Lithium Ionic: Sale of Salinas to PLS for US$37.5M, Retains 2% Royalty

0:04 Good morning, good afternoon or good evening, depending on where in the world you're signing in from. I appreciate you guys making the last minute. I know there's people from actually, looks like at least 6 or 7 time zones. I really appreciate you joining us from around the world today for some pretty exciting news. I've got with me today Blake Hyland, CEO and Director of Lithium Ionic. Blake, how are you today? Oh good, how are you? Good. So here's how today's gonna work, just for the folks in the room. I got some questions about this morning's pretty exciting press release. This is also an interactive event. We're going to keep it pretty short today, probably 15, 20 minutes. But if you do have a question or 2, we'll probably have time to get to it. So use that chat button at the bottom of your screen. We'll try to get to as many questions as we can today's short event. The only other thing before I get to the pro team, There's a request meeting button at the bottom of the screen. Please press that if you'd like to meet with Blake with the Myonic team.

0:50 We'll try to connect you after today's event. It's also being recorded. We'll be able to replay it probably in just a couple hours. So stay tuned for that. But Blake, big news this morning. You sold the Salinas properties to PLS for $37.5 million in cash and keeping a royalty on

1:06 top. So for anybody just catching the headline, give us the deal in a nutshell. What are shareholders waking up to this morning? Yeah, I think this is a hugely positive event. I'd start off by thanking our team who worked so hard to get it across the line and also for the members of PLS who worked so hard on it as well and working so collaboratively to get this across the line. So, we're excited to see what they do next. We're excited to see how rapidly and aggressively they can push their project forward in that region. I think that this area is going to be a big, big part of it. That's really a big catalyst to why we were so interested in moving forward with this transaction. We view, obviously, the cash component is almost $40 million US and then a 2% royalty on that. Depending how you do the math, there's 10, 15, maybe 20 million US of value in each one of those. I don't know. We'll see when we get there. So we look at this as a 60, 70 million US transaction,

2:06 which is darn near our market cap right now on a secondary asset for us. And these, on a per ton basis, LCE, that's about $120 per ton. I think that's well above what we're seeing in the market in the last couple of years, and certainly getting close to what Latin Resources saw when they sold the assets, it was next door to us to PLS a few years ago. So we looked at this as a neighbor who is working at consolidating that is going to operate a large project here that has been a collaborative and good partner in the region on moving projects forward. And it makes sense, it makes perfect sense that these things be the same deposit that run onto each other, that we're always likely gonna be the partner that we work with on these projects.

2:56 And ultimately to continue to unlock value in the Lithium Valley. So it was a no-brainer to work with them. They've been great to work with. Hopefully it's the start of a good partnership to work on many things in the future. But yeah, I look at the value proposition and it's pretty unbelievable what the team has been able to get across the line today. Awesome. And I want to rewind the tape for a second because I think the speed here is certainly a big part of the story. You walked into the Salinas district in early 23 and under 2 years took it from first drill holes to define a splodum and resource. How did the team move that fast? Well, that's what it's kind of what our team does. To be honest with you, I mean, I look at Bandera is the same way. I mean, it's a project that's gone from from drill hole to, you know, full feasibility study almost, you know, almost completed the next round of engineering and into permit process in 4 years. It's incredible the pace the team moves.

3:52 We've talked about this before in different contexts, but the Valley is kind of right for moving exploration forward. It's, I think, one of the most important hard rock developing asset regions in the world. It's very high quality, very high grade. And I do think we all give our team a ton of kudos. They just are excellent explorers. They've done a very good job of knowing where to go, how to get deals done, how to consolidate here, how to pick up ground that others can't. And I think for that reason, we were able to kind of get on top of something, get ground that was difficult to get, but We got it, understand the geology better than others, put some drill holes on it, outline something of value and then give that value back to our shareholders. Something that we, up till today, has had no value in our share price. I mean, an asset that had not contributed a single cent to where we trade, just brought in what I think is a 70 million US transaction. So it's just a great, great outcome.

4:53 Now, exciting. Now, I know people always say this and I think it's true. Timing is everything in mining. Lithium went through, as I'm sure everybody in the room knows, a pretty brutal down cycle. A lot of your peers had to raise money at probably the literal worst possible moment,

5:08 just to keep lights on. Prices have now turned. Why was now the right time to sell in your eyes? Yeah, look, I think hopefully we're the equity markets coming with the uptick in commodity price too. And I think it is. And there are a lot of good key indicators that we've talked about before that are showing that that's the direction things are going. But I think to your point, yeah, people have had to do that and take money out. And that's just the nature of the beast, you know, to move projects forward, you know, that don't make money, you have to tap into the market. Sometimes this helps us not do that continues to keep the company tight, and the share structure tight. I think it made sense now, because we had a neighbor who was ready to move, they're ready to move, They're ready to get going on building their project. And I think they certainly viewed this part of the belt as a key element in moving it forward near surface extension of what they're going to do.

6:03 They know they're going to aggressively engineer it and permanent and go through that process. Why do it twice? Like, let's get going. Let's do it. So the opportunities in front of us, I think this could be top of the market or bottom of the market. This is still an excellent valuation for the asset. So for us, it was a no brainer to move forward. It was not really kind of where we were as a company or not. It was, this is tremendous value for something that we didn't have value for before. This is with a partner or potential partner that we are excited to work with.

6:31 Let's get going and create value for our shareholders. No, exciting. Barry in the chat, I think there's something going on with your computer. You're writing stuff backwards. But I think I got your question. I've deleted it. But I will I will ask it before we head out. But Blake on the how, Because, you know, obviously, there are a lot of options here. You could have held on, you could have found a JV partner. Instead, you took clean sales, cash up front and a royalty in the back end. What made this structure the winner out of all the potential options with the property? That's right. And I think, you know, we saw a couple of different options. I, again, I think this is great value, but I do look at it and say, what's best for the whole district? What's best for the consolidation in this belt? What makes this district even better? This makes this district even better. Anybody looking into this belt is now going to see, you know, a PLS was able to expand already very large resource to be even larger, to be able to potentially build something that is a huge producer, you know, that's going to go alongside what Sigma is doing next door to us, and what we're going to be doing very soon and what CBL has been doing for 30 years.

7:40 This type of transaction, I think, is important both for us as a company and with the value that we gained out of it. But I also think there's tremendous value gained by Build right here and they're going to bring

7:51 that value to the belt. And that just creates even more opportunity for, you know, consolidation in the region, added visibility, added investment. And The more you can do that, the better. Can you bring in JV partners? Can you push and negotiate and be difficult with each other? Sure. Can you also look at growing the belt and being opportunistic and try to draw eyes to the region. Yeah, and that's what we chose to do, I think. Awesome. I do want to talk about the buyer for a second, because folks in the room might not know. PLS is one of the largest hard rock lithium producers on the planet, And they're writing a check to consolidate the ground right next to their Kalina project. What should that tell investors watching here today about Brazil's lithium valley generally?

8:41 Well, I think that when I look at them and I give them big kudos because this is an Australian company that, you know, a few years ago finally got the mandate to look outside of Australia, which is very rare for a lot of the lithium producers to actually step out of that region and look globally. And what I would say to that is, here is a company with lots of cash, that's been producing very well for a long time, one of the leaders in the industry, they could have gone anywhere. They could go anywhere in the world. They can go through North America, wherever they want to go. And they picked this belt as where they were going to start making their investments and where they were going to build projects next. I think to anybody looking broadly at the lithium business and where it's going to go next, this region is clearly important. And I think that PLS has pointed to that with their checkbook and said, we're all in, we're developing this region, we're going to have the Lithium Valley be the next hard rock belt. And so anybody looking at this should be looking at it the same way, I think. No, it's exciting. But I want to

9:44 obviously get to the fun part. It's a short interview. But where's the money going to go? All of its non-dilutive capital headed towards Bandera, your flagship, or non-dilutive, probably the favorite series of words for investors generally. Where does the first dollar go? How much closer does this get you to a construction decision? I'm stifling a bunch of jokes here that I want to make. I won't do that. But look, we are very clear about we're advancing a mine, right? We're in a permanent process and moving that forward. A lot of this money is now going to be earmarked for helping us advance that. If you look at the value I've talked about there between the cash that's coming in now, the value of these royalties, whether it be from the cash from production or whether they're saleable. And then you look at the 20 million prepaid that's attached to our offtake, you know, there's somewhere between 60, 70, 80, 90 million US of value in cash in this company now that we've been able to create over the last sort of 6 months. And we're going to continue

10:43 to chip away at that. And so that money is going to continue to go to advance Bandera, finalize the engineering, get the permit across the line, order long lead items, and start moving the project forward. We have timelines that we really believe we can stay on top of, and this cash is helping us stay on top of that. Awesome. One more from me and then I'll get into a couple that came in over email, but I'd love to bring it home. You've got a very strengthened balance sheet. You've got a flagship project, pretty clear singular mission, I think at this point. So paint the picture for us. What does lithium ionic look like in 1 to 2 years, let's say?

11:20 Yeah, like our vision, I don't think it's changed. We've been kind of steadily executing on the things that we said we're going to execute on them. Sometimes we miss them by a month or a week or a year, but we've steadily executed on the catalysts we said are going to come. And Bandera is going to be a focus now to bring that into production. We believe by the end of 27, start of 28, we can be in a place where we're constructed and moving rock. And I think that is incredibly fast. We started this conversation talking about how did you guys go from where you were in Salinas in 23 to where you are now? It's because we've had a steadfast focus on being as quick and moving as fast as possible to get these projects online, hit the market at the right time. We think it's gonna be perfect timing to have a huge supply demand gap.

12:08 And this project is gonna sing over that timeline. So we're remaining focused on that. That's what the next 12 to 24 months looks like. We're gonna continue to be open to consolidation and opportunity in the belt. We always have. We're going to continue to look for more Salinas opportunities, more Bandera opportunities, because I think it's what we're good at as well. But I view the next 2 years as extremely exciting for this company. Awesome. Got time. Just, I know we want to keep it to 15 minutes. There's 2 questions that came in over email. One is now how long are you cashed up till? Well, so it depends. I mean, look, this cash gives us a big, big runway. But the royalties can double that very quickly, too. And then, you know, getting through FID unlocks more cash. And the truth is, we want to be in a place where our next announcement around cash of any kind is that we're financed to build this mine, right? So we're not taking this cash to sit on it and wait until we have to go to the market again. I think very much our goal is to utilize this window of opportunity to get the permit across the line, finance the build and start construction. So, we're not counting down the days till the next raise, we're looking to build the mine next.

13:26 Awesome. The last one that I will shoot your way, as somebody wants to know, and I remind people, obviously people can't give exact dates on these but they want to know when the next news out of Bandera can be expected. Yeah good question I mean obviously you know we think we have a massive catalyst coming in the next a few weeks here so we're gonna we're gonna hopefully have that to discuss around Bandera. And then we're going to continue to be newsy around the build and construction of that. This cash helps us unlock a lot of the next steps on Bandera. So we're hoping that for the rest of the year, we're going to have a steady flow of very positive news around Bandera and its construction and into next year as well. Perfect. Appreciate it very much. I know you're a busy man today, Blake, so I won't keep you longer than the 15 minutes I promised.

14:14 For everybody in the room, particularly those who came in a bit late. I know there's about a dozen of you. Just a reminder, you can hit request meeting button at the bottom of the screen. It will also be up when I close the room and you can request a meeting with the Lithium Ionic team. But Blake, thanks so much. Exciting news, obviously, to the company. I'm looking forward to see what happens next.