of June 30, 2021, Lithium Americas was deemed to become a “large accelerated filer” and the Company engaged its registered public accounting firm to provide an attestation report relating to management’s assessment of ICFR for the year ended December 31, 2021, as defined in Rules 13a‐15(f) and 15d-15(e) under the U.S. Exchange Act.
ICFR are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. Management is responsible for the design of the Company’s ICFR.
The Company’s ICFR include policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of assets, provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the financial statements in accordance with IFRS and that receipts and expenditures are being made only in accordance with the authorization of management
20 |
LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
and directors of the Company, and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.
Due to their inherent limitations, ICFR can provide only reasonable assurance and may not prevent or detect misstatements. Furthermore, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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 the Company’s future performance. All statements, other than statements of historical fact, may be forward-looking information. Information concerning mineral resource and mineral reserve estimates also may be deemed to be forward-looking information in that it reflects a prediction of mineralization that would be encountered if a mineral deposit were developed and mined. 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”, “target”, “intend”, “could”, “might”, “should”, “believe”, “scheduled”, “implement” and similar words or 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 or the Company’s expectations relating to such matters: the impacts of COVID-19 on the availability and movement of personnel, supplies and equipment and on the timing for regulatory approvals and permits, construction by Minera Exar, in which the Company has a co-ownership interest with Ganfeng, at the Caucharí-Olaroz project, and on budgets and costs and further guidance in this regard, and on third parties providing services to the Company in respect of the Thacker Pass project or to Minera Exar with respect to the Caucharí-Olaroz Project; successful development of the Caucharí-Olaroz and Thacker Pass projects, including timing, progress, construction, milestones, anticipated production, extent of early works and results thereof; expectations and anticipated impact of the COVID-19 outbreak, including with regard to the health and safety of the Company’s and Minera Exar’s workforce, COVID-19 protocols and their efficacy, and impacts on timelines and budgets; statements regarding anticipated decision making with respect to Minera Exar or the Thacker Pass project; capital expenditures and programs; development of mineral resources and mineral reserves; government regulation of mining operations and treatment under governmental and taxation regimes; the realization of mineral resources and mineral reserves estimates, including whether mineral resources will ever be developed into mineral reserves and information and underlying assumptions related thereto; the timing, cost, quantity, capacity, quality and product type of future production at the Thacker Pass and Caucharí-Olaroz projects, and for any expansion programs; expected outcome and timing of environmental surveys, permit applications and regulatory authorizations, and other environmental matters; expectations regarding the sufficiency of brine inventory; the expected outcome of community engagement activities with local communities for the Thacker Pass Project; the timing, outcome and expected impact of litigation concerning the Thacker Pass project; the Company’s funding requirements and ability to raise capital; budget estimates and expected expenditures to be made by the Company on its properties; the expected use of proceeds raised from prior financings; results of the Company’s engineering, design and permitting program at the Thacker Pass project, and that the Company meets deadlines and receives permits as anticipated; timing to start operations at and successful results and samples to be generated from the Company’s integrated pilot plant; timing, results and completion of a feasibility study for the Thacker Pass project; the Company’s share of the expected capital expenditures for the construction of the Caucharí-Olaroz project, and expenditures for permitting and Thacker Pass feasibility study activities at the Thacker Pass project; ability to achieve capital cost efficiencies; stability and inflation related to the Argentinian peso, whether the Argentinian government implements additional foreign exchange and capital controls, and the effect of current or any additional regulations on the Company’s operations; the Company’s anticipated ownership interest in holdings of shares, warrants and other securities issued by third parties and anticipated benefits of such investment; expectations concerning the offer to Millennial; and the potential for partnership and financing scenarios for the Thacker Pass project.
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
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 Company’s control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. With respect to forward-looking information listed above and incorporated by reference herein, the Company has made assumptions regarding, among other things:
| • | current technological trends, advancements and changes; |
| • | successful operations under the co-ownership structure, and maintaining a cordial business relationship between the Company and Ganfeng for the Caucharí-Olaroz project; |
| • | ability of the Company to fund, advance and develop the Caucharí-Olaroz project and the Thacker Pass project, and the respective impacts of the projects when production commences; |
| • | the Company’s ability to operate in a safe and effective manner; |
| • | uncertainties relating to receiving and maintaining mining, exploration, environmental and other permits or approvals in Nevada and Argentina, 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; |
| • | pricing and demand for lithium, including that such demand is supported by growth in the electric vehicle market; |
| • | the impact of increasing competition in the lithium business, and LAC’s competitive position in the industry; |
| • | commodity prices generally, currency exchange rates, interest rates, and general economic conditions; |
| • | a stable and supportive legislative, regulatory and community environment in the jurisdictions where the Company operates; |
| • | stability and inflation of the Argentine peso, including any foreign exchange or capital controls which may be enacted in respect thereof, and the effect of current or any additional regulations on the Company’s operations; |
| • | the impact of unknown financial contingencies, including litigation costs, on the Company’s operations; |
| • | gains or losses, in each case, if any, from short-term investments in Argentine bonds and equities; |
| • | estimates of and unpredictable changes to the market prices for lithium products; |
| • | exploration, development and construction costs for the Caucharí-Olaroz project and the Thacker Pass project, including the impact of COVID-19 on such costs; |
| • | estimates of mineral resources and mineral reserves at the Company’s properties, including whether resources will ever be developed into reserves; |
| • | reliability of technical data; |
| • | anticipated timing and results of exploration, development and construction activities, including the impact of COVID-19 on such timing; |
| • | timely responses from governmental agencies responsible for reviewing and considering the Company’s permitting activities at its projects, and the timely resolution of any litigation concerning the Company’s projects; |
| • | the ability to develop and achieve production at any of the Company’s mineral exploration and development properties; |
| • | that the benefits of prior and future transactions with partners and lenders will be achieved; |
| • | the impact of COVID-19 on the Company’s business; |
| • | approval of pending patents; |
| • | accuracy of current development budget and construction estimates; and |
| • | preparation of a development plan for lithium production and a feasibility study for the Thacker Pass project. |
Although the Company believes that the assumptions and expectations reflected in such forward-looking information are reasonable, we 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.
The Company’s actual results could differ materially from those anticipated in any forward-looking information as a result of the risk factors contained in this MD&A, including but not limited to, the factors referred to under the heading
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LITHIUM AMERICAS CORP.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(expressed in US dollars, unless stated otherwise)
“Risks and Uncertainties” in this MD&A. Such risks also include, but are not limited to the following: the impacts of COVID-19 on the availability and movement of personnel, supplies and equipment and on the timing for regulatory approvals and permits, construction by Minera Exar, in which the Company has a co-ownership interest with Ganfeng and JEMSE, at the Caucharí-Olaroz project, and on third parties providing services to the Company in respect of the Thacker Pass project or to Minera Exar with respect to the Caucharí-Olaroz project; the Company’s mineral properties may not be developed as planned and uncertainty of whether production will commence at the Company’s mineral exploration properties or the properties in which it has an interest; cost overruns; risks associated with the Company’s ability to successfully secure adequate funding or remain funded; market prices affecting the ability to develop the Company's mineral properties, and properties in which the company has an interest; risks associated with co-ownership arrangements; risk to the growth of lithium markets; lithium prices; inability to obtain required governmental permits and government-imposed limitations on operations; technology risk; inability to achieve and manage expected growth; political risk associated with foreign operations, including co-ownership arrangements with foreign domiciled partners; emerging and developing market risks; risks associated with not having production experience; operational risks; changes in government regulations; changes to environmental requirements; failure to obtain or maintain necessary licenses, permits or approvals; insurance risk; receipt and security of mineral property titles and mineral tenure risk; changes in project parameters as plans continue to be refined; changes in legislation, governmental or community policy; changes in public perception concerning mining projects generally; mining industry competition; market risk; volatility in global financial condition; uncertainties associated with estimating Mineral Resources and Mineral Reserves, including uncertainties relating to the assumptions underlying Mineral Resource and Mineral Reserve estimates; and whether Mineral Resources will ever be converted into Mineral Reserves; whether the Company is able to successfully monetize any increase in off-take from any increased development plan, and the expected benefits from prior and future transactions and borrowings; the addition of further debt on the Company’s balance sheet; risks related to investments in Argentine bonds and equities; opposition to development of the Company’s mineral properties; the outcome of any litigation concerning the Company’s mineral properties; lack of unitization and reservoir management rules; water risk; surface access risk; geological, technical, drilling or processing problems; uncertainties in estimating capital and operating costs, cash flows and other project economics; liabilities and risks, including environmental liabilities and risks inherent in mineral extraction operations; health and safety risks; risks related to the stability and inflation of the Argentine peso, including any foreign exchange or capital controls which may be enacted in respect thereof, and the effect of current and any additional regulations on the Company’s operations; risks related to unknown financial contingencies, including litigation costs, on the Company’s operations; unanticipated results of exploration activities; unpredictable weather conditions; unanticipated delays in preparing technical studies; inability to generate profitable operations; restrictive covenants in debt instruments; lack of availability of additional financing on terms acceptable to the Company and/or its co-owners for any co-ownership interests; shareholder dilution; intellectual property risk; dependency on key personnel; payment of dividends; competition for, amongst other things, capital, undeveloped lands, skilled personnel, equipment and inputs; fluctuations in currency exchange and interest rates; regulatory risk, including as a result of the Company’s dual-exchange listing and increased costs thereof; conflicts of interest; Common Share price volatility; cybersecurity risks and threats; CATL not exercising its match right under its existing agreement with Millennial; the performance of the Company’s shares through to completion of the transactions contemplated by the offer made to Millennial being stable; the approval of Millennial shareholders of the transaction; changes to the Company’s current and future business plans and the strategic alternatives available to the Company; favourable treatment of the transaction under applicable anti-competition laws; and stock market conditions generally. Consequently, actual results and events may vary significantly from those included in, contemplated or implied by such statements.
Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking information contained in this MD&A is expressly qualified by these cautionary statements. All forward-looking information in this MD&A speaks as of the date of this MD&A. The Company 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. Additional information about these assumptions and risks and uncertainties is contained in our filings with securities regulators, including our most recent AIF, which are available on SEDAR at www.sedar.com.
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