UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

 

For the month of October 2021

Commission File Number 001-40569

 

Standard Lithium Ltd.

(Translation of registrant’s name into English)

Suite 110, 375 Water Street Vancouver, British Columbia, Canada V6B 5C6

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F ☐

Form 40-F ☒

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 

 

 

Exhibits 99.1, 99.2 and 99.3 to this Form 6-K of Standard Lithium Ltd. (the “Company”) are hereby incorporated by reference as exhibits to the Registration Statement on Form F-10 (File No. 333-259442) of the Company, as amended or supplemented.

 

DOCUMENTS INCLUDED AS PART OF THIS REPORT

 

Exhibit
99.1	Audited Consolidated Financial Statements for the year ended June 30, 2021
99.2	Management’s Discussion and Analysis for the year ended June 30, 2021
99.3	Consent of Manning Elliot LLP

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

			Standard Lithium Ltd.
			(Registrant)
Date:	October 22, 2021		By:	/s/ Robert Mintak
				Name:	Robert Mintak
				Title:	Director & CEO

 

 

 

 

 

 

 

 

 

3

 

Exhibit 99.1

 

Consolidated Financial Statements

(Expressed in Canadian dollars)

Years ended June 30, 2021 and 2020

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and Directors of Standard Lithium Ltd.

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated financial statements of Standard Lithium Ltd. and its subsidiaries (the “Company”) which comprise the consolidated statements of financial position as at June 30, 2021 and 2020, and the consolidated statements of comprehensive loss, changes in equity and cash flows for the years then ended and the related notes comprising a summary of significant accounting policies and other explanatory information (collectively referred to as the “consolidated financial statements”).

 

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

Material Uncertainty Related to Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 the Company has not generated revenue or cash flow from operations since inception. As at June 30, 2021, the Company has an accumulated deficit of $68,617,507. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a reasonable basis for our audit opinion.

 

 

Critical Audit Matters

Critical audit matters are matters arising from the current year audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 

/s/ Manning Elliott LLP

 

CHARTERED PROFESSIONAL ACCOUNTANTS

 

Vancouver, British Columbia, Canada

 

October 21, 2021

 

We have served as the Company’s auditor since 2017.

 

 

 

 

 

STANDARD LITHIUM LTD.

Consolidated Statements of Financial Position

As at June 30, 2021 and 2020

Expressed in Canadian dollars

 

			2021				2020
ASSETS
Current assets
Cash		$	27,988,471			$	4,141,494
Receivables			139,396				44,908
Prepaid expenses			249,671				281,616
			28,377,538				4,468,018
Non-current assets
Reclamation deposit  (Note 5)			77,660				85,392
Exploration and evaluation assets (Note 4)			31,590,194				28,948,349
Intangible asset (Note 6)			1,691,575				1,882,609
Pilot plant (Note 7)			12,338,741				22,377,444
			45,698,170				53,293,794
TOTAL ASSETS		$	74,075,708			$	57,761,812
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities (Note 12)		$	2,408,302			$	7,073,336
Non-current liabilities
Convertible loan (Note 8)			-				4,955,500
Decommissioning provision (Note 10)			123,940				136,280
			123,940				5,091,780
TOTAL LIABILITIES			2,532,242				12,165,116
EQUITY
Share capital (Note 11)			122,996,406				70,990,300
Reserves (Note 11)			19,563,420				15,716,067
Deficit			(68,617,507	)			(43,183,131	)
Accumulated other comprehensive income (loss)			(2,398,853	)			2,073,460
TOTAL EQUITY			71,543,466				45,596,696
TOTAL LIABILITIES AND EQUITY		$	74,075,708			$	57,761,812

 

Nature and Continuance of Operations (Note 1)

Commitments (Note 4)

Subsequent Events (Note 17)

 

Approved by the Board of Directors and authorized for issue on October 21, 2021.

 

“Robert Mintak”		“Dr. J. Andrew Robinson”
Director		Director

 

The accompanying notes are an integral part of these consolidated financial statements.

 

STANDARD LITHIUM LTD.

Consolidated Statements of Comprehensive Loss

Years ended June 30, 2021 and 2020

Expressed in Canadian Dollars

 

			2021				2020
Administrative Expenses
Advertising and investor relations		$	496,230			$	302,372
Amortisation of pilot plant (Note 7)			11,360,466				3,722,862
Amortisation of intangible asset (Note 6)			191,034				27,740
Consulting fees			934,479				687,946
Filing and transfer agent			154,230				91,189
Foreign exchange (gain) loss			(849,201	)			515,143
Management fees (Note 12)			1,526,911				925,815
Office and administration			574,276				294,438
Patent			269,765				110,158
Pilot plant operating			4,596,156				-
Preliminary economic assessment			210,283				88,273
Professional fees			711,741				374,815
Project investigation			229,257				-
Research and development			-				2,811
Share-based payment (Notes 11 and 12)			4,828,614				2,037,564
Travel			26,474				113,351
Loss from operations before other items			(25,260,714	)			(9,293,787	)
Other items
Loss on settlement of liability (Note 9)			-				(83,414	)
Interest and accretion expense (Notes 8 and 9)			(173,662	)			(150,167	)
Net loss before other comprehensive income (loss)			(25,434,376	)			(9,527,368	)
Other comprehensive income (loss)
Item that may be reclassified subsequently to income or loss:
Currency translation differences of foreign operations			(4,472,313	)			1,935,340
Total comprehensive loss		$	(29,906,689	)		$	(7,592,028	)
Weighted average number of common shares outstanding – basic and diluted			121,469,730				88,776,626
Basic and diluted loss per share		$	(0.21	)		$	(0.11	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

STANDARD LITHIUM LTD.

Consolidated Statements of Changes in Equity

Years ended June 30, 2021 and 2020

Expressed in Canadian dollars

 

		Number of shares				Share capital				Shares to be issued				Reserves				Deficit				Accumulated other comprehensive income (loss)				Total equity
Balance, June 30, 2019			87,594,076			$	57,875,488			$	475,000			$	13,544,859			$	(33,655,763	)		$	138,120			$	38,377,704
Share-based payment			-				-				-				2,037,564				-				-				2,037,564
Shares issued for cash, net of costs			16,140,219				11,794,287				-				133,644				-				-				11,927,931
Warrants exercised			163,025				53,525				-				-				-				-				53,525
Shares issued for exploration and evaluation assets			1,100,000				792,000				-				-				-				-				792,000
Shares issued for intangible asset acquisition			500,000				475,000				(475,000	)			-				-				-				-
Net loss for the year			-				-				-				-				(9,527,368	)			-				(9,527,368	)
Currency translation differences for foreign operations			-				-				-				-				-				1,935,340				1,935,340
Balance, June 30, 2020			105,497,320				70,990,300				-				15,716,067				(43,183,131	)			2,073,460				45,596,696
Share-based payment			-				-				-				4,828,614				-				-				4,828,614
Shares issued for cash, net of costs			15,697,500				31,867,688				-				-				-				-				31,867,688
Warrants exercised			11,245,133				10,151,569				-				-				-				-				10,151,569
Shares issued for conversion of loan			6,251,250				4,353,088				-				-				-				-				4,353,088
Shares issued for exploration and evaluation assets			1,100,000				3,411,000				-				-				-				-				3,411,000
Stock options exercised			1,375,000				2,222,761				-				(981,261	)			-				-				1,241,500
Net loss for the year			-				-				-				-				(25,434,376	)			-				(25,434,376	)
Currency translation differences for foreign operations			-				-				-				-				-				(4,472,313	)			(4,472,313	)
Balance, June 30, 2021			141,166,203			$	122,996,406			$	-			$	19,563,420			$	(68,617,507	)		$	(2,398,853	)		$	71,543,466

 

The accompanying notes are an integral part of these consolidated financial statements.

 

STANDARD LITHIUM LTD.

Consolidated Statements of Cash Flows

Years ended June 30, 2021 and 2020

Expressed in Canadian Dollars 

 

			2021				2020
Cash flows from (used in) operating activities
Net loss		$	(25,434,376	)		$	(9,527,368	)
Add items not affecting cash
Share-based payment			4,828,614				2,037,564
Amortisation of pilot plant			11,360,466				3,722,862
Amortisation of intangible asset			191,034				27,740
Interest and accretion expense			173,662				150,167
Loss on settlement of liability			-				83,414
Foreign exchange (gain) loss			(1,008,095	)			181,670
Net changes in non-cash working capital items to operations:
Receivables			(94,488	)			45,520
Prepaid expenses			31,945				(27,092	)
Accounts payable and accrued liabilities			1,314,051				193,021
Net cash used in operating activities			(8,637,187	)			(3,112,502	)
Cash flows used in investing activities
Exploration and evaluation expenditures			(5,924,200	)			(1,650,288	)
Intangible asset			-				(500,000	)
Pilot plant			(4,671,107	)			(14,068,082	)
Net cash used in investing activities			(10,595,307	)			(16,218,370	)
Cash flows from financing activities
Proceeds from the issuance of shares, net of costs			31,867,688				11,927,931
Exercise of warrants			10,151,569				53,525
Exercise of stock options			1,241,500				-
Proceeds from (repayment of) convertible loan			(181,286	)			4,641,796
Net cash from financing activities			43,079,471				16,623,252
Net change in cash			23,846,977				(2,707,620	)
Cash, beginning of year			4,141,494				6,849,114
Cash, end of year		$	27,988,471			$	4,141,494
Supplemental Cash Flow Information
Interest paid			181,286				-
Income taxes paid			-				-

 

Non-Cash Transactions (Note 16)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1.

Nature and Continuance of Operations

 

Standard Lithium Ltd. (the “Company”) was incorporated under the laws of the Province of British Columbia on August 14, 1998 under the name Tango Capital Corp. On April 7, 1999, the Company changed its name to Patriot Capital Corp. and to Patriot Petroleum Corp. effective March 5, 2002. On December 1, 2016 the Company continued under the Canadian Business Corporations Act and changed its name to Standard Lithium Ltd. The Company’s principal operations are comprised of exploration for and development of lithium brine properties in the United States of America (“USA”). The address of the Company’s corporate office and principal place of business is 110, 375 Water Street, Vancouver, British Columbia, Canada, V6B 5C6. The Company’s shares are listed on the TSX Venture Exchange and NYSE American Stock Exchange under the symbol “SLI” and the Frankfurt Exchange in “S5L”.

 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) on a going concern basis, which presume the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. The Company has no sources of revenue and as at June 30, 2021 had an accumulated deficit of $68,617,507. These matters raise significant doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to raise equity financings. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue in business.

 

During March 2020, the World Health Organisation declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse developments, has adversely affected workforces, economies and financial markets globally, leading to an economic downturn. The impact of COVID-19 on the Company’s operations has not been significant, but management continues to monitor the situation.

 

2.

Basis of Presentation

 

a)       Statement of compliance

 

These consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Board (“IASB”). These consolidated financial statements have been prepared on the basis of IFRS standards that are effective for the Company‘s fiscal year ended June 30, 2021.

 

b)       Basis of consolidation

 

The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries. On February 21, 2017, the Company acquired Moab Minerals Corp. and its wholly owned subsidiary 1093905 Nevada Corp. Moab Minerals Corp. was incorporated under the British Columbia Business Corporations Act and 1093905 Nevada Corp. was incorporated in the State of Nevada, USA. On March 17, 2017, the Company incorporated California Lithium Ltd. in the State of Nevada, USA. On June 13, 2017, the Company acquired Vernal Minerals Corp. and its wholly owned subsidiary Arkansas Lithium Corp. Vernal Minerals Corp. was incorporated under the British Columbia Business Corporations Act and Arkansas Lithium Corp. was incorporated in the State of Nevada, USA. On December 13, 2018, the Company acquired 2661881 Ontario Limited which was incorporated under the laws of Ontario. On February 3, 2021, the Company incorporated Texas Lithium Holding Corp. in the Province of British Columbia and on February 11, 2021 the Company incorporated its wholly owned subsidiary Texas Lithium Corp. in the State of Nevada, USA.

 

2.

Basis of Presentation - continued

 

b)       Basis of consolidation - continued

 

On June 9, 2021, the Company amalgamated Moab Minerals Corp., Vernal Minerals Corp. and 2661881 Ontario Limited into Standard Lithium Ltd. All significant inter-company balances and transactions have been eliminated upon consolidation.

 

c)       Functional and presentation currency

 

Items included in the consolidated financial statements of the Company and its wholly owned subsidiaries are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The functional currency of the Company and its Canadian subsidiary, Texas Lithium Holding Corp. is the Canadian dollar. The functional currency of 1093905 Nevada Corp., California Lithium Ltd., Arkansas Lithium Corp. and Texas Lithium Corp. is the United States dollar.

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of transaction. Foreign currency gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are included in profit and loss.

 

The results and financial position of a subsidiary that has a functional currency different from the presentation currency are translated into the presentation currency as follows:

 

·

Assets and liabilities are translated at the closing rate at the reporting date;

·

Income and expenses for each income statement are translated at average exchange rates for the period; and

·

All resulting exchange differences are recognised in other comprehensive income as cumulative translation adjustments.

On consolidation, exchange differences arising from the translation of the net investment in foreign entity is taken to accumulated other comprehensive loss. When a foreign operation is sold, such exchange differences are recognized in profit or loss as part of the gain or loss on sale.

 

d)       Basis of measurement

 

The consolidated financial statements have been prepared on the historical cost basis except for financial assets classified as fair value through profit or loss which are stated at their fair value.

 

In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

e)       Critical accounting estimates and judgments

 

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities and contingent liabilities as at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Estimates and judgments are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

 

2.

Basis of Presentation – continued

 

e)       Critical accounting estimates and judgments - continued

 

Significant accounting judgments that management has made in the process of applying accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements include, but are not limited to:

(i)       Determination of categories of financial assets and financial liabilities

The determination of categories of financial assets and financial liabilities has been identified as an accounting policy involving assessments and judgments made by management.

 

(ii)      Recoverability of long-lived assets

The application of the Company’s accounting policy for long-lived assets requires judgment in determining whether future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. If, after expenditures are capitalized, information becomes available suggesting there are indications of impairment, the carrying amount is tested to determine if it exceeds the recoverable amount.

 

(iii)    Going concern assumption

As described in Note 1, management uses its judgement in determining whether the Company is able to continue as a going concern.

 

(iv)     Deferred income taxes

Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable income realized, including the usage of tax planning strategies.

 

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the amounts recognized in the financial statements are as follows:

 

(i)       Share-based payment transactions

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating the fair value for share-based payment transactions are disclosed in Note 11.

 

2.

Basis of Presentation – continued

 

e)       Critical accounting estimates and judgments - continued

 

(ii)      Impairment calculations

The Company evaluates each long-term asset each reporting period to determine if there are any indications of impairment. If any such indications exist, an estimate of the recoverable amount is performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. The estimates and assumptions used to estimate the recoverable amount of the long-lived assets are subject to risk and uncertainty and there is the possibility that changes in circumstances will alter these estimates and assumptions.

 

(iii)     Decommissioning provision

The Company estimates the decommissioning obligations for the Company’s pilot plant. In most instances, removal of assets and remediation occurs many years into the future. Amounts recorded for the decommissioning obligations and related accretion expense require estimates regarding remediation date, future environmental legislation, the extent of reclamation activities required, the engineering methodology for estimating costs, future removal technologies in determining the removal costs, and discount rates to determine the present value of these cash flows.

 

3.

Significant Accounting Policies

 

The accounting policies set out below have been applied consistently to all periods presented in these financial statements and have been applied consistently by the Company.

 

a)       Impairment of non-financial assets

Non-financial assets are evaluated at least annually by management for indicators that carrying value is impaired and may not be recoverable. When indicators of impairment are present, the recoverable amount of an asset is evaluated at the level of a cash generating unit (“CGU”), the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets, where the recoverable amount of the CGU is the greater of the CGU’s fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments to the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.

 

Where an impairment loss subsequently reverses for assets with a finite useful life, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

 

3.

Significant Accounting Policies – continued

  

b)       Income taxes

Tax expense comprises current and deferred tax. Tax is recognized in income except to the extent it relates to items recognized in other comprehensive income or directly in equity.

 

Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the end of the reporting period.

 

Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. Deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the end of the reporting period, and which are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.

 

Deferred tax liabilities are generally recognized for all taxable temporary differences. However, deferred tax liabilities are not recognized for taxable temporary differences arising on investments in subsidiaries where the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future, or on temporary differences that arise from goodwill which is not deductible for tax purposes. Deferred tax assets are recognized to the extent it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. Deferred tax assets are reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise on initial recognition of assets and liabilities acquired other than in a business combination.

 

c)       Convertible debentures

Convertible debentures are classified separately into financial liability and equity components in accordance with the substance of the contractual agreement. At the date of issue, the fair value of the liability component is estimated using a discount rate that would have been applicable to non-convertible debt. This amount is recorded as a liability on an amortized cost basis until extinguished upon conversion or repayment. The equity component is determined by deducting the amount of the liability component from the face value of the convertible debenture as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured.

 

d)       Earnings per share

Basic earnings (loss) per share (“EPS”) is calculated by dividing profit or loss attributable to ordinary equity holders (numerator) by the weighted average number of ordinary shares outstanding (denominator) during the period. The denominator is calculated by adjusting the shares issued at the beginning of the period by the number of shares bought back or during the period, multiplied by a time-weighting factor.

 

Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of dilutive options and other dilutive potential units. The effects of anti-dilutive potential units are ignored in calculating diluted EPS. All options and warrants are considered anti-dilutive when the Company is in a loss position.

 

3.

Significant Accounting Policies – continued

 

e)       Share-based payments

The Company has an equity-settled share purchase stock option plan. Share-based payments to employees are measured at the fair value of the instruments issued and are amortized over the vesting period, which is the period over which all of the specific vesting conditions are satisfied. For awards with graded vesting, the fair value of each tranche is recognized over its respective vesting period.

 

Share-based payments to non-employees are measured at the fair value of goods or services received, or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The offset to the recorded cost is to stock options reserve. Consideration received on the exercise of stock options is recorded as share capital and the related stock options reserve is transferred to share capital. Upon expiry the recorded value is transferred to deficit.

 

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.

 

Where a grant of options is cancelled and settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.

 

f)       Financial instruments

The following table summarizes the classification and measurement of the Company’s financial instruments under IFRS 9:

 

Financial Instrument	Classification
Cash	FVTPL
Accounts payable	Amortized cost
Convertible loan	Amortized cost

 

Financial assets

The Company classifies its financial assets into the following categories, depending on the purpose for which the asset was acquired. Management determines the classification of its financial assets at initial recognition.

 

Amortized cost

Amortized cost are those assets which are held within a business whose objective is to hold financial assets to collect contractual cash flows; and the terms of the financial assets must provide on specified dates cash flows solely through the collection of principal and interest.

 

3.

Significant Accounting Policies – continued

 

f)       Financial instruments – continued

Fair value through other comprehensive income (“FVOCI”)

FVOCI assets are those assets which are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets; and the contractual terms of the financial assets give rise on specified dates to cash flows solely through the collection of principal and interest.

 

FVTPL

A financial asset shall be measured at fair value through profit or loss unless it is measured at amortized cost or FVOCI. The Company may however make the irrevocable option to classify particular investments as FVTPL.

 

All financial instruments are initially recognized at fair value on the consolidated statement of financial position. Subsequent measurement of financial instruments is based on their classification. Financial assets and liabilities classified at FVTPL are measured at fair value with changes in those fair values recognized in the consolidated statement of loss and comprehensive loss for the year. Financial assets classified at amortized cost are measured at amortized cost using the effective interest method.

 

Financial assets are de-recognized when the contractual rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred.

Financial liabilities

Management determines the classification of its financial liabilities at initial recognition.

 

Amortized cost

The Company classifies all financial liabilities as subsequently measured at amortized cost using the effective interest method, except for financial liabilities carried at FVTPL and certain other exceptions.

 

Financial liabilities are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

 

g)       Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received net of direct issuance costs.

 

The Company uses the residual value method with respect to the measurement of common shares and share purchase warrants issued as units. The proceeds from the issue of units is allocated between common shares and share purchase warrants where the fair value of the common shares is based on the market value on the announcement date and the balance, if any, is allocated to the attached warrants.

 

3.

Significant Accounting Policies – continued

 

h)       Leases

Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Leases in terms of which the Company does not assume substantially all the risks and rewards of ownership are classified as operating leases, which are recognised as an expense on a straight-line basis over the lease term.

 

i)       Intangible assets

Intangible assets with finite useful lives are recorded at cost less accumulated amortization and accumulated impairment losses and are amortized on a straight-line basis over their estimated useful life. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives are carried at cost less accumulated impairment losses.

 

The Company’s intangible asset is amortized on a straight-line basis over its estimated useful life of 10 years.

 

j)       Asset acquisition

Management determines whether assets acquired and liabilities assumed constitute a business. A business consists of inputs and processes applied to those inputs that have the ability to create outputs. The Company completed the acquisition of 2661881 Ontario Limited on December 13, 2018 and concluded that the transaction did not qualify as a business combination under IFRS 3, “Business Combinations”, as management concluded that significant processes were not acquired. Accordingly, the acquisition of 2661881 Ontario Limited has been accounted for as an asset acquisition (Note 6).

k)       Exploration and Evaluation Expenditures

General exploration and evaluation (“E&E”) expenditures incurred prior to acquiring the legal right to explore are charged to profit or loss as incurred. E&E expenditures incurred subsequent to acquisition of the legal right to explore, including license and property acquisition costs, geological and geophysical expenditures, costs of drilling exploratory wells and directly attributable overhead including salaries and employee benefits, are initially capitalized as E&E assets. E&E assets are not depleted and are moved into property, plant and equipment when they are determined to meet certain technical feasibility and commercial viability thresholds as determined by management. Upon transfer to property, plant and equipment, E&E assets are assessed for impairment in addition to regular impairment reviews to ensure they are not carried at amounts above their estimated recoverable values.

 

3.

Significant Accounting Policies – continued

 

k)       Exploration and Evaluation Expenditures – continued

E&E assets are assessed for impairment at the cash-generating unit level when there are indicators of impairment. The Company considers the following to be indicators of impairment:

(a)

the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed;

(b)

substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned;

(c)

exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and

(d)

sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

 

l)       Property and Equipment

Property and and equipment is initially recorded at historical cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset.

 

Residual values and useful economic lives are reviewed at least annually and are adjusted if appropriate at each reporting date. Subsequent expenditures relating to an item of property and equipment are capitalized when it is probable that future economic benefits from the use of the assets will be increased. All other subsequent expenditure is recognized as repairs and maintenance expenses during the period in which they are incurred. Gains and losses on disposal of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of the asset and are recognized net within other income in the consolidated statement of comprehensive loss.

 

The Company’s pilot plant is amortized on a straight-line basis over its estimated useful life of 2 years.

 

m)       Decommissioning Provision

The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of long-term assets, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of management’s best estimate of future remediation costs arising from the decommissioning is capitalized to the related asset along with a corresponding increase in the decommissioning provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The amount capitalized will be depreciated on the same basis as the related assets.

 

The Company’s estimates of remediation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of future expenditures. These changes in estimates are recorded directly to the asset with a corresponding entry to the decommissioning provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates.

 

3.

Significant Accounting Policies – continued

 

m)      Decommissioning Provision – continued

Changes in the net present value due to the passage of time are charged to profit and loss for the period as a borrowing cost with a corresponding entry to the decommissioning provision. The net present value of remediation costs arising from subsequent site damage that is incurred on an ongoing basis during production are charged to profit or loss in the period incurred. The costs of remediation projects that were included in the provision are recorded against the provision as incurred.

 

n)       Research and development expenditures

Research expenditures are expensed in the period incurred. Product development expenditures are expensed in the period incurred unless the product under development meets specific criteria related to technical, market and financial feasibility for deferral and amortization. The Company's policy is to amortize deferred product development expenditures over the expected future life of the product once product revenues or royalties are recorded.

 

o)       Changes in accounting standards

 

New accounting standards issued but not yet effective

 

Accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.

 

4.

Exploration and Evaluation Assets

 

			California Property $				Arkansas Property $				Total $
Acquisition costs:
Balance, June 30, 2019			8,101,447				10,863,335				18,964,782
Acquisition of property			1,320,347				960,910				2,281,257
Effect of movement in foreign exchange rates			331,972				449,077				781,049
Balance, June 30, 2020			9,753,766				12,273,322				22,027,088
Acquisition of property			3,897,975				945,501				4,843,476
Effect of movement in foreign exchange rates			(883,192	)			(1,111,337	)			(1,994,529	)
Balance, June 30, 2021			12,768,549				12,107,486				24,876,035
Exploration Costs:
Balance, June 30, 2019			4,367,380				2,049,687				6,417,067
Other exploration costs			6,317				231,137				237,453
Effect of movement in foreign exchange rates			181,021				85,718				266,740
Balance, June 30, 2020			4,554,718				2,366,542				6,921,260
Other exploration costs			10,757				408,853				419,610
Effect of movement in foreign exchange rates			(412,424	)			(214,287	)			(626,711	)
Balance, June 30, 2021			4,153,051				2,561,108				6,714,159
Balance, June 30, 2020			14,308,484				14,639,864				28,948,349
Balance, June 30, 2021			16,921,600				14,668,594				31,590,194

 

4.

Exploration and Evaluation Expenditures - continued

 

California Property

 

On August 11, 2016, the Company entered into an option purchase and assignment agreement (the "Option Purchase Agreement") with TY & Sons Explorations (Nevada), Inc. ("TY & Sons") and Nevada Alaska Mining Company Inc. ("Nevada Mining"), pursuant to which the Company will acquire all of TY & Sons’ right, title and interest in a property option agreement between TY & Sons and Nevada Mining, as property owner (the "Underlying Option Agreement"). Under the Underlying Option Agreement, TY & Sons has the option (the "Option") to acquire from Nevada Mining an interest in the California Property (collectively, the "Option Purchase"), which comprises mineral claims situated in San Bernardino County, California. The transaction, having received the approval of the TSX Venture Exchange, closed on November 17, 2016. As consideration, the Company issued 14,000,000 common shares of the Company and paid certain costs incurred to TY & Sons.

 

In order to exercise the Option pursuant to the terms of the Underlying Option Agreement, the Company will be required to pay the total sum of US$325,000 and issue an aggregate of 2,500,000 common shares to Nevada Mining as follows:

 

·

US$125,000 on closing of the Option Purchase Agreement (paid)

·

US$50,000 on or before July 7, 2017 (paid)

·

US$50,000 on or before July 7, 2018 (paid)

·

US$50,000 on or before July 7, 2019 (paid)

·

US$50,000 on or before July 7, 2020 (paid)

 

·

Issue 500,000 common shares on closing of the Option Purchase Agreement (issued)

·

Issue 500,000 common shares on or before October 1, 2017 (issued)

·

Issue 500,000 common shares on or before October 1, 2018 (issued)

·

Issue 500,000 common shares on or before October 1, 2019 (issued)

·

Issue 500,000 common shares on or before October 1, 2020 (issued)

 

The property is subject to a 2.5% net smelter return royalty on commercial production from the mineral claims, in favour of Nevada Mining. The property is also subject to an additional 0.5% net smelter returns royalty applicable to any after acquired properties in the area of interest stipulated by the Option Purchase Agreement, also in favour of Nevada Mining.

 

On May 1, 2017, the Company signed a Property Lease Agreement with National Chloride Company of America (“National Chloride”) for rights to an adjacent property to the California Property, with approximately 12,290 acres. Under this Property Lease Agreement, the Company paid US$25,000 at signing of a Letter of Intent and will be required to pay the total sum of US$1,825,000 and issue an aggregate of 1,700,000 common shares of the Company to National Chloride as follows:

 

4.

Exploration and Evaluation Expenditures - continued

 

California Property – continued

 

·

US$25,000 on the Purchase Agreement date (paid)

·

US$50,000 on or before November 24, 2017 (paid)

·

US$100,000 on or before May 24, 2018 (paid)

·

US$100,000 on or before May 24, 2019 (paid)

·

US$100,000 on or before May 24, 2020 (paid)

·

US$100,000 on or before May 24, 2021 (paid)

·

US$100,000 on or before May 24, 2022

·

US$250,000 upon successful completion of a pre-feasibility study

·

US$1,000,000 upon successful completion of a bankable feasibility study

 

·

Issue 100,000 common shares on the closing date (issued)

·

Issue 100,000 common shares on or before November 24, 2017 (issued)

·

Issue 200,000 common shares on or before May 24, 2018 (issued)

·

Issue 200,000 common shares on or before May 24, 2019 (issued)

·

Issue 200,000 common shares on or before May 24, 2020 (issued)

·

Issue 200,000 common shares on or before May 24, 2021 (issued)

·

Issue 200,000 common shares on or before May 24, 2022

·

Issue 500,000 common shares successful completion of a pre-feasibility study

 

It is expressly agreed that the “Leased Rights” are limited to lithium exploration and production activities and operations. The Company will pay a two percent royalty on gross revenue derived from the properties to National Chloride, subject to a minimum annual royalty payment of US$500,000. On September 1, 2017, the Property Lease Agreement was amended to include an additional approximately 6,000 acres adjacent to the 12,290 acres. The amendment agreement continues all the economic terms of the previous lease agreement with National Chloride, with the additional requirement that the Company will be responsible for ongoing carrying costs associated with the additional claims. A payment of $56,873 (US$44,805) was made to the Bureau of Land Management, Department of the Interior (“BLM”) for these carrying costs.

 

On April 23, 2018 the Company entered into an exploration and option agreement (“EOA”), with TETRA Technologies, Inc., to secure access to additional operating and permitted land consisting of approximately 12,100 acres in Bristol Dry Lake, and up to 11,840 acres in the adjacent Cadiz Dry Lake, Mojave Desert, California. The EOA with TETRA allows for the exclusive right to negotiate and conduct exploration activities and to enter into a mineral lease to allow exploration and production activities for lithium extraction on property held under longstanding mining claims and permits by TETRA.

 

4.

Exploration and Evaluation Expenditures - continued

 

California Property – continued

 

In connection with the entering into of the EOA, the Company made a non-refundable deposit of $131,680 (US$100,000) and will be required to pay the total sum of US$2,700,000 and issue an aggregate of 3,400,000 common shares of the Company to TETRA Technologies, Inc. as follows:

 

·

US$100,000 initial payment on April 23, 2018 (paid)

·

US$100,000 on or before October 23, 2018 (paid)

·

US$200,000 on or before April 23, 2019 (paid)

·

US$200,000 on or before April 23, 2020 (paid)

·

US$200,000 on or before April 23, 2021 (paid)

·

US$200,000 on or before April 23, 2022

·

US$200,000 on or before April 23, 2023

·

US$500,000 upon successful completion of a pre-feasibility study

·

US$1,000,000 upon successful completion of a bankable feasibility study

 

·

Issue 200,000 common shares on April 23, 2018 (issued)

·

Issue 200,000 common shares on or before October 23, 2018 (issued)

·

Issue 400,000 common shares on or before April 23, 2019 (issued)

·

Issue 400,000 common shares on or before April 23, 2020 (issued)

·

Issue 400,000 common shares on or before April 23, 2021 (issued)

·

Issue 400,000 common shares on or before April 23, 2022

·

Issue 400,000 common shares on or before April 23, 2023

·

Issue 1,000,000 common shares successful completion of a pre-feasibility study

 

4.

Exploration and Evaluation Expenditures - continued

 

Arkansas Property

 

On July 26, 2017, the Company entered into a Memorandum of Understanding (MOU) with a non-affiliated NYSE-listed company (the “Vendor”) with regard to an option to acquire certain rights to conduct brine exploration and production and lithium extraction activities on approximately 33,000 net brine acres located in Columbian and Lafayette Counties, Arkansas. At signing of the MOU, a non-refundable deposit of $614,150 (US$500,000) was made with additional fees and payment obligations in the future if the option is executed and exercised, and subject to certain conditions.

 

On December 29, 2017, the Company entered into an Option Agreement to proceed with the transaction (the “Agreement Date”). Under this Option Agreement, the Company will be required to make payments to the Vendor as follows:

 

·

US$500,000 before January 28, 2018 (paid)

·

An additional US$600,000 on or before December 29, 2018 (paid)

·

An additional US$700,000 on or before December 29, 2019 (paid)

·

An additional US$750,000 on or before December 29, 2020 (paid)

·

Additional annual payments of US$1,000,000 on or before each annual anniversary of the Agreement Date, beginning with that date that is 48 months following the Agreement Date, until the earlier of the expiration of the Exploratory Period or, if the Optionee exercises the Option, the Optionee beginning payment of the Royalty.

 

During the Lease Period, at any time following the commencement of Commercial Production, the Company agreed to pay a Royalty of 2.5% of gross revenue (minimum Royalty US$1,000,000) to the underlying owner.

 

On May 4, 2018 the Company entered into a Memorandum of Understanding (“MOU”), with LANXESS Corporation (“LANXESS”) with the purpose of testing and proving the commercial viability of extraction of lithium from brine that is produced as part of LANXESS’ bromine extraction business at its three southern Arkansas facilities. The MOU sets out the basis on which the parties have agreed to cooperate in a phased process towards developing commercial opportunities related to the production, marketing and sale of battery grade lithium products extracted from tail brine and brine produced from the Smackover Formation. The MOU forms the basis of what will become a definitive agreement and is binding until the execution of a more comprehensive agreement that the parties may execute on the completion of further development phases. The Company has paid an initial $3,834,000 (US$3,000,000) reservation fee to LANXESS to secure access to the tail brine, with an additional US$3,000,000 reservation fee due upon completion of certain development phases which were completed prior to the year end of June 30, 2019. The additional US$3,000,000 fee was included in the accounts payable and accrued liabilities as at June 30, 2020 and 2019 and was paid in full on February 16, 2021.

 

5.

Reclamation deposit

 

On September 6, 2017, the Company paid $77,660 (US$62,659) for a reclamation bond to the Bureau of Land Management (“BLM”) with respect to the exploration trenching and drilling on the California Property (Note 4). This amount was determined by the BLM to be sufficient to meet all anticipated reclamation requirements.

 

6.

Intangible asset

 

On December 13, 2018, the Company acquired 2661881 Ontario Limited (“2661881”) from Craig Johnstone Brown (“Brown”) by purchasing all the issued and outstanding shares. 2661881 holds the intellectual property rights to a process for the selective extraction of lithium from brine solutions (the “IP Assets”). The Company determined that this transaction is an asset acquisition as the assets acquired did not constitute a business.

 

The consideration payable by the Company to Brown will be comprised of cash and common shares of the Company as follows:

 

(i)

$50,000 deposit (paid);

(ii)

$250,000 on the closing date (paid);

(iii)

$250,000 promissory note payable six months after the closing date (paid);

(iv)

500,000 common shares on the closing date (issued);

(v)

$500,000 payable on the earlier of (i) the third anniversary of the closing date, (ii) the date that the Company conclusively determines whether or not to proceed with the commercial development of the IP Assets (regardless of the outcome of such decision); or (iii) such other date as the Company and Brown may agree in writing (the “Investment Date”)(paid); and

(vi)

500,000 shares issuable on the earlier of (i) the third anniversary of the closing date, (ii) the date that the Company conclusively determines whether to proceed with the commercial development of the IP Assets (regardless of the outcome of such decision); or (iii) such other date as the Company and Brown may agree in writing (the “Investment Date”)(issued).

 

On October 28, 2019, the Company agreed to accelerate the timeframe of completion of the payments and common share issuances detailed under items (v) and (vi) above to Brown by making (a) a cash payment of $250,000, on or before November 15, 2019 (paid); and (b) a further $250,000 (paid), and the issuance of 500,000 common shares (issued) on or before December 31, 2019. As at June 30, 2020, the Company had satisfied all payment and share issuance obligations due and owing with respect to the acquisition of 2661881 as detailed above.

 

6.

Intangible asset (continued)

 

The fair value of the intangible assets acquired is as follows:

			$
Consideration paid
Cash			300,000
Fair value of 500,000 common shares issued at closing date			475,000
Fair value of promissory note payable due six months after closing date			226,391
Cash payable on or before the Investment Date			375,657
Fair value of 500,000 common shares issuable on or before the Investment Date			475,000
Total consideration paid			1,852,048
Legal fees capitalized in connection with the acquisition of 2661881			58,301
Balance, June 30, 2019			1,910,349
Amortisation			(27,740	)
Balance, June 30, 2020			1,882,609
Amortisation			(191,034	)
Balance, June 30, 2021			1,691,575

 

The intangible asset represents purchase of intellectual property rights and was put in use in conjunction with the operation of the Company’s pilot plant on May 9, 2020 (Note 7).

 

7.

Pilot plant

 

On May 9, 2020, the Company commenced full-time operation of its LiSTR pilot plant, located at LANXESS’ south plant facility in El Dorado, Arkansas. The pilot plant is the culmination of over three years of research and development activities by the Company and its partners. The pilot plant is a bespoke DLE (Direct Lithium Extraction) plant, designed to extract lithium directly and continuously from Smackover Formation brines. The plant is designed to process up to 50 USGPM of brine, extract the lithium, and produce a high quality, concentrated lithium chloride intermediate product.

 

The pilot plant is being amortized on a straight-line basis over its estimated useful life of 2 years and has an estimated salvage value of $620,000 at the end of its estimated useful life.

 

As at June 30, 2021, the carrying value of the pilot plant is summarized as follows:

			$
Balance at June 30, 2019			-
Costs transferred from asset under construction			25,964,026
Decommissioning provision			136,280
Amortisation			(3,722,862	)
Balance at June 30, 2020			22,377,444
Additions			2,764,138
Amortisation			(11,360,466	)
Effect of movement in foreign exchange rates			(1,442,375	)
Balance at June 30, 2021			12,338,741

 

8.

Convertible loan

 

On October 29, 2019 (the “Closing Date”), the Company entered into a US$3,750,000 loan and guarantee agreement (the “Agreement”) with LANXESS Corporation (the “Lender”). The Loan was fully advanced to the Company on the Closing Date and will be used in the ongoing development of the Company’s pilot plant in southern Arkansas (see Note 7).

 

The principal amount of the Loan matures on the fifth anniversary of the Closing Date, provided that at the election of the Lender at any time after the second anniversary of the Closing Date, the Maturity Date shall be such earlier date as the Lender may elect by written notice provided to the Company at least 60 days before such earlier date. The Loan will be convertible at the option of the Lender at any time prior to the repayment of the Loan, at the Lender’s option, to convert all or any portion of a Loan into common shares and warrants of the Company at a rate such that for each US$1,000 of principal converted, the Lender will receive 1,667 common shares of the Company and one-half of one warrant to purchase an additional common share with an exercise price of $1.20 per common share for a term of three years. Assuming full conversion of the Loan principal, the Lender would receive 6,251,250 common shares and 3,125,625 warrants of the Company. All securities issued upon conversion of the Loan will be subject to four-month-and-one-day statutory hold period from the date the Loan was advanced.

 

The outstanding principal amount of the Loan will bear interest at an annual rate of 3.0%, subject to adjustments with accrued interest being payable in cash on each anniversary of the Closing Date. In the event that the Company has a positive consolidated operating cash flow, as shown on its consolidated financial statements, the Company will pay a fee to the Lender of 4.5% per annum on the average daily outstanding principal amount of the Loan from the issuance date to the date that the consolidated operating cash flow of the Company is positive. From and after the date on which the consolidated operating cash flow of the Company is positive, the annual interest rate increases to 7.5%. Pre-payments are permitted with prior written approval of the Lender and are subject to a prepayment fee of 3.0% on the portion of the Loan being prepaid.

 

The Company determined that the Convertible loan contains an embedded foreign exchange derivative liability and a debt host liability. The embedded foreign exchange derivative liability was determined to be not material and therefore the Company assigned the full value on initial recognition to the debt host liability.

 

The gross proceeds of the Convertible loan were reduced by the transaction costs of US$199,869 resulting in a balance of US$3,550,131 on initial recognition. The Convertible loan is measured at amortized cost and will be accreted to maturity over the term at 4.1% per annum using the effective interest method.

 

On June 10, 2021, the Lender elected for early conversion of the loan in full and the Company issued 6,251,250 common shares and issued 3,125,625 share purchase warrants. Each warrant is exercisable to acquire an additional common share of the Company at a price of $1.20 until June 10, 2024. The full conversion of the loan facility retired the US$3,750,000 of long-term liability. The Company paid the Lender $181,286 of interest accrued on the loan from the period of October 29, 2019 to June 9, 2021.

 

8.

Convertible loan - continued

 

			$
Beginning balance at June 30, 2019			-
Initial recognition			4,641,796
Interest and accretion expense			132,034
Foreign exchange loss			181,670
Balance at June 30, 2020			4,955,500
Interest and accretion expense			173,662
Foreign exchange gain			(594,788	)
Common shares issued for conversion			(4,353,088	)
Interest paid			(181,286	)
Balance at June 30, 2021			-

 

9.

Amounts payable

 

During the year ended June 30, 2019, the Company issued note payable of $250,000 payable six months after the closing date of the acquisition of 266861 Ontario Limited (Note 6) and will owe $500,000 at a later date as referenced in Note 6(v). Due to these amounts being owed at a later date the Company valued these at the present value and recorded accretion expense as follows:

 

			$
Beginning balance at June 30, 2018			-
Fair value of promissory note payable due six months after closing date			226,391
Accretion expense for promissory note payable due six months after closing date			23,609
Cash payable on or before the Investment Date			375,657
Accretion expense for cash payable on or before the Investment Date			22,796
Total note payable			648,453
Less: amount paid			(250,000	)
Amounts payable at June 30, 2019			398,453
Accretion expense for cash payable on or before the Investment Date			18,133
Loss on settlement of liability			83,414
Less: amount paid			(500,000	)
Amounts payable at June 30, 2020			-

 

10.

Decommissioning Provision

 

The following table presents the continuity of the decommissioning provision associated with the Company’s pilot plant:

			$
Beginning balance at June 30, 2019			-
Initial recognition			136,280
Balance at June 30, 2020			136,280
Effect of movement in foreign exchange rates			(12,340	)
Balance at June 30, 2021			123,940

 

10.

Decommissioning Provision - continued

 

The present value of the decommissioning provision of $123,940 was calculated using an average risk-free rate of 0.25%. Decommissioning activities are expected to occur between 2023 and 2025.

 

11.

Share Capital

 

a)       Authorized capital

 

Unlimited number of common voting shares without nominal or par value.

Unlimited number of preferred shares without par value issued in one or more series.

 

141,166,203 common shares were issued and outstanding at June 30, 2021.

 

On October 1, 2019, the Company issued 500,000 common shares with a fair value of $360,000 to Nevada Alaska Mining Co. Ltd. (Note 4).

 

On December 27, 2019, the Company issued 500,000 common shares with a fair value of $475,000 in connection with the acquisition of 2661881 Ontario Limited and the intangible asset (Note 6).

 

On February 20, 2020, the Company closed a non-brokered private placement of 16,140,219 special warrants (each, a “Special Warrant”) at a price of $0.75 per Special Warrant for gross proceeds of $12,105,165. Each Special Warrant entitles the holder to receive, upon voluntary exercise prior to, or deemed exercise on, the Automatic Exercise Date (as defined below) and without payment or additional consideration, one unit (each, a “Conversion Unit”) of the Company. Each Conversion Unit will consist of one common share of the Company, and one-half-of-one common share purchase warrant (each whole warrant, a “Conversion Warrant”). Each Conversion Warrant will entitle the holder to acquire an additional common share of the Company, at a price of $1.00 per share for a period of 24 months from the issuance of the Special Warrants, subject to an accelerated expiry if the closing price of the Company’s shares is greater than $1.50 per share for a period of 15 consecutive trading days (the “Acceleration Event”). The Company will give notice to the holders of the Acceleration Event and the Conversion Warrants will expire 30 days thereafter. Each Special Warrant will be deemed exercised on the date (the “Automatic Exercise Date”) that is two (2) business days following the earlier of: (i) the date which is four-months-and-one day from completion of the private placement; and (ii) the date on which the Company obtains a receipt from the applicable securities regulatory authorities (the “Securities Commissions”) for a final prospectus qualifying distribution of the Conversion Units. In connection with the completion of the private placement, the Company paid finders’ fees of $120,132, issued 452,025 Conversion Warrants with a fair value of $133,644 to finders and also incurred other issuance costs in the amount of $57,102. All Special Warrants converted to unrestricted common shares on June 21, 2020.

 

On April 23, 2020, the Company issued 400,000 common shares with a fair value of $248,000 to TETRA Technologies, Inc. (Note 4).

 

On May 24, 2020, the Company issued 200,000 common shares with a fair value of $184,000 to National Chloride. (Note 4).

 

During the year ended June 30, 2020, the Company issued a total of 163,025 common shares for the exercise of share purchase warrants. The Company received proceeds of $53,525 upon exercise. 

 

11.

Share Capital - continued

 

a)       Authorized capital – continued

 

On October 1, 2020, the Company issued 500,000 common shares with a fair value of $1,025,000 to Nevada Alaska Mining Co. Ltd. (Note 4).

 

On December 18, 2020, the Company closed a prospectus financing of 15,697,500 common shares at a price of $2.20 for aggregate gross proceeds of $34,534,500. The Company incurred $2,666,812 of share issuance costs related to the financing.

 

On April 23, 2021, the Company issued 400,000 common shares with a fair value of $1,600,000 to TETRA Technologies, Inc. (Note 4).

 

On May 21, 2021, the Company issued 200,000 common shares with a fair value of $786,000 to National Chloride. (Note 4).

 

On June 10, 2021, the Company issued 6,251,250 common shares to Lanxess Corporation upon the conversion of the convertible loan (Note 8).

 

During the year ended June 30, 2021, the Company issued a total of 11,245,133 common shares for the exercise of share purchase warrants. The Company received proceeds of $10,190,569 upon exercise. As at June 30, 2021, the Company held $39,000 as a receivable from the Company’s transfer agent.

 

During the year ended June 30, 2021, the Company issued a total of 1,375,000 common shares for the exercise of stock options. The Company received proceeds of $1,241,500 upon exercise and transferred $981,261 from contributed surplus to share capital.

 

b)

Warrants

 

Warrant transactions are summarized as follows:

		Number of warrants			Weighted average exercise price
Balance at June 30, 2019		14,886,996			1.53
Expired		(5,156,411	)		2.60
Exercised		(163,025	)		0.32
Cancelled		(15,000	)		1.00
Issued		8,522,135			1.00
Balance at June 30, 2020		18,074,695			0.98
Expired		(141,317	)		1.00
Exercised		(11,245,133	)		0.93
Issued		3,125,625			1.20
Balance at June 30, 2021		9,813,870			1.13

 

The weighted average remaining contractual life of the warrants outstanding is 1.40 years.

 

11.

Share Capital - continued

 

c)

Options

 

The Company has a stock option plan in place under which it is authorized to grant options to officers, directors, employees, consultants and management company employees enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. Under the plan, the exercise price of each option shall not be less than the price permitted by any stock exchange. The options can be granted for a maximum term of 10 years.

 

On July 19, 2019, the Company granted 100,000 stock options to a consultant of the Company at a price of $0.83 for a period of three years. All of the stock options vested on July 31, 2019.

 

On October 16, 2019, the Company granted 150,000 stock options to a consultant of the Company at a price of $0.75 for a period of four years. All of the stock options vested at grant.

 

On January 13, 2020, the Company granted 300,000 stock options to a consultant of the Company at a price of $0.89 for a period of 3 years. All of the stock options vested at grant.

 

On March 9, 2020, the Company granted 4,450,000 stock options to directors and officers of the Company at a price of $0.76 for a period of three (3) years. All of the stock options vested at grant.

 

On May 4, 2020, the Company granted 850,000 stock options to consultants of the Company at a price of $0.75 for a period of three years. All of the stock options vested at grant.

 

On May 13, 2020, the Company granted 100,000 stock options to a consultant of the Company at a price if $0.81 for a period of three (3) years with the stock options vesting one quarter at three months from grant date, one quarter at six months from grant date, one quarter at nine months from grant date and one quarter at one year from grant date.

 

On August 9, 2020, the Company extended the expiration date of 435,784 stock options issued to consultants from August 9, 2020 to August 9, 2021. The exercise price of the options remains $1.02 per option.

On January 18, 2021, the Company granted 1,200,000 stock options to directors and officers of the Company at a price of $3.39 for a period of 5 years. All of the stock options vested at grant.

On April 13, 2021, the Company granted 400,000 stock options to consultants of the Company at a price of $3.43 for a period of three (3) years with the stock options vesting one quarter at grant, one quarter three months from grant date, one quarter at six months from grant date and one quarter at nine months from grant date.

 

11.

Share Capital - continued

 

c)       Options

 

The weighted average fair value at grant date of options granted during the year ended June 30, 2021 was $2.90 per option (2020: $0.99). The fair value was determined using the Black-Scholes option-pricing model using the following weighted average assumptions:

 

		2021				2020
Expected stock price volatility			114	%			103	%
Risk-free interest rate			0.56	%			0.97	%
Dividend yield			-				-
Expected life of options			4 years				3.17 years
Stock price on date of grant		$	3.41			$	0.80
Forfeiture rate			-				-

 

Stock option transactions are summarized as follows:

 

		Number of options				Weighted average exercise price
Balance at June 30, 2019			8,747,681			$1.25
Options expired			(150,000	)		1.03
Options cancelled			(300,000	)		1.21
Options expired			(721,897	)		2.10
Options granted			5,950,000			0.78
Balance at June 30, 2020			13,525,784			0.99
Options exercised			(1,375,000	)		0.90
Options granted			1,600,000			3.40
Balance at June 30, 2021			13,750,784			$1.29

 

11.

Share Capital - continued

 

c)       Options

 

The following table summarizes stock options outstanding and exercisable at June 30, 2021:

 

				Options Outstanding												Options Exercisable
								Weighted				Weighted								Weighted
								Average				Average								Average
Exercise				Number				Remaining				Exercise								Exercise
Price				of				Contractual Life				Price				Number				Price
$				Shares				(years)				$				Exercisable				$
1.05				1,250,000				0.67				1.05				1,250,000				1.05
0.96				2,340,000				0.96				0.96				2,340,000				0.96
1.02				360,784				0.11				1.02				360,784				1.02
2.10				500,000				1.65				2.10				500,000				2.10
1.40				1,900,000				2.18				1.40				1,900,000				1.40
1.00				500,000				0.75				1.00				750,000				1.00
0.75				150,000				2.30				0.75				150,000				0.75
0.76				4,450,000				1.69				0.76				4,450,000				0.76
0.75				600,000				1.84				0.75				600,000				0.75
0.81				100,000				1.87				0.81				100,000				0.81
3.39				1,200,000				4.56				3.39				1,200,000				3.39
3.43				400,000				2.79				3.43				100,000				3.43
				13,750,784				1.78				1.29				13,450,784				1.23

 

12.

Related Party Transactions

 

Key management personnel are persons responsible for planning, directing and controlling the activities of the entity, and include directors and officers of the Company.

 

Compensation to key management is comprised of the following:

			2021				2020
Management fees		$	1,526,911			$	925,125
Share-based payments			4,072,365				1,402,448
		$	5,599,276			$	2,327,573

 

As at June 30, 2021 there is $404,296 (2020: $200,809) in accounts payable and accrued liabilities owing to officers of the Company.

 

Amounts due to/from the related parties are non-interest bearing, unsecured and have no fixed terms of repayment.

 

13.

Income Taxes

 

Income tax expense (recovery) varies from the amount that would be computed from applying the combined Canadian federal and provincial income tax rate to income before taxes as follows:

 

			2021				2020
Net loss for the year before taxes		$	(25,434,376	)		$	(9,527,368	)
Statutory Canadian corporate tax rate			27.0	%			27.0	%
Anticipated tax recovery		$	(6,867,282	)		$	(2,572,389	)
Non-deductible items and other differences			1,843,110				866,608
Change in unrecognized tax benefits			5,024,172				1,705,781
Actual income tax provision (recovery)		$	-			$	-

 

The significant components of the Company’s deferred tax assets (liabilities) are as follows:

 

 

			2021				2020
Non-capital loss carry forwards		$	8,119,908			$	5,655,576
Capital assets			2,979,317				740,484
Mineral property interests			1,765,416				1,765,416
Share issue costs			871,412				550,405
			13,736,053				8,711,881
Unrecognized deferred tax assets			(13,736,053	)			(8,711,881	)
Net deferred income tax assets		$	-			$	-

 

At June 30, 2021, the Company has available non-capital tax losses for Canadian income tax purposes of approximately $25,325,000, available for carry-forward to reduce future years’ taxable income, if not utilized, expiring between 2031 and 2041. At June 30, 2021, the Company has available non-capital tax losses for United States income tax purposes of approximately $6,106,000, available for indefinite carry-forward to reduce future years’ taxable income.

 

14.

Capital Management

 

The Company considers its capital structure to include shareholders’ equity. Management’s objective is to ensure that there is sufficient capital to minimize liquidity risk and to continue as a going concern. Management reviews its capital management approach on an ongoing basis and believes that its approach, given the relative size of the Company is reasonable.

 

The Company is not subject to any external restrictions and the Company did not change its approach to capital management during the year.

 

15.

Financial instruments and financial risk management

 

The fair value of financial instruments is the amount of consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act. Fair values are determined by reference to quoted market prices, as appropriate, in the most advantageous market for that instrument to which the Company has immediate access. In the absence of an active market, fair values are determined based on prevailing market rates for instruments with similar characteristics.

 

The fair value of current financial instruments approximates their carrying value as they are short term in nature.

 

Financial instruments that are held at fair value are categorised based on a valuation hierarchy which is determined by the valuation methodology utilised:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is as prices) or indirectly (that is, derived from prices).

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

There were no transfers between Levels 1, 2 or 3 for the years ended June 30, 2021 and 2020.

 

The following table sets forth the Company’s financial assets measured at fair value by level within the fair value hierarchy:

June 30, 2021			Level 1				Level 2				Level 3				Total
Cash		$	27,988,471			$	-			$	-			$	27,988,471

 

June 30, 2020			Level 1				Level 2				Level 3				Total
Cash		$	4,141,494			$	-			$	-			$	4,141,494

 

The Company’s Board of Directors has the overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and in response to the Company’s activities. Management regularly monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

 

In the normal course of operations, the Company is exposed to various risks such as commodity, interest rate, credit, and liquidity risk. To manage these risks, management determines what activities must be undertaken to minimize potential exposure to risks. The objectives of the Company in managing risk are as follows:

·

maintaining sound financial condition;

·

financing operations; and

·

ensuring liquidity to all operations.

 

15.

Financial instruments and financial risk management – continued

 

In order to satisfy these objectives, the Company has adopted the following policies:

·

recognize and observe the extent of operating risk within the business;

·

identify the magnitude of the impact of market risk factors on the overall risk of the business and take advantage of natural risk reductions that arise from these relationships.

 

(i)

Interest rate risk

The Company does not have any financial instruments which are subject to interest rate risk.

 

(ii)

Credit risk

Credit risk is the risk of loss if counterparties do not fulfill their contractual obligations and arises principally from trade receivables. The Company does not have any financial instruments which are subject to credit risk.

 

(iii)

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages this risk by careful management of its working capital to ensure its expenditures will not exceed available resources. As at June 30, 2021, the Company has a working capital surplus of $25,969,236 (2020 – working capital deficit $2,605,318).

 

(iv)

Foreign Exchange Risk

Currency risk is the risk to the Company’s earnings that arises from fluctuations of foreign exchange rates and the degree of volatility of these rates. The Company does not use derivative instruments to reduce its exposure to foreign currency risk. The Company is exposed to currency risk through the following assets and liabilities denominated in US dollars:

 

			2021 $				2020 $
Cash			736,623				574,506
Accounts payable			(1,520,823	)			(6,426,587	)
Convertible loan			-				(4,955,500	)

 

At June 30, 2021, US Dollar amounts were converted at a rate of USD 1.00 to CAD 1.2394. A 10% increase or decrease in the US Dollar relative to the Canadian Dollar would result in a change of approximately $78,000 (2020: $700,000) in the Company’s comprehensive loss for the year.

 

16.

Non-Cash Transactions

 

Non-cash Financing and Investing Activities		2021				2020
		$				$
Shares issued for exploration and evaluation assets			3,411,000				792,000
Shares issued for convertible loan			4,353,088				-
Warrants issued for finder’s fees			-				133,644
Shares issued for intangible asset			-				475,000
Exploration and evaluation expenditures included in accounts payable			152,564				4,224,680
Pilot plant expenditures included in accounts payable			225,265				2,132,234

 

17.

Subsequent Events

 

On July 13, 2021, the Company commenced trading on the NYSE American Stock Exchange under the symbol “SLI” and concurrently changed its trading symbol on the TSX Venture Exchange to “SLI.V”

 

On July 20, 2021, the Company granted 200,000 stock options to a director. The options have an exercise price of $6.08 for a period of five (5) years. All of the options vested at grant.

 

Subsequent to June 30, 2021, the Company issued 3,949,045 common shares upon the exercise of warrants for proceeds of $4,190,316 and 434,745 common shares upon the exercise of stock options for proceeds of $441,961.

 

 

 

 

Exhibit 99.2 

 

 

 

 

 

 

 

 

 

 

 

 

Management’s Discussion and Analysis

 

FOR THE YEAR ENDED JUNE 30, 2021

 

 

 

 

 

 

 

 

introduction

 

The following management’s discussion and analysis (“MD&A”) for Standard Lithium Ltd. was prepared by management based on information available as at October 21, 2021 and it should be reviewed in conjunction with the audited consolidated financial statements and related notes thereto of the Company for the year ended June 30, 2021. The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). All dollar figures are expressed in Canandian dollars unless otherwise stated. These documents and additional information on the corporation are available on SEDAR at www.sedar.com.

 

As used in this MD&A, the terms “Standard Lithium” and “the Company” mean Standard Lithium Ltd., unless the context clearly requires otherwise.

 

Forward-Looking Statements

 

Except for statements of historical fact, this MD&A contains certain “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”). The 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. 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 Company’s planned exploration and development programs, commercial opportunities for lithium products, expected results of exploration, accuracy of mineral or resource exploration activity, accuracy of mineral reserves or mineral resources estimates, including the ability to develop and realize on such estimates, whether mineral resources will ever be developed into mineral reserves, and information and underlying assumptions related thereto, budget estimates and expected expenditures by the Company on its properties, regulatory or government requirements or approvals, the reliability of third party information, continued access to mineral properties or infrastructure, payments and share issuances pursuant to property agreements, fluctuations in the market for lithium and its derivatives, expected timing of the expenditures, performance of the Company’s business and operations, changes in exploration costs and government regulation in Canada and the United States, competition for, among other things, capital, acquisitions, undeveloped lands and skilled personnel, changes in commodity prices and exchange rates, currency and interest rate fluctuations, the Company’s funding requirements and ability to raise capital, expectations and anticipated impact of the COVID-19 outbreak, including with regard to the health and safety of the Company’s workforce, COVID-19 protocols and their efficacy and impacts on timelines and budgets, and other factors or information.

 

Forward-looking statements do 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, the Company has made assumptions regarding, among other things: current technological trends; ability to fund, advance and develop the Company’s properties; the Company’s ability to operate in a safe and effective manner; uncertainties with respect to receiving, and maintaining, mining, exploration, environmental and other permits; pricing and demand for lithium, including that such demand is supported by growth in the electric vehicle market; impact of increasing competition; commodity prices, currency rates, interest rates and general economic conditions; the legislative, regulatory and community environments in the jurisdictions where the Company operates; impact of unknown financial contingencies; market prices for lithium products; budgets and estimates of capital and operating costs; estimates of mineral resources and mineral reserves; reliability of technical data; anticipated timing and results of operation and development; and the impact of COVID-19 on the Company and its business. Although the Company believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, the Company 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.

 

Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, but are not limited to: general economic conditions in Canada, the United States and globally; industry conditions, including the state of the electric vehicle market; governmental regulation of the mining industry, including environmental regulation; geological, technical and drilling problems; unanticipated operating events; competition for and/or inability to retain drilling rigs and other services and to obtain capital, undeveloped lands, skilled personnel, equipment and inputs; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authorities; uncertainties associated with estimating mineral resources and mineral reserves, including uncertainties relating to the assumptions underlying mineral resource and mineral reserve estimates; whether mineral resources will ever be converted into mineral reserves; 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 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; intellectual property risk; stock market volatility; volatility in market prices for commodities; liabilities inherent in the mining industry; the development of the COVID-19 global pandemic; changes in tax laws and incentive programs relating to the mining industry; other risks pertaining to the mining industry; conflicts of interest; dependency on key personnel; and fluctuations in currency and interest rates, as well as those factors discussed in the section entitled “Risk Factors” in the Annual Information Form prepared by the Company for the year ended June 30, 2021.

 

Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended.

 

Readers are cautioned that the foregoing lists of factors are not exhaustive. 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.

 

summary of Standard lithium’s business

 

Standard Lithium Ltd. (“Standard”, the “Company” or “SLI”) was incorporated under the laws of the Province of British Columbia on August 14, 1998. At its annual general meeting held on November 3, 2016, the shareholders of the Company approved the change of name of the Company to “Standard Lithium Ltd.” and to the continuance of the Company from the Business Corporations Act (British Columbia) to the Canada Business Corporations Act. The shareholders also approved the consolidation of the Company’s common shares on the basis of one post-consolidation share for five pre-consolidation shares. All common share and per common share amounts in this report have been retroactively restated to reflect the share consolidation.

 

The Company’s common shares are listed on the TSX Venture Exchange (the “TSXV”) and the NYSE American Stock Exchange under the symbol “SLI”, and the Frankfurt Stock Exchange under the symbol “S5L”. The Company’s head office is located at 375 Water Street, Suite 110, Vancouver, British Columbia, V6B 5C6 Canada.

 

The Company is focused on the sustainable development of a portfolio of lithium-brine bearing properties in the United States utilizing proprietary Direct Lithium Extraction (“DLE”) and purification technologies. The Company has developed a suite of Intellectual Property (“IP”) related to novel technologies that can be deployed to either selectively extract lithium from brine or convert and purify intermediate lithium chemicals to higher purity materials.

 

This IP suite is protected by a series of patent applications, and where the underlying inventor is an associate of, or consultant to Standard, exclusive rights or sole-licensing agreements are in place to allow Standard unfettered access to the patent(s) and associated know-how.

 

The Company has also either directly secured brine leases from public lands or private landowners, or has partnered, in a variety of commercial relationships, with existing brine resource holders in Arkansas and California.

 

The Company’s immediate attention is on advancing its south Arkansas lithium project towards commercial production. The company also has an early stage lithium brine project in the Mojave Desert in California

 

Historical information relating to the formation of the various land packages and commercial agreements are available under the Company’s SEDAR profile.

 

Arkansas Lithium

 

The Company’s flagship project is located in southern Arkansas, where it is engaged in the testing and proving of commercial viability of lithium extraction from over 150,000 acres of permitted brine operations (the “LANXESS Property”). The Company has commissioned its first industrial-scale direct lithium extraction demonstration plant (the “Demonstration Plant”) at LANXESS’ (as defined herein) south plant facility connected to existing LANXESS infrastructure. The Demonstration Plant utilizes the company’s proprietary LiSTR technology to selectively extract lithium from brine that is a byproduct of existing bromine production facilities run by LANXESS. The LiSTR process uses a stable/fine-grained solid ceramic adsorbent material with a crystal lattice that under certain PH conditions is capable of selectively pulling lithium ions from brine and releasing lithium for recovery. The ceramic adsorbent material is loaded with lithium in stirred tank reactors containing the brine. The Li-extraction process takes advantage of the fact that the brine is hot, approximately 70°C. This means that no additional energy is required and the reaction kinetics for adsorption are ideal. In the second step, the loaded adsorbent releases the Li ions for recovery. The LiSTR process is capable of producing a high-purity lithium chloride (LiCl) solution for further processing into battery-quality lithium carbonate. The Demonstration Plant is being used for proof-of-concept and commercial feasibility studies. The Company is also pursuing the resource development of over 27,000 acres of separate brine leases and deeds located in southwestern Arkansas (the “South-West Arkansas Lithium Project”, and together with the LANXESS Property, the “Arkansas Lithium Project”).

 

lanxess project

 

On May 9, 2018 the Company announced the signing of a MOU with global specialty chemicals company LANXESS Corporation (“LANXESS”) and its US affiliate Great Lakes Chemical Corporation, with the purpose of testing and proving the commercial viability of extraction of lithium from brine (“tail-brine”) that is produced as part of LANXESS’ bromine extraction business at its three Southern Arkansas facilities.

 

The MOU sets out the basis on which the parties have agreed to cooperate in a phased process towards developing commercial opportunities related to the production, marketing and sale of battery grade lithium products that may be extracted from tail-brine and brine produced from the Smackover Formation. The MOU forms the basis of what will become a definitive agreement and is binding until the execution of a more comprehensive agreement that the parties may execute on the completion of further development phases. Standard Lithium paid an initial US$3,000,000 reservation fee to LANXESS allowing the Company to; locate and interconnect a lithium extraction demonstration plant at one of LANXESS processing facilities in south Arkansas, secure access to tail-brine produced as part of LANXESS bromine extraction business, cooperate with LANXESS as may be required to operate the demonstration plant with additional fees and obligations due from the Company to LANXESS in the future subject to certain conditions.

 

In addition, on November 9, 2018, the Company signed the LANXESS JV Term Sheet for a contemplated joint venture to coordinate in the commercial development of lithium extracted from the Smackover Formation in Southern Arkansas. Under the proposed terms of the joint venture, LANXESS would contribute lithium extraction rights and grant access to its existing infrastructure to the joint venture, and Standard Lithium would contribute existing rights and leases held in the Smackover Formation and the pilot plant being developed on the property, as well as its proprietary extraction processes including all relevant intellectual property rights.

 

Upon proof of concept, LANXESS is prepared to provide funding to the joint venture to allow for the commercial development of the future commercial project. It is anticipated that the joint venture will include options for Standard Lithium to participate in project funding on similar terms.

 

The final terms of the joint venture and any funding arrangement remain subject to completion of due diligence, technical proof of concept, normal economic viability studies to confirm the technical feasibility and economic viability of the project, and the negotiation of definitive agreements between the parties.

 

The Company has issued two technical reports for the LANXESS Project. The first Resource Report was filed on the Company’s SEDAR profile on November 19, 2018 and comprised an Inferred Resource estimate for lithium contained in brine underlying the LANXESS Property (19th Nov 2018 Inferred Resource report). The second report was a Preliminary Economic Assessment (PEA), filed on August 1, 2019 (link to PEA on SLL's SEDAR page). The PEA comprised an upgraded Indicated Resource estimate for the property, as well as preliminary capital and operational costing and project economics for a proposed commercial plant at the property. All information contained within the PEA superseded that which had been previously reported for the LANXESS Project.

 

As described above, on August 1 2019, the Company issued the Preliminary Economic Assessment (PEA) for the LANXESS Property and the Executive Summary of this is provided below. The full report is available under the Company’s SEDAR profile.

 

Property Location and Description

The LANXESS Property is located south and west of the City of El Dorado in Union County, AR, U.S.A. The southern and western edges of the Property border the State of Louisiana (LA) and Columbia County, respectively. The Property encompasses Townships 16-19 South, and Ranges 15-18, West of the 5th Meridian (W5M). The Property centre is at UTM 520600 Easting, 3670000 Northing, Zone 15N, NAD83.

 

 

lanxess project - continued

 

Ownership and History

The LANXESS Property is presently owned by LANXESS Aktiengesellschaft (LANXESS), a specialty chemicals company based in Cologne, Germany. Presently, LANXESS is listed in the Dow Jones Sustainability Index and FTSE4Good Index. LANXESS owns 100% of the brine leases and brine rights on their properties, either by an executed brine lease or by operation of law, as a result of unitization by the AOGC. The land package consists of 150,081.81 acres that cover over 607 km². Of the total land package, 142,881.81 acres are ‘Unitized’ and approximately 7,200 acres occur outside the Unit boundaries (Non-Unitized).

 

Each Unit (South, Central and West) has their own brine supply wells, pipeline network and bromine processing (separation) infrastructure. The facilities and their locations, which are 100% owned and operated by Great Lakes Chemical Corporation, a wholly-owned subsidiary of LANXESS, are as follows:

South Unit (South Plant): 324 Southfield Cutoff, El Dorado, AR 71730;

Central Unit (Central Plant): 2226 Haynesville Highway (HWY 15S), El Dorado, AR 71731; and

West Unit (West Plant): 5821 Shuler Road, Magnolia, AR 71731.

 

Geology and Mineralization

The authors have reclassified the LANXESS Li-Brine Resource from an Inferred Mineral Resource to an Indicated Mineral Resource in the current Technical Report. The average lithium concentration used in the resource calculation is 168 mg/L Li. Resources have been estimated using a cut-off grade of 100 mg/L lithium. The total Indicated LANXESS Li-Brine Resource for the South, Central and West brine units is estimated at 590,000 tonnes of elemental Li. The total lithium carbonate equivalent (LCE) for the main resource is 3,140,000 tonnes LCE. With a planned level of production of 20,900 tonnes per year (tpy) of LCE, the resources will exceed the planned 25 years of operation by a significant margin. Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no guarantee that all, or any part, of the mineral resource will be converted into a mineral reserve.

 

Recovery Method and Mineral Processing

Standard Lithium’s objective is to produce battery-grade lithium carbonate from the tail-brine that exits the LANXESS bromine extraction operations. There are three (3) bromine extraction operations that will be used for lithium extraction (South, Central and West). Each facility will have its own primary lithium chloride extraction plant, which will produce purified and concentrated lithium chloride solutions. These solutions will be conveyed, via pipelines, to one location (Central Plant) for further processing to the final product - lithium carbonate. The total lithium carbonate production is 20,900 tpy. The final product

lithium recovery is about 90%. The production process parameters are supported by bench scale metallurgical testing and mini-pilot plant testing program results.

 

CAPEX

Capital expenditures are based on an operating capacity of 20,900 tpy of battery grade lithium carbonate. Capital equipment costs have been obtained from in-house data and solicited budget price information. The estimate is compliant to the AACE International Class 5 standard. The accuracy of this estimate is expected to be within a -30% / +50% range.

 

The production process parameters are supported by bench scale metallurgical testing and mini-pilot plant testing program results.

 

lanxess project - continued

 

CAPEX Summary

Stage of Development	Description	Cost (US$)
Phase 1	South Lithium Chloride Plant	106,886,000
	Central Lithium Carbonate Plant – Train № 1	27,711,000
	Pipelines	2,340,000
	Contingency 25%	34,234,000
	Phase 1 Subtotal	171,171,000
Phase 2	West Lithium Chloride Plant	99,393,000
	Central Lithium Carbonate Plant – Train № 2	25,769,000
	Pipelines	3,780,000
	Contingency 25%	32,236,000
	Phase 2 Subtotal	161,178,000
Phase 3	Central Lithium Chloride Plant	66,589,000
	Central Lithium Carbonate Plant – Train № 3	17,261,000
	Contingency 25%	20,963,000
	Phase 3 Subtotal	104,813,000
	CAPEX TOTAL	437,162,000

 

OPEX

Operating expenditures are based on a phased development with an increasing lithium carbonate production capacity: Phase 1: 9,700 tpy, Phase 2: 8,200 tpy, Phase 3: 3,000 tpy. The OPEX summary (rounded to ‘000) is presented in the table below.

 

Annual Operating Cost Summary

Description	Phase 1 (US$)	Phase 2 (US$)	Phase 3 (US$)
Manpower	3,745,000	5,680,000	6,710,000
Electrical Power	4,040,000	7,306,000	9,097,000
Reagents & Consumables	30,138,000	55,615,000	64,936,000
Water	496,000	916,000	1,070,000
Natural Gas	582,000	1,074,000	1,254,000
Miscellaneous Direct Expenditures	605,000	1,098,000	1,299,000
Sustaining Capital Cost	1,199,000	2,314,000	3,061,000
Brine Transportation	48,000	123,000	123,000
Land lease	100,000	200,000	300,000
Subtotal	40,953,000	74,326,000	87,849,000
Indirect Operational Expenditures	1,009,000	1,901,000	2,410,000
TOTAL	41,962,000	76,227,000	90,259,000

 

Note: OPEX per one metric tonne of production is US$4,319.

 

lanxess project - continued

 

Economic Analysis

The project economics assumed a three-year rolling average price of US$13,550/t for the lithium carbonate product. The results for IRR and NPV from the assumed CAPEX, OPEX and price scenario at full production, are presented in the table below.

 

Economic Evaluation - Case 1 (Base Case) Summary

Overview	Units	Values	Comments
Production	tpy	20,900	At completion of Phase 3 production
Plant Operation	years	25	From the start of Phase 1 production
Capital Cost (CAPEX)	US$	437,162,000
Annual Operating Cost (OPEX)	US$	90,259,000	At completion of Phase 3 production
Average Selling Price	US$/t	13,550
Annual Revenue	US$	283,195,000
Discount Rate	%	8
Net Present Value (NPV) Post-Tax	US$	989,432,000
Net Present Value (NPV) Pre-Tax	US$	1,304,766,000
Internal Rate of Return (IRR) Post-Tax	%	36.0
Internal Rate of Return (IRR) Pre-Tax %	%	41.8

 

Conclusions

§

The total Indicated LANXESS Li-Brine Resource is estimated at 3,140,000 tonnes of LCE. The volume of resources will allow the lithium bearing brine extraction operations to continue well beyond the currently assumed 25 years.

§

The results of the geological evaluation and resource estimates for the Preliminary Economic Assessment of LANXESS Smackover Project justifies development of the project to further evaluate the feasibility of production of lithium carbonate.

§

The experience gained from the long-term operations of the brine extraction and processing facilities on the LANXESS controlled properties decreases the risk related to sustainability of the brine extraction from the Smackover Formation.

§

The well-developed infrastructure and availability of a qualified work force will decrease the risks related to construction, and commissioning and operating of the lithium extraction and lithium carbonate processing plants.

§

The results of the bench scale testing and mini-plant process testing program increase the level of confidence in the key parameters for the operating cost estimate.

§

Improvements made to process efficiency, particularly the reduction of reagents and chemicals consumption, will improve the economics of the Project.

§

The discounted cash flow economic analysis, at a discount rate of 8%, indicates that the Project is economically viable under the base case conditions. The key economic indicators, NPV = US$989,432,000 (post-tax) and IRR = 36% (post-tax), are very positive.

 

lanxess project - continued

 

Recommendations

§

The LANXESS Li-brine resource estimate should be upgraded from the current classification of “Indicated” to “Measured”, as classified according to CIM (2014) definition standards.

§

The sampling and testing program should be continued to allow for the most updated calculation of the lithium concentration to be used in the resource estimate calculation.

§

The testing program should address the opportunities to reduce the usage of reagents for production of lithium chloride to lower the operating cost.

§

The large Demonstration Plant scheduled for deployment in late-2019 at the South Plant should be used to collect as much data as possible to inform the next phases of study.

§

Complete an evaluation of the SiFT process to produce battery quality lithium carbonate vs. the traditional OEM process used in this PEA.

§

On completion of the PEA, the project should progress to a NI 43-101 compliant PFS.

 

LANXESS Project – Current Status

 

During 2019, the Company designed and constructed a modular demonstration-scale lithium extraction plant in Ontario, Canada. This Demonstration Plant was mobilized and transported to LANXESS’ operational brine processing facility at their South Plant. The initial installation of the plant was completed in mid-October 2019, a semi-permanent structure to enclose the plant and ancillary laboratory, office and control room were installed by December 2019, and all utility and service connections were completed by the end of January 2020. In mid-May 2020 the Company announced the completion of the commission phase of the Demonstration Plant. The Demonstration Plant is designed to continuously process an input tail brine flow of 50 gallons per minute (gpm; or 11.4 m3/hr) from the LANXESS South Plant, which is equivalent to an annual production of between 100-150 tonnes per annum of Lithium Carbonate. The highly automated, three-story demonstration plant includes an integrated office and control room, as well as a full, process-specific analytical laboratory.

 

On September 9, 2020 the Company shipped a large volume of lithium chloride solution product from the Arkansas Demonstration Plant for final conversion to lithium carbonate.  The Company shipped an initial total volume of 20,000 liters of lithium chloride product for conversion to battery quality lithium carbonate using: (1) a third-party OEM/vendor in Plainfield, Illinois for lithium carbonate conversion using a conventional process; and (2) Saltworks Technologies Inc. in Richmond, B.C. to continue work currently underway using the Company’s proprietary SiFT crystallization process.

 

The Company’s industrial-scale lithium carbonate SiFT crystallization pilot plant, operated successfully in Richmond, BC from mid-July 2020 until June 2021 (when it was relocated to Arkansas). Initially, the SiFT plant used a lithium chloride solution that was produced in 2019 by the Company’s mini-pilot DLE plant (note, this lithium chloride solution was produced from Arkansas brine). Additional bulk volumes of polished lithium chloride product were shipped from Arkansas to BC and successfully converted to battery quality lithium carbonate. In the summer of 2021 the SiFT Plant was relocated from BC to the main project location at the LANXESS South Plant, immediately adjacent to, and connected to the Company’s LiSTR Demonstration Plant.

 

On March 1, 2021 the Company announced that it has completed the conversion of its Arkansas-produced lithium chloride into 99.985% pure lithium carbonate using original equipment manufacturer (OEM) technology. The work was completed by Veolia Water Technologies at their facility in Plainfield, Illinois, and demonstrates that the lithium chloride intermediate product produced by Standard Lithium’s industrial-scale LiSTR direct lithium extraction (DLE) plant in Arkansas can be converted into better than battery-quality lithium carbonate using established OEM carbonation technology.

 

Southwest arkansas project (Formerly KNOWN AS TETRA PROject)

 

On December 29, 2017, the Company entered into an Option Agreement with Tetra Technologies Inc. to acquire certain rights to conduct brine exploration and production and lithium extraction activities on approximately 27,000+ net brine acres of leases located in Columbia and Lafayette Counties, Arkansas.

 

The lease area has been historically drilled for oil and gas exploration, and approximately 256 exploration and production wells have been completed in the Smackover Formation in or immediately adjacent to the Southwest Arkansas Project. All of these 256 wells have geological logs, and all can be used to constrain the top of the Smackover Formation brine-bearing zone. In addition, a subset of 30 wells has full core reports that provide detailed data, and downhole geophysical logs that include formation resistivity and porosity data.

 

On August 28, 2018 The Company announced analysis from four brine samples recovered from two existing wells in the project area showed lithium concentrations ranging between 347–461 mg/L lithium, with an average of 450 mg/L lithium in one of the wells, and 350 mg/L in the other. The brines were sampled from preexisting oil and gas wells that had been previously drilled into the Smackover Formation, and were completed at depths of approximately 9,300 ft (2,830 m) below ground level.

 

Southwest Arkansas Project Inferred Resource – Executive Summary

On February 28 2019, the Company issued an Inferred Resource report for the Southwest Arkansas Project, and the Executive Summary of this is provided below; the full report is available under the Company’s SEDAR profile (See Inferred Resource Report on Company's Sedar page).

The following summary does not purport to be a complete summary of the Southwest Arkansas Project and is subject to all the assumptions, qualifications and procedures set out in the resource report and is qualified in its entirety with reference to the full text of the report.

 

Southwest Arkansas Lithium Project Inferred Resource Statement

	Upper Smackover Form.		Middle Smackover Formation		Total (and main resource)
Parameter	South Resource Area	North Resource Area	South Resource Area	North Resource Area
Aquifer Volume (km3)	2.49	3.65	0.60	0.93	7.66
Brine Volume (km3)	0.25	0.36	0.06	0.09	0.76
Average lithium concentration (mg/L)	399	160	399	160	199
Average Porosity	10.1 %	10.1 %	10.3 %	10.3 %	10.1 %
Total Li resource (as metal) metric tonnes (see notes [4] & [5] below)	78,000	44,000	18,000	11,000	151,000
Total LCE resource (metric tonnes) (see notes [4] & [5] below)	413,000	233,000	98,000	59,000	802,000

 

Southwest arkansas project- CONTINUED

 

 

Notes:

[1]       Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no guarantee that all or any part of the mineral resource will be converted into a mineral reserve.

[2]       Numbers may not add up due to rounding.

[3]       The resource estimate was completed and reported using a cut-off of 50 mg/L lithium.

[4]       The resource estimate was developed and classified in accordance with guidelines established by the Canadian Institute of Mining and Metallurgy. The associated Resource Report was completed in accordance with the Canadian Securities Administration’s National Instrument 43-101 and all associated documents and amendments. As per these guidelines, the resource was estimated in terms of metallic (or elemental) lithium.

[5]       In order to describe the resource in terms of ‘industry standard’ lithium carbonate equivalent, a conversion factor of 5.323 was used to convert elemental lithium to LCE.

 

The Southwest Arkansas Project Inferred Resource, as reported, is contained within the Upper and Middle facies of the Smackover Formation, a Late Jurassic oolitic limestone aquifer system that underlies the entire project. This brine resource is in an area where there is localised oil and gas production, and where brine is produced as a waste by-product of hydrocarbon extraction. The data used to estimate and model the resource were gathered from active and abandoned oil and gas production wells on or adjacent to the Property.

 

The resource underlies a total of 802 separate brine leases and eight brine mineral deeds which form a patchwork across Columbia and Lafayette Counties in south-western Arkansas. The Property consists of 11,033 net hectares (27,262 net acres) leased by TETRA, and the resource estimate was only modelled for that footprint.

 

The resource area is split into the northern and southern resource zones, where a fault system is interpreted to act as a divide between the two areas (although there is hydrogeological continuity in the resource zone across the fault system). In general, the Upper and Middle Smackover formations are slightly thinner, with lower lithium grades in the northern zone, and slightly thicker with higher lithium grades in the southern zone. The depth, shape, thickness and lateral extent of the Smackover Formation were mapped out in a 3D model using the following data:

·

2,444 wells drilled into the subsurface in the general TETRA Property area. Of these, 2,041 wells were deep enough (2,135 m, or 7,000 feet) to penetrate the Upper Smackover Formation;

·

104 wells had electric logs available within the TETRA Property that included the top of the Upper Smackover Formation;

·

32 wells had electric logs available within the TETRA Property that included the base of the Upper Smackover Formation; and,

·

19 wells had electric logs available within the TETRA Property that included the base of the Middle Smackover Formation.

 

In addition, hardcopy prints of 20 proprietary regional seismic lines totaling over 200 line-km (over 125 line-miles) were procured, scanned, rasterized and loaded into Kingdom^® seismic and geological interpretation software.

 

Southwest arkansas project - CONTINUED

 

The porosity and permeability data used to characterize the Smackover Formation hydrological model included:

·

Historical effective porosity measurements of more than 1,935 Smackover Formation core samples that yielded an average effective porosity of 14.3%;

·

Historical permeability data that vary from <0.01 to >5,000 millidarcies (mD) with an average of 338 mD;

·

515 core plug samples from oil and gas wells within the Upper and Middle Smackover Formations at the TETRA Property were analysed for permeability and porosity and yielded an overall average permeability of 53.3 mD and a total porosity of 10.2%; and,

·

3,194 Smackover Formation total porosity values based on LAS density/porosity logs from 29 wells within, and/or adjacent to, the TETRA Property that have an average total porosity of 9.2%.

 

With respect to the resource estimation, a statistical review of the capped and declustered effective porosity measurements collected within the Upper and Middle Smackover formations resulted in average porosity values of 10.1% and 10.3% for the Upper and Middle Smackover formations, respectively.

 

Representative in-situ brine geochemistry was assessed using eight lithium brine samples taken from wells re-entered by Standard Lithium in 2018, and was supplemented by four historical samples. These data yielded an average lithium grade of 160 mg/L in the northern resource zone and 399 mg/L in the southern resource zone. Sample quality assurance and quality control was maintained throughout by use of sample blanks, duplicates and standard ‘spikes’, and by using an accredited, independent laboratory, with a long history of analysing very high salinity lithium brines.

 

Resource Estimation Methodology

The resource estimate was completed by Independent qualified person (QP) Mr. Roy Eccles M.Sc. P. Geol. of APEX Geoscience Ltd., assisted by other Independent QP’s; Dr. Ron Molnar Ph.D. P. Eng. of METNETH₂O, and Mr. Kaush Rakhit M.Sc. P. Geol. of Canadian Discovery Ltd (hydrogeology). The resource estimate of the lithium brine at the Southwest Arkansas Project is classified as an “Inferred” Mineral Resource and was developed and classified in accordance with guidelines established by the Canadian Institute of Mining and Metallurgy. The associated technical report was completed in accordance with the Canadian Securities Administration’s National Instrument 43-101 and all associated documents and amendments.

 

Future Target for Exploration

A Future Target for Exploration (FTE) was also developed which considered the additional resource which may be present if the lease areas were ‘filled-in’ and the total footprint of the Tetra Project were unitised as a brine-production unit in the future; this FTE considered that an additional 86,000 to 160,000 tonnes LCE may be present under the total Project footprint if unitisation were applied for and approved. The potential quantity and grade of the FTE is conceptual in nature. It is uncertain if Standard Lithium will acquire the leases being delineated as a future target of exploration and it is uncertain if a mineral resource estimate including the leases in question will ever be delineated.

 

Southwest Arkansas Project – Current Status

On October 12, 2021, the Company announced the positive results of a Preliminary Economic Assessment and update of the inferred mineral resource at the Southwest Arkansas Project. Additionally, the Company’s project partner Tetra Technologies, has been involved in renewal of brine leases across the Project, where appropriate.

 

california Lithium

 

The Company also has a lithium brine development project in the Mojave Desert region of California. This project consists of approximately 48,000 acres of mixed private, patented and placer claim land in the Bristol Dry Lake and Cadiz Dry Lake basins (collectively known as The Bristol Dry Lake Project). The Bristol Dry Lake Project is located in San Bernardino County, CA approximately 150 miles east-northeast of Los Angeles. The Company has rights and access to four sets of placer mining claims (and some patented claims) which are mostly situated on Federal lands controlled by the Bureau of Land Management (BLM). The Bristol Lake playa is a flat, dry salt lake in the Mojave Desert that occupies approximately 155 sq. km in a 2,000 sq. km arid drainage basin. There are two established brine producers in the basin and 100+ years of industrial mineral production (salts and brines) from the below-surface brine deposits.

 

The land package consists of:

·

Option purchase agreement with Nevada Alaska Mining Inc.;

·

Property lease agreement with National Chloride; and,

·

A License, exploration and operation agreement with TETRA Technologies.

 

Details regarding the various commercial agreements with these companies and the Company’s ongoing commitments can be found in previous versions of the Company’s MD&A.

 

Some limited investigation and processing works have been completed at the Bristol Dry Lake Project, consisting of geophysical surveys, drilling and sampling, test-pitting and sampling, completion of evaporation pond performance testing and other water level surveys. As of the time of writing of this document, these data have not been integrated into a technical report for the Project, however it is the Company’s intention to complete any necessary investigation works and deliver a technical report in the future.

 

QA/QC

Steve Ross, P.Geol., a Qualified Person as defined by NI 43-101, has reviewed and approved the technical disclosure in this MD&A.

 

2. highlights for the YEAR ended JUNE 30, 2021

 

An AIF for the Fiscal Year 2020 (ended on June 30, 2020) was issued and refiled by the Company on November 27, 2020 and can be viewed in its entirety under the Company’s SEDAR profile.

 

In May 2021, the Company engaged NORAM Engineering and Constructors Ltd. as the lead consultant to prepare and coordinate the PEA on its Southwest Arkansas project.

 

On June 10, 2021, LANXESS Corporation opted for early conversion of the loan and the Company issued 6,251,250 common shares and issued 3,125,625 warrants with an exercise price of $1.20 per warrant and expiring on June 10, 2024.

 

On July 13, 2021, the Company began trading on the NYSE American Exchange (“NYSE AMEX”) under the symbol “SLI”. The Company concurrently changed the trading symbol on the TSX Venture Exchange to “SLI.V”.

 

Share Issuances

 

On December 18, 2020, the Company closed a prospectus financing of 15,697,500 common shares at a price of $2.20 for aggregate gross proceeds of $34,534,500. The Company incurred $2,666,812 of share issuance costs related to the financing.

 

On June 10, 2021, the Company issued 6,251,500 common shares to LANXESS Corporation upon the conversion of the convertible loan.

 

During the year ended June 30, 2021, the Company issued 11,245,133 common shares for proceeds of $10,190,569 upon the exercise of warrants with $39,000 receivable as of this date.

 

During the year ended June 30, 2021, the Company issued a total of 1,375,000 common shares for the exercise of stock options. The Company received proceeds of $1,241,500 and transferred $981,261 from reserves to share capital upon exercise.

 

During the year ended June 30, 2021, the Company issued 1,100,000 common shares with a fair value of $3,411,000 related to property agreements.

 

Subsequent to June 30, 2021, the Company issued 3,949,045 common shares upon the exercise of warrants for proceeds of $4,190,316 and issued 434,745 common shares with a fair value of $441,961 upon the exercise of stock options.

 

Stock Option Grants

 

On August 9, 2020, the Company extended the expiration date of 435,784 stock options issued to consultants from August 9, 2020 to August 9, 2021. The exercise price of the options remains $1.02 per option.

 

On January 18, 2021, the Company granted 1,200,000 stock options to directors and officers of the Company at a price of $3.39 for a period of 5 years. All of the stock options vested at grant.

 

On April 13, 2021, the Company granted 400,000 stock options to consultants of the Company with an exercise price of $3.43 for a period of 3 years. The stock options vested 25% at grant, 25% on July 13, 2021, 25% on October 13, 2021 and 25% on January 13, 2022.

 

On July 20, 2021, the Company granted 200,000 stock options to a director of the Company with an exercise price of $6.08 for a period of 5 years. All the stock options vested at grant.

 

3. selected annual financial information

 

The following table contains a summary of the Company’s financial results as reported under IFRS:

 

		June 30, 2021 $				June 30, 2020 $				June 30, 2019 $
Total revenue			-				-				-
Total assets			74,075,708				57,761,812				44,391,331
Working capital surplus (deficiency)			25,969,236				(2,605,318	)			1,578,892
Total non-current financial liabilities			123,940				5,091,780				398,453
Net loss			25,434,376				9,527,368				8,578,841
Net loss per share			0.21				0.11				0.11

 

Results of Operations

 

Three months ended June 30, 2021 compared to the three months ended June 30, 2020:

 

The Company incurred a net loss of $7,080,345 for the quarter ended June 30, 2021 (“Q4-2021”) compared to a net loss of $4,468,997 for the quarter ended June 30, 2020 (“Q4-2020”). The primary reason for the increase in loss was costs related to the operation of the pilot plant, amortisation of the pilot plant and share-based payments. These increased costs were offset by a decreased gain on foreign exchange as compared to the same period last year. Consulting fees were higher when comparing quarter to quarter. Management fees incurred during Q4-2021 of $332,752 were higher than fees incurred during Q4-2020 due to increases to contracts in 2021. Professional Fees of $359,938 were higher than fees of $144,764 during Q4-2020. This is mainly due to higher legal and audit fees incurred during the period. Filing and transfer agent fees of $40,264 were higher than fees of $27,396 during Q4-2020. The increase is related to the volume of warrant exercises and sustaining fees for the NASDAQ exchange. Office and administration cost of $200,484 were higher than the costs of $57,759 incurred during the comparative quarter due to higher insurance costs and costs related to the set-up of the corporate office in Vancouver. Advertising and investor relations costs incurred during Q4-2021 of $135,763 were higher than costs incurred during Q4-2020 of $39,914 due to the purchasing of ads. Travel costs of $26,016 incurred during Q4-2021 was higher than costs of $11,925 incurred during Q4-2020 due to the restriction of travel abroad and to the United States being loosened and a trip made by management to the project in AR. The share-based compensation during the period was $459,583 as compared to $320,917 recognized in Q4-2020 as share-based compensation. The Company incurred $194,903 of cost associated with a preliminary economic assessment during Q4-2021 with $nil incurred during Q4-2020. The updated PEA was released subsequent to the end of June 30, 2021. The company incurred $116,256 of costs related to patent applications as compared to $46,506 of costs incurred during Q4-2020. The increase in fees relates to the advancement of the applications.

 

 

 

 

Year ended June 30, 2021 compared to the year ended June 30, 2020:

 

The Company incurred a net loss of $25,434,376 for the year ended June 30, 2021 (“FY2021”) compared to a net loss of $9,527,368 for the year ended June 30, 2020 (“FY2020”). The primary reason for the increase in loss was amortisation of the pilot plant, amortisation of the intangible asset, costs related to the operation of the pilot plant, increased professional fees, management fees including a bonus paid to directors and officers and increased share-based payments. These increased costs were offset by an increased gain on foreign exchange. Consulting fees increased to $934,479 during FY2021, compared with $687,946 in FY2020 due to the addition of costs related to the engagement of a lobbyist and the addition of strategic advisors. Management fees of $1,526,911 during FY2021 increased from fees of $925,815 incurred during FY2020 mainly due to a one-time bonus paid to directors and officers of $375,000 and a board approved increase in approved management and director’s fees. Professional Fees of $711,741 were higher than fees of $374,815 during FY2020. This is mainly due to higher legal fees and costs associated with a review of Q1-2021 & Q3-2021 incurred during the period. Filing and transfer agent fees of $154,230 were higher than fees of $91,189 during FY2020 mainly due fees related to the NASDAQ listing and the issuance of shares upon the exercise of warrants. Office and administration cost of $574,276 were higher than the costs of $294,438 incurred during the comparative year due to higher insurance costs and costs associated with the relocation of the office in Vancouver. Advertising and investor relations costs of $496,230 were incurred during FY2021 as compared to $302,372 during FY2020 as the Company continues its efforts to raise awareness of the Company to Canadian and US institutional investors. Travel costs of $26,474 incurred during FY2021 was lower than costs of $113,351 incurred during FY2020 due to the restriction of travel abroad and to the United States. The share-based compensation during the year was $4,828,614 as compared to $2,037,564 recognized in FY2020 as share-based compensation. The Company incurred $210,283 of cost associated with a preliminary economic assessment during FY2021 as compared with costs of $88,273 incurred during FY2020. The company incurred $269,765 of costs related to patent applications as compared to $110,158 of costs incurred during FY2020.

 

Summary of Quarterly Results

 

The following table presents selected unaudited consolidated financial information for the last eight quarters in accordance with IFRS, stated in Canadian dollars:

 

Quarter Ended		Total Revenues		Net Income/(Loss)		Earnings/(Loss) Per share
September 30, 2019		$Nil		$(852,917)		$(0.01)
December 31, 2019		$Nil		$(877,831)		$(0.01)
March 31, 2020		$Nil		$(3,327,623)		$(0.04)
June 30, 2020		$Nil		$(4,468,997)		$(0.05)
September 30, 2020		$Nil		$(2,787,507)		$(0.04)
December 31, 2020		$Nil		$(5,764,090)		$(0.05)
March 31, 2021		$Nil		$(9,802,434)		$(0.07)
June 30, 2021		$Nil		$(7,080,345)		$(0.05)

 

Liquidity and Capital Resources

 

As of June 30, 2021, the Company had a working capital surplus of $25,969,236 compared to a working capital deficit of $2,605,318 as of June 30, 2020. Cash and cash equivalents at June 30, 2021 totaled $27,988,471 compared to $4,141,494 at June 30, 2020. During the year ended June 30, 2021 the Company had a net cash inflow of $23,846,977.

 

On December 18, 2020, the Company closed a prospectus financing of 15,697,500 common shares at a price of $2.20 for aggregate gross proceeds of $34,534,500. The Company incurred $2,666,812 of share issuance costs related to the financing.

 

On June 10, 2021, the Company issued 6,251,500 common shares to LANXESS Corporation upon the conversion of the convertible loan.

 

During the year ended June 30, 2021, the Company issued 11,245,133 common shares for proceeds of $10,190,569 upon the exercise of warrants with $39,000 receivable as of this date.

 

During the year ended June 30, 2021, the Company issued a total of 1,375,000 common shares for the exercise of stock options. The Company received proceeds of $1,241,500 and reclassified $981,261 from reserves to share capital upon exercise.

 

During the year ended June 30, 2021, the Company issued 1,100,000 common shares with a value of $3,411,000 related to property agreements.

 

Subsequent to June 30, 2021, the Company issued 3,949,045 common shares upon the exercise of warrants for proceeds of $4,190,316 and issued 434,745 common shares with a fair value of $441,961 upon the exercise of stock options.

 

Management has determined that the cash resources will be sufficient to continue operations in the short term and additional funding will be required to sustain the Company’s ongoing operations. As a result, the Company will continue to attempt to raise funds through equity or debt financing to meet its on-going obligations. There can be no certainty that such additional funds may be raised when required.

 

Transactions with Related Parties

 

Key management personnel are persons responsible for planning, directing and controlling the activities of the entity, and include directors and officers of the Company.

 

Compensation to key management is comprised of the following:

 

		June 30, 2021				June 30, 2020
Non-Executive Chair of the Board due to Paloduro Investments Inc.		$	81,250			$	-
President and Chief Operating Officer due to Green Core Consulting Ltd.			450,003				300,000
Chief Executive Officer due to Rodhan Consulting & Management Services			450,000				300,000
Due to Varo Corp Capital Partners Inc.			295,000				240,000
Director due to JSB Investments Inc.			87,500				-
Chief Financial Officer due to Kara Norman			163,158				85,125
Share-based payment			4,072,365				1,402,448
		$	5,599,276			$	2,327,573

 

As at June 30, 2021 there is $404,296 (June 30, 2020: $200,809) in accounts payable and accrued liabilities owing to officers of the Company.

 

Amounts due to/from the related parties are non-interest bearing, unsecured and have no fixed terms of repayment.

 

Outstanding Share Data

 

The authorized capital of Standard Lithium consists of an unlimited number of common shares and preferred shares without par value.

 

As of the date of this MD&A, there were 145,562,493 common shares issued and outstanding, 13,505,275 stock options and 5,863,089 warrants outstanding. Of the warrants outstanding, 1,422,350 are exercisable to acquire one common share at $1.30 expiring March 21, 2022, 1,315,114 are exercisable to acquire one common share at $1.00 expiring on February 20, 2022 and 3,125,625 are exercisable to acquire one common share at $1.20 expiring on June 10, 2024. The 1,315,114 warrants issued on February 20, 2020 are subject to acceleration under certain circumstances.

 

Details of options outstanding and exercisable at the date of this report are as follows:

 

				Options Outstanding												Options Exercisable
								Weighted				Weighted								Weighted
								Average				Average								Average
Exercise				Number				Remaining				Exercise								Exercise
Price				of				Contractual Life				Price				Number				Price
$				Shares				(years)				$				Exercisable				$
	1.05				1,215,275				0.36				1.05				1,215,275				1.05
	0.96				2,340,000				0.65				0.96				2,340,000				0.96
	2.10				500,000				1.34				2.10				500,000				2.10
	1.40				1,900,000				1.87				1.40				1,900,000				1.40
	1.00				500,000				0.44				1.00				500,000				1.00
	0.75				150,000				1.99				0.75				150,000				0.75
	0.76				4,450,000				1.38				0.76				4,450,000				0.76
	0.75				550,000				1.53				0.75				600,000				0.75
	0.81				100,000				1.56				0.81				75,000				0.81
	3.39				1,200,000				4.25				3.39				1,200,000				3.39
	3.43				400,000				2.48				3.43				300,000				3.43
	6.08				200,000				4.75				6.08				200,000				6.08
					13,505,275				1.88				1.36				13,405,275				1.37

 

Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Financial Instruments and Risk Management

 

The fair value of financial instruments is the amount of consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act. Fair values are determined by reference to quoted market prices, as appropriate, in the most advantageous market for that instrument to which the Company has immediate access. In the absence of an active market, fair values are determined based on prevailing market rates for instruments with similar characteristics.

 

The fair value of current financial instruments approximates their carrying value as they are short term in nature.

 

 

Financial Instruments and Risk Management - continued

 

Financial instruments that are held at fair value are categorised based on a valuation hierarchy which is determined by the valuation methodology utilised:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is as prices) or indirectly (that is, derived from prices).

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

There were no transfers between Levels 1, 2 or 3 for the year ended June 30, 2021 and the year ended June 30, 2020.

 

The following table sets forth the Company’s financial assets measured at fair value by level within the fair value hierarchy:

 

June 30, 2021		Level 1				Level 2				Level 3				Total
Cash		$	27,988,471			$	-			$	-			$	27,988,471

 

June 30, 2020		Level 1				Level 2				Level 3				Total
Cash		$	4,141,494			$	-			$	-			$	4,141,494

 

The Company’s Board of Directors has the overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and in response to the Company’s activities. Management regularly monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

 

In the normal course of operations, the Company is exposed to various risks such as commodity, interest rate, credit, and liquidity risk. To manage these risks, management determines what activities must be undertaken to minimize potential exposure to risks. The objectives of the Company in managing risk are as follows:

 

·

maintaining sound financial condition;

·

financing operations; and

·

ensuring liquidity to all operations.

 

In order to satisfy these objectives, the Company has adopted the following policies:

 

·

recognize and observe the extent of operating risk within the business;

·

identify the magnitude of the impact of market risk factors on the overall risk of the business and take advantage of natural risk reductions that arise from these relationships.

 

(i)

Interest rate risk

 

The Company does not have any financial instrument which are subject to interest rate risk.

 

(ii)

Credit risk

 

Credit risk is the risk of loss if counterparties do not fulfill their contractual obligations and arises principally from trade receivables. The Company does not have any other financial instruments which are subject to credit risk.

 

 

Financial Instruments and Risk Management - continued

 

(iii)

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages this risk by careful management of its working capital to ensure its expenditures will not exceed available resources. As at June 30, 2021, the Company has a working capital surplus of $25,969,236. The Company is actively engaged in raising additional capital to meet financial obligations.

 

(iv)

Currency Risk

 

Currency risk is the risk to the Company’s earnings that arises from fluctuations of foreign exchange rates and the degree of volatility of these rates. The Company does not use derivative instruments to reduce its exposure to foreign currency risk. The Company is exposed to currency risk through the following assets and liabilities denominated in US dollars:

 

		June 30, 2021 $				June 30, 2020 $
Cash			736,623				574,506
Accounts payable			(1,520,823	)			(6,426,587	)
Convertible loan			-				(4,955,500	)

 

At June 30, 2021, US Dollar amounts were converted at a rate of USD 1.00 to CAD 1.2394. A 10% increase or decrease in the US Dollar relative to the Canadian Dollar would result in a change of approximately $78,000 (2020: $700,000) in the Company’s comprehensive loss for the year to date.

 

4. Risk Factors

 

There are a number of risks that may have a material and adverse impact on the future operating and financial performance of the Company and could cause the Company's operating and financial performance to differ materially from the estimates described in forward-looking statements relating to the Company. These include widespread risks associated with any form of business and specific risks associated with the Company's business and its involvement in the lithium exploration and development industry.

 

Readers are advised to study and consider risk factors disclosed in the Company’s Annual Information Form for the fiscal year ended June 30, 2021 and available under the Company’s profile on SEDAR at www.sedar.com.

 

 

20

Exhibit 99.3

 

 

Consent of Independent Registered Public Accounting Firm

 

We consent to the incorporation by reference of our report dated October 21, 2021 with respect to the consolidated statements of financial position of Standard Lithium Ltd. and its subsidiaries (the “Company”) as at June 30, 2021 and 2020, and the consolidated statements of comprehensive loss, changes in equity and cash flows for the years then ended and the related notes comprising a summary of significant accounting policies and other explanatory information, included in Exhibit 99.1 on Form 6-K filed on October 22, 2021, in the Registration Statement on Form F-10 of the Company (File No. 333-259442) for the registration of up to US$250,000,000 of common shares, preferred shares, debt securities, subscription receipts, warrants or units of the Company.

 

 

 

/s/ MANNING ELLIOTT LLP

 

Chartered Professional Accountants

Vancouver, Canada

 

October 22, 2021