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Lithium Chile — Management Reports 2025
Sep 26, 2025
46677_rns_2025-09-26_b4e94521-a88b-4fc0-b950-6895c689a896.pdf
Management Reports
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LITHIUM CHILE INC.
DECEMBER 31, 2024
MANAGEMENT DISCUSSION AND ANALYSIS
This Management Discussion and Analysis ("MD&A") for Lithium Chile Inc. ("Lithium Chile" or the "Corporation") is a review of how the Corporation performed during the period covered by the annual audited consolidated financial statements for the years ended December 31, 2024 and 2023 ("Audited Statements"), and of the Corporation's financial condition and future prospects. The MD&A complements and supplements the Audited Statements and should be read in conjunction with the Audited Statements and the related notes thereto. The Audited Statements have been prepared in Canadian dollars in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), which are also generally accepted accounting principles ("GAAP") for publicly accountable enterprises in Canada.
The Corporation's Board of Directors has reviewed and approved the Audited Statements and this MD&A, both of which are effective May 1, 2025.
Certain information presented in this MD&A constitutes forward looking information that is subject to substantial risks and uncertainties. Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", "continue" and similar expressions have been used to describe these forward-looking statements. By their nature, forward-looking statements necessarily involve risks associated with the provision of services such as loss of market, lack of qualified personnel, impact of the regulatory environment, and competition from other companies providing similar services. Readers are cautioned that the assumptions used in the preparation of forward-looking information and statements, although considered reasonable at the time may prove to be imprecise. As such, undue reliance should not be placed on forward-looking statements. A number of factors, many of which are beyond the control of Lithium Chile, may affect the actual performance of Lithium Chile and actual results may differ from those expressed or implied by such forward looking information. Accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will occur, or if they do occur, what benefit Lithium Chile will derive from them. Readers are cautioned not to place undue reliance on these forward-looking statements.
DESCRIPTION OF BUSINESS
Lithium Chile Inc. was incorporated pursuant to the provisions of the Business Corporations Act (Alberta) on October 18, 2010. The Corporation's principal business is the acquisition and development of lithium properties in Chile and Argentina and its common shares trade on the TSX Venture Exchange under the symbol "LITH" and on the OTC-QB under the symbol "LTMCF".
At December 31, 2024, the Corporation had a working capital deficiency of $1,019,371 (December 31, 2023 - $17,350,327 working capital balance). Due to the nature of the mining industry, additional financing may be required in due course. Management may seek additional forms of financing through the issuance of new equity or debt instruments to continue its operations, and while it has been successful in doing so in the past, there can be no assurance it will be able to do so in the future.
Referenced in this MD&A are the following entities:
| Name | Country | Ownership |
|---|---|---|
| Lithium Chile Inc. ("Lithium Chile") | Canada | Parent company |
| Lithium Chile 2.0 Inc. ("Lithium 2.0") | Canada | 100% subsidiary of Lithium Chile |
| Kairos Inversiones SpA ("Kairos Inversiones") | Chile | 100% subsidiary of Lithium Chile |
| Argentum Lithium S.A. ("Argentum") | Argentina | 100% subsidiary of Lithium Chile |
| ArLi S.A. ("ArLi") | Argentina | 62.2% subsidiary of Argentum |
| Salta Litio S.A. ("Salta") | Argentina | 89% subsidiary of Argentum |
| Geo Inversiones Mineras S.A. | Argentina | 99% subsidiary of Lithium Chile |
UNCERTAINTIES AND VOLATILITY
The conflicts in Ukraine and the Middle East and recent political tensions between the United States and many countries have contributed to significant volatility in financial and commodity markets. These ongoing events have impacted global commercial activity, including causing significant fluctuations in worldwide demand and prices for certain commodities. The duration and impact of the conflicts and political tensions and magnitude of the impact on the economy and financial effect on the Corporation is not known at this time.
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CORPORATE REVIEW
Argentina:
Binding Letter of Intent to Sell the Arizaro Project:
- In December 2024, the Corporation executed a binding Letter of Intent (LOI) with an Asia-based critical minerals group to sell an 80% interest in the Arizaro project for a total consideration of USD $180 million.
- The structure of the sale involves the 100% acquisition of Lithium Chile’s Argentine subsidiary, Argentum.
- The transaction is subject to satisfactory due diligence, receipt of Argentine government approvals, and finalization of a Definitive Agreement, anticipated in the first half of 2025.
- The LOI reflects strong market validation of Lithium Chile’s project development and exploration success over the past two years.
Strategic Acquisition of Additional Ownership:
- In October 2024, Lithium Chile announced the acquisition of 17.8% interest from its joint venture partner, thereby increasing its ownership of the Arizaro project to 80%.
- Under the terms of the Agreement, Lithium Chile will pay for the additional interest through the issuance of 19,000,000 common shares and a cash payment of CAD $2.7 million among other conditions.
- This acquisition of the 17.8% is required to complete the Corporation’s objective of consummating a sale transaction on the Arizaro Project in Argentina.
- The acquisition further strengthened Lithium Chile’s negotiating position ahead of discussions with potential buyers and investors.
Pre-Feasibility Study (PFS) Results:
- In July 2024, the Corporation published its Pre-Feasibility Study (PFS), conducted by Ausenco Engineering Chile.
PFS Highlights:
- Pre-tax NPV: USD $3.85 billion
- Pre-tax IRR: 42.1%
- After-tax NPV: USD $2.65 billion
- After-tax IRR: 35.2%
- Initial CapEx: USD $721 million
- Annual production rate: 25,000 tonnes of battery-grade lithium carbonate.
-
Estimated mine life: 20 years, with strong potential for expansion based on current resources.
-
The PFS incorporated Argentina’s RIGI tax incentive framework for critical minerals, projecting highly competitive operating margins and a favorable permitting environment.
Resource Expansion and Drilling Activities:
- In April 2024, Lithium Chile announced a 24% increase in the lithium resource estimate for its Arizaro project.
- Total Resource: 4.12 million tonnes of lithium carbonate equivalent (LCE).
- Measured: 261,000 tonnes
- Indicated: 2.24 million tonnes
- Inferred: 1.62 million tonnes
- This increase was attributed to successful drilling at ARDDH-08, which showed:
- An average grade of 538 mg/L between 200–300 meters.
-
343 mg/L from 300–570 meters.
-
The expansion validated the project’s scalability and highlighted the potential for additional resource growth with further drilling on adjacent concessions, including Block IV.
Water Resource Development:
- Following the success of the initial freshwater discovery at Chascha Sur, the Corporation initiated drilling of two additional water production wells to:
- Secure long-term water supply critical for the Direct Lithium Extraction (DLE) facility.
- Support the environmental and operational needs for large-scale lithium production.
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
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Block IV Acquisition and Exploration Preparations:
- In January 2024, Lithium Chile confirmed that Argentum was awarded Block IV, an 8,445-hectare concession adjacent to Arizaro.
- Strategic Importance:
- Block IV is only 18 kilometers from the main Arizaro salar resource.
- It enhances Lithium Chile’s ability to optimize infrastructure and increase future resource expansion.
- Environmental Impact Study (EIS) Status:
- An EIS was filed for Block IV, aiming to initiate a focused drilling campaign in early 2025, leveraging proximity to existing camps and facilities.
- The Corporation’s exploration permits are pending approval by REMSa and provincial mining authorities.
Chile:
Strategic Joint Venture with Eramet S.A.:
- In March 2024, Lithium Chile entered into a strategic joint venture with Eramet, a major European mining company, covering:
- Llamara, Aguilar, Rio Salado, and Aguas Calientes lithium properties in Chile.
- The agreement provides:
- Initial exploration funding by Eramet.
- Lithium Chile retaining significant ownership stakes in each project.
- Access to Eramet’s advanced lithium extraction technologies.
- This JV materially de-risks early-stage exploration while preserving upside for shareholders.
Corporate Reorganization and Spin-Out:
- In May 2024, the Corporation announced a corporate restructuring initiative aimed at maximizing shareholder value:
- Creation of Kairos Gold Inc. (“Kairos Gold”), to hold Lithium Chile’s non-lithium assets (gold, copper, silver).
- The Kairos Gold spin-out was completed in December 2024:
- Shareholders received 1 share of Kairos Gold for every 10 shares of Lithium Chile held.
- Kairos Gold is preparing to list on the TSX Venture Exchange in early 2025.
Tender Participation for CEOLs in Chile:
- In the fourth quarter of 2024, the Corporation, through Kairos Inversiones expanded its land position on the Salar de Coipasa in northern Chile by acquiring an additional 7,900 hectares.
- As part of Chile's comprehensive National Lithium Strategy, a simplified bidding process for a Concession of Special Lithium Operation Contract (“CEOL”) was launched in 2024 for six priority saline systems, which included the Corporation’s shared Coipasa Salt Flat claims.
- Lithium Chile through Kairos Inversiones, together with its 50% joint venture partner, Grupo Errázuriz, were among the first companies granted authority to apply for a CEOL on the Coipasa salt flat, situated in the Tarapacá region.
- The Corporation’s participation ensures it will remain a key player in the next wave of Chilean lithium production.
- It also provides first-mover advantage in securing necessary government partnerships for commercialization.
OUTLOOK
Lithium Chile remains strategically positioned to benefit from growing global demand for battery metals, particularly lithium, as the energy transition accelerates.
Priorities for 2025 include:
- Finalizing the sale of the Arizaro project, which will provide substantial non-dilutive cash proceeds to fund future projects.
- Advancing exploration and project development at Molle Verde and Block IV.
- Progressing with permitting and partnership opportunities for CEOL-backed Chilean lithium projects.
The Corporation continues to evaluate opportunities to enhance shareholder value through project advancement, partnerships, and strategic asset monetization.
Lithium Chile Inc. Management Discussion & Analysis December 31, 2024
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SPIN-OUT TRANSACTIONS
During 2024, the Corporation completed a series of transactions as part of a proposed plan of Arrangement as approved at a meeting of the shareholders of the Corporation that took place on October 17, 2024.
a) The Corporation incorporated a new wholly owned Canadian subsidiary, Kairos Gold, which acquired the outstanding shares of the Corporation's wholly owned Chilean subsidiary Compañía Minera Kairos Chile SpA ("Minera Kairos").
b) The Chilean lithium assets were transferred from Minera Kairos to the Corporation's wholly owned Chilean subsidiary, Kairos Inversiones, at carrying values, while the copper, gold, silver assets remained in Minera Kairos.
c) Lithium Chile distributed the Kairos Gold shares as a dividend to its shareholders on a basis of one Kairos Gold share for every 10 shares of the Corporation. The aggregate amount of the dividend was $4,931,969 and was recognized as consideration for the disposition of Minera Kairos, based on the following carrying values of the net assets of Minera Kairos on the disposition date as detailed in the following table:
| Carrying amount of net assets (liabilities) disposed of: | |
|---|---|
| Cash | $ 11,591 |
| Accounts receivable | 88,386 |
| Due from related party | 110,144 |
| Mineral properties (copper, gold, silver claims) | 4,731,962 |
| Trade payables and accrued liabilities | (10,114) |
| $ 4,931,969 | |
| Consideration | |
| Dividend | $ 5,853,027 |
| Exchange difference on translation of subsidiaries | (921,058) |
| $ 4,931,969 |
In accordance with IFRIC 17, Distributions of Non-cash Assets to Owners, the Company recognized the distribution of net assets to its shareholders at fair value which approximated the carrying value of net assets disposed.
In connection with the disposition Minera Kairos, the Corporation transferred $921,058 of exchange differences on translation of subsidiaries from accumulated other comprehensive income to the 2024 consolidated statement of net income (loss) and comprehensive income (loss).
SELECTED FINANCIAL INFORMATION
The following summarizes information derived from the Company's consolidated financial statements:
| Years ended and as at December 31, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Net income (loss) and comprehensive income (loss) | $ (815,440) | $ (8,685,060) | $ (3,690,382) |
| Basic and diluted income (loss) per share | $ 0.05 | $ (0.04) | $ (0.01) |
| Total assets | $ 53,308,427 | $ 55,852,480 | $ 54,540,958 |
| Long-term liabilities | $ 2,731,133 | $ 1,018,044 | $ - |
| Share capital | $ 63,347,164 | $ 62,880,447 | $ 53,916,166 |
| Number of common shares outstanding | 206,627,657 | 206,224,157 | 196,685,347 |
Net Income and Cash Flow from Operations
Net income of $9,348,188 and a comprehensive loss of ($815,440) resulted for the year ended December 31, 2024, as compared to a comprehensive loss of $8,685,060 for the comparable period in 2023. The income in 2024 relates primarily to the inflation adjustment of $29,373,590. Offsetting the net income is a $815,440 comprehensive loss arises from the foreign translation adjustment from translating the subsidiaries from Pesos to CAD$ of $10,163,628 and an impairment of $14,908,213. Due to the difference between the official bank rate and the market rate obtained from the exchange of US dollars for ARS, the Corporation realized gains of $1,674,049 (2023 – $2,996,778) on cash capital contributions made to Argentum.
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
Operating expenses include general and administrative expenses of $3,390,042, discussed in more detail below, an impairment of mineral properties in the amount of $14,908,213 and share-based compensation of $237,480 which is significantly lower than the comparable period. Share-based compensation decreased over 2023 by $2,842,367 as the RSUs fully vested in 2023 and the stock options have almost fully vested in 2024. The (unrealized) loss on marketable securities decreased by $338,399 as the market value of the Marketable Securities fluctuated throughout the year. The Monumental Energy and Wealth Mineral investments were part of mineral property transactions discussed below in (e) and (f) of the Mineral Properties section.
General and Administrative
General and administrative ("G&A") expenses are as follows:
| For the years ended December 31 | 2024 | 2023 |
|---|---|---|
| Business development | $ 936,489 | $ 768,606 |
| Professional fees | 824,818 | 495,838 |
| Office and rent | 803,291 | 572,812 |
| Salaries, wages and employee benefits | 543,100 | 1,495,236 |
| Travel and entertainment | 212,308 | 420,571 |
| Consulting fees | 70,036 | 124,343 |
| $ 3,390,042 | $ 3,877,406 |
Significant changes to G&A from 2023 to 2024 are as follows: Business development costs increased by $167,883 as compared to 2023, primarily as a result of certain success fees paid in relation to the Arizaro Block IV property awarded to the Corporation at the end of 2023. Professional fees increased by $328,980 in 2024 for legal fees relating to the spin-out transaction described in more detail above in Corporate Reorganization in addition to the other strategic opportunities being developed as described above in Corporate Review. General office and rent increased by $230,479 due to resources required to support the completion of the PFS as describe above in the Corporate Review. Wages and employee benefits decreased significantly during the year ended December 31, 2024 as there were no bonuses awarded in 2024 and as operations in Argentina were scaled back somewhat after the finalization of the PFS describe above in Corporate Review.
Additional Information
Capitalized exploration and evaluation expenditures for the year ended December 31, 2024 were $14,117,781 (2023 - $21,739,587 before accounting for impairment, foreign exchange, inflation effects and before the addition of the $1,030,775 (2023 - $683,874) acquisition payments on the Arizaro property in Argentina).
Financial Resources and Liquidity
At December 31, 2024, the Corporation had a working capital deficiency of $1,019,371 (December 31, 2023 - $17,350,327). Other than as described below in Mineral Properties, the Corporation has no capital commitments for 2025.
The Corporation is confident it has sufficient funds for general and administrative expenses over the next twelve months. However, due to the nature of the mining industry, additional financing may be required in due course. Management will seek additional forms of financing through the issuance of new equity or debt instruments to continue its operations.
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
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Mineral Properties - Exploration and Evaluation Expenditures
The Corporation's exploration and evaluation expenditures relate to mineral properties in Chile and Argentina. A continuity of mineral properties is summarized below:
| As at December 31 | 2024 | 2023 |
|---|---|---|
| Balance, beginning of year | $ 35,273,028 | $ 14,918,778 |
| Cash property acquisition payments | 1,030,775 | 683,874 |
| Cash additions to lithium claims | 14,117,781 | 21,739,587 |
| Cash additions to copper, gold, silver claims | 1,768,365 | 177,423 |
| Cash additions to equipment | 2,152 | 225,688 |
| Option payment, cash | (500,000) | - |
| Option payment, shares (Note 5) | (84,000) | - |
| Option payment, shares, restricted stock discount fully accreted | - | (269,382) |
| Disposition of copper, gold, silver claims on spin-out (Note 4) | (4,731,962) | - |
| Impairment of lithium claims | (14,908,213) | - |
| Depreciation on minor equipment | (43,148) | (35,570) |
| Effect of hyperinflation | 22,081,173 | 6,512,845 |
| Effect of foreign exchange translation | (4,193,240) | (8,680,215) |
| Balance, end of year | $ 49,812,711 | $ 35,273,028 |
Mineral Property Description
As at December 31, 2024, the Corporation held a lithium property portfolio consisting of 107,936 hectares covering sections of 10 salars and 2 laguna complexes in Chile and 20,800 hectares in Argentina.
Mineral Property Impairment
During 2024, a review of mineral properties resulted in an impairment charge of $14,908,213. This charge is comprised of $13,722,360 (USD$5,739,915 initial payment plus the effect of hyper-inflation) for the impairment of Block IV described below (c) and $1,185,853 being the historical costs of three Chilean properties no longer considered prospective and as such the claims were permitted to lapse.
The Corporation did not identify any indicators of impairment in 2023.
Mineral Property Transactions
a) On January 19, 2024, Mineral Kairos entered into a Purchase Option Agreement (the "Option") with Mario Adrian Echeverria Araya, whereby the Corporation may earn 100% of Oro Brillante, a 100-hectare exploitation property in Chile. The initial payment of CLP$277,666,667 ($383,757) made in January 2024 started a 180-day period for Minera Kairos to undertake mineral exploration of the property. A second payment of CLP$277,666,667 ($403,340) was made in July 2024. The Option was included in the spin-out transaction (Note 4).
b) During 2023, the Corporation increased its interest in the Salar de Arizaro joint venture in Argentina from 60% to 62.2% while reducing the contractual cash payments for the acquisition by US$145,000, for a total cost of USD$1,855,000. To date, all of the US$D1,855,000 contractual payments have been made.
This increased interest was a result of swapping 2,500 hectares of non-resource claims for an additional interest in the claims where the Corporation's lithium resource is being developed in Argentina. The swap was executed with the original vendors of the property who in turn gave up 2.2% of their working interest in the Salar de Arizaro project.
c) On December 5, 2023, Argentum was awarded Block IV in a bidding round in the Salar de Arizaro project. Block IV is an 8,445-hectare concession awarded by the Salta Provincial Mining and Energy Corporation ("REMSa"). The initial payment to REMSa upon the award grant was USD$5,739,915. A further option payment of USD$11,001,503 was due in December 2024, which was not made due to several factors. Additional consideration grants REMSa a 22% carrying interest as a partner in the Project. A new Argentinean subsidiary, Salta, was incorporated specifically for this project in order to partner with REMSa.
Although REMSa has not issued a notice of default to the Corporation and currently is in negotiations with the Corporation on a revised agreement with a staggered payment plan for the remaining option payment, the outcome of the discussions was not known as of the date of these financial statements. As such, Management determined that an impairment of the initial payment was required due to the uncertain status of the option. Should a revised agreement be executed with REMSa and a payment plan implemented, the impairment may be reversed in a future financial period.
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
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d) During 2023, the Corporation terminated an option agreement with Volos Minerals Inc. ("Volos"), whereby Volos would earn 51% in the Corporation's Las Garillas project. The terms included cash option payments by Volos of $100,000 and minimum of $250,000 of exploration expenditures by Volvos within two years.
e) The terms of the sale of a non-core asset to Wealth in 2022 in exchange for 2,000,000 common shares of Wealth (Note 5) include the following additional payments by Wealth to the Corporation: i) 1,000,000 common shares of Wealth upon establishing a resource or results from a test well by June 22, 2023 with an average grade of 300 parts per million lithium; ii) 500,000 common shares of Wealth if Wealth does not complete the required work necessary to determine such a resource. No further share payments are payable to the Corporation if the necessary work is completed and a resource or test well does not produce an average grade of 300 parts per million lithium. During 2024, it was determined that no further share payments are payable to the Corporation.
f) On April 21, 2022, the Corporation closed option agreement with Monumental whereby Monumental may earn up to 75% of the 5,200-hectare Salar de Laguna Blanca project in Chile. Pursuant to the option agreement, Monumental issued 3,401,874 common shares (Note 5) to the Corporation in 2022 and an additional 1,050,000 common shares in 2024 (Note 5) and must also make cash option payments to the Corporation totaling CAD$1,500,000 over a 3-year period ending April 21, 2025.
The Corporation received a $200,000 cash option payment in 2022 and a $250,000 cash option payment in 2024.
On October 15, 2024, the option agreement was amended such that the $1,050,000 balance of cash option payments are payable in an amount of $300,000 by June 21, 2025 and $750,000 by April 21, 2026 and requiring $800,000 of minimum capital expenditures by April 21, 2026.
g) On August 23, 2022, the Corporation entered into an option agreement whereby Monumental may earn a 50.01% interest in the Salar de Turi project by making certain staged cash option payments totaling $700,000 and incurring no less than CAD$1,400,000 of capital expenditures by August 23, 2024. The Salar de Turi project consists of 31 lithium exploration concessions totaling 8,500 hectares in Chile.
In 2022, Monumental made CAD$200,000 of option payments. In 2023, Monumental was in default of the option payments and required capital expenditures.
In 2024, the Corporation approved the assumption of the option agreement by Summit Nanotech ("Summit") under the same terms and the Corporation received a CAD$250,000 option payment from Summit.
Mineral property commitments
- Other than as described above, the Corporation's mineral properties do not require any minimum work or expenditure commitments. There is no financial commitment extending past the current year in which a claim is held. Claims are acquired and paid throughout the year, therefore the number of claims held fluctuates throughout the year. The transition from an exploration claim to an exploitation claim also creates a variation in claim costs.
- The Corporation is obligated to make annual tax payments to the Chilean government of approximately USD$4.15 per hectare in relation to exploration concessions and approximately USD$27.66 per hectare in relation to exploitation claims. Claim costs on Chilean mineral properties for the year ended December 31, 2024 were approximately $433,239 (2023 – $422,771).
- The Corporation is obligated to make annual tax payments to the Argentine government in relation to exploration and exploitation claims. Claim costs on Argentine mineral properties for the year ended December 31, 2024 were approximately $63,032 (2023 – $47,304).
Related Party Transactions
The Corporation reported the following related party transactions and balances:
- During 2024, the Corporation charged $nil (2023 – $110,144) of rent and office expenses to a Chilean company related through common officers and directors of which $nil is reported as due from related party at December 31, 2024 (2023 – $110,144).
- During 2024, the Corporation was charged $35,774 (2023 – $35,774) of rent and office expenses by a Canadian company related through common officers and directors of which $nil is included in trade and other payables at December 31, 2024 (2023 – $nil).
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
- During 2024, the Corporation was charged $446,736 (2023 – $399,967) of exploration related services capitalized to mineral properties by Argentine companies controlled by a director of the Corporation of which $36,045 is included in trade and other payables at December 31, 2024 (2023 – $33,596).
- A note receivable of $1,000,000 is due from San Lorenzo Gold Corp., which is related to the Corporation through common directors. The balance including interest at December 31, 2024 is $1,190,519.
- Monumental Energy Corp. ("Monumental") is related to the Corporation by an officer of the Corporation who is a director of Monumental. During 2024, the Corporation received an additional 1,050,000 shares of Monumental valued at $84,000 (Mineral Property Note). At December 31, 2024 the Corporation holds 4,451,874 shares of Monumental, recorded in Marketable Securities.
- SaLi Lithium Corp. ("SaLi") is related to the Corporation as an officer of the Corporation is also a director of SaLi. The Corporation holds 1,166,666 shares of SaLi, recorded in Marketable Securities.
The above transactions were in the normal course of operations and were initially recorded at fair value.
Key Management Compensation
The Corporation considers officers and directors to be key management personnel. Key management compensation is summarized below:
| For the years ended December 31 | 2024 | 2023 |
|---|---|---|
| Salaries, directors' fees and other benefits included in G&A expenses | $ 507,500 | $ 903,036 |
| Consulting fees included in professional fees (Note 10) | 58,000 | 126,500 |
| Consulting fees capitalized to mineral properties | 560,333 | 748,231 |
| Share-based compensation | 49,692 | 2,444,979 |
| $ 1,175,525 | $ 4,222,746 |
Included in trade and other payables at December 31, 2024 is $39,140 (2023 – $105,218) in respect of key management compensation.
SELECTED QUARTERLY INFORMATION
| Fiscal Quarter Ended | December 31, 2024 | September 30, 2024 | June 30, 2024 | March 31, 2024 |
|---|---|---|---|---|
| Interest and other revenue | $ 47,450 | $ 49,029 | $ 46,130 | $ 315,308 |
| Net income (loss) | $ 1,656,738 | $ 4,356,757 | $ 2,867,111 | $ 467,582 |
| Net income per share | $ 0.01 | $ 0.02 | $ 0.01 | $ 0.00 |
| Fiscal Quarter Ended | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 |
| --- | --- | --- | --- | --- |
| Interest and other revenue | $ 265,464 | $ 235,811 | $ 342,123 | $ 342,046 |
| Net income (loss) | $ (1,791,277) | $ 3,157,760 | $ (596,414) | $ (302,487) |
| Net loss per share | $ (0.01) | $ 0.02 | $ (0.01) | $ 0.00 |
Interest and other revenue in 2024 and 2023 is comprised solely of interest earned on term deposits and investments.
CASH FLOW
For the year ended December 31, 2024 the Corporation's cash decreased by $1,015,103 (2023 - $13,874,081). The decrease in cash results from cash from operations of $51,863 (2023 - cash used $1,046,170), cash used in investing activities of $1,332,591 (2023 - $18,668,602) and offset against cash provided by financing activities of $265,625 (2023 - $5,760,691).
The cash spent on investing activities is related to the exploration program on the lithium properties, the redemption of investments and the scheduled payments for the acquisition of the Argentina property. Cash was provided from the proceeds of stock options and Warrants being exercised.
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
The Corporation is not a party to any industry contracts or obligations and there are no off-balance sheet arrangements.
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
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CRITICAL ACCOUNTING ESTIMATES
There are no critical or material accounting estimates.
SUBSEQUENT EVENTS
a) In April 2025, the Corporation entered into an arm's length consulting agreement with a third party (the "Provider") for the purposes of providing the Corporation with corporate advisory services. The agreement is for one year and the Provider will be paid in four instalments of $45,000, payable in common shares of the Corporation. The Corporation will pay the first two instalments by issuing 169,811 common shares at a deemed price of $0.53 per share, and the remaining two instalments will be paid in a number of common shares based the market price on the date of issuance. Completion of the Agreement is subject to regulatory approval including, but not limited to, the approval of the TSXV.
b) The Corporation has executed a binding letter of intent with an arm's length party (the "Buyer") for the sale of the Corporation's interest in the Salar de Arizaro project for cash consideration of USD$180 million (approximately $250 million). Completion of the transaction remains subject to certain conditions, including:
- Completion of definitive agreements pertaining to the sale (the "Definitive Agreements"). The signatory to the Definitive Agreements will be the Buyer or a company controlled by the Buyer;
- Government approvals in both Canada and Argentina; and
- Regulatory approvals and consents, including that of the TSXV which includes shareholder approval.
ADDITIONAL CORPORATE DISCLOSURES
| Audit Committee Composition | Schedule “A” |
|---|---|
| Audit Committee Charter | Schedule “B” |
| Corporate Governance Disclosure | Schedule “C” |
BUSINESS RISKS
Mining Industry Risks
The exploration for and development of mineral deposits involves a high degree of risk that even a combination of careful evaluation, experience, knowledge and sufficient financial resources may not eliminate. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit such as size, grade and proximity to infrastructure; commodity prices which are inherently cyclical and cannot be predicted with certainty; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The effect of these factors cannot be accurately predicted and the combination of these factors may result in not receiving an adequate return on invested capital.
Properties without Known Mineable Reserves
The Corporation's activities will continue to be directed towards the search for, evaluation of, and development of mineral deposits. There is no assurance that expenditures associated with those activities will result in securing commercial mineral deposits and actual expenditures may be higher than currently anticipated.
Uncertainty as to Calculations of Mineral Deposit Estimates
There is a significant degree of uncertainty attributable to the calculation of mineral deposit estimates. Until the mineral is actually mined and processed, mineral deposit estimates, grades and recovery rates must be considered as estimates only. Consequently, there can be no assurance that any mineral deposit estimates or grade information will prove accurate. In addition, the value of mineral deposits may vary depending on mineral prices and other factors. Any material change in grades, stripping ratios or other mining and processing factors may affect the economic viability of projects. Furthermore, mineral deposit estimate information should not be interpreted as any assurance of mine life or of the potential profitability of existing or future projects.
Uninsurable Risks
The Corporation may become subject to liability for cave-ins, pollution or other hazards against which it cannot insure or against which it may elect not to insure because of high premium costs or for other reasons. The payment of any such liabilities would reduce the funds available for development and mining activities. Payment of liabilities for which the Corporation does not carry insurance may have a material adverse effect on the Corporation's financial position.
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
- 10 -
Currency
Currency fluctuations may materially affect the financial position and results of Lithium. The Corporation may engage in currency hedging to offset currency fluctuations risks. The Corporation is exposed to the risk of changes in the Canadian/U.S. dollar exchange rate, the U.S./Chilean Peso exchange rate and the U.S./Argentinian Peso for services and geological costs that are denominated in Pesos and converted to U.S. dollars or directly influenced by U.S. dollar (USD) benchmark prices.
Governmental Regulation of the Mining Industry
The mineral development or exploration activities of the Corporation are subject to various laws governing prospecting, development, production, taxes, labour standards and occupational health, mine safety, toxic substances and other matters. Mining and exploration activities are also subject to various laws and regulations relating to protection of the environment. Although the Corporation believes that its activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail production or development. Amendments to current laws and regulations governing the operations and activities of the Corporation or more stringent implementation thereof could have a material adverse effect on the business, financial condition and results of operations of the Corporation.
Exploration and Development Risks
Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover deposits but also from finding deposits that, though present, are insufficient in quantity and quality to return a profit from production. The marketability of resources or reserves acquired or discovered by the Corporation may be affected by numerous factors which are beyond the control of Lithium and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of facilities, commodity markets, processing equipment availability and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, the combination of which factors may result in Lithium not receiving an adequate return of investment capital.
There is no assurance that the Corporation's mineral exploration and development activities will result in any discoveries or acquisitions of commercial bodies of minerals. The long-term profitability of Lithium operations will in part be directly related to the costs and success of its development efforts which may be affected by a number of factors. Substantial expenditures are required to establish reserves through drilling and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery or acquisition of a deposit, no assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis.
If the Corporation loses or abandons its interest in its properties, there is no assurance that it will be able to acquire another mineral property of merit or that such an acquisition would be approved by the TSX Venture Exchange. There is also no guarantee that the TSX Venture Exchange will approve the acquisition of any additional properties by the Corporation, whether by way of option or otherwise, should the Corporation wish to acquire any additional properties.
The business of exploration and development of minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines and there is no guarantee that the Corporation's new projects will become producing mines.
Insurance
In the course of exploration, development and production of mineral properties, certain risks, and in particular, unexpected or unusual geological operating conditions including rock bursts, cave-ins, fires, flooding and earthquakes may occur. It is not always possible to fully insure against such risks and the Corporation may decide not to take out insurance against such risks as a result of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate any future profitability and result in increasing costs and a decline in the value of the securities of the Corporation.
Permits and Licenses
The future operations of The Corporation may require permits from various governmental authorities and will be governed by laws and regulations governing prospecting, development, mining, production, export, taxes, labour standards, occupational health, waste disposal, land use, environmental protections, mine safety and other matters. There can be no guarantee that the Corporation will be able to obtain all necessary permits and approvals that may be required to undertake development activity or commence construction or operation of mine facilities on the Corporation's properties.
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
- 11 -
Environmental Legislation
Environmental laws and regulations may affect the operations of the Corporation. These laws and regulations set various standards regulating certain aspects of health and environmental quality. They provide for penalties and other liabilities for the violation of such standards and establish, in certain circumstances, obligations to rehabilitate current and former facilities and locations where operations are or were conducted. The permission to operate can be withdrawn temporarily where there is evidence of serious breaches of health and safety standards, or even permanently in the case of extreme breaches. Significant liabilities could be imposed for damages, clean-up costs or penalties in the event of certain discharges into the environment, environmental damage caused by previous owners of acquired properties or non-compliance with environmental laws or regulations. In all major developments, the Corporation generally relies on recognized designers and development contractors, from which Lithium will, in the first instance, seek indemnities. The Corporation intends to minimize risks by taking steps to ensure compliance with environmental, health and safety laws and regulations and operating to applicable environmental standards
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions hereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations, including the Corporation may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.
Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the Corporation and cause increases in exploration expenses, capital expenditures or production costs, reduction in levels of production at producing properties, or abandonment or delays in development of new mining properties.
Title to Properties
The acquisition of title to mineral properties is a very detailed and time-consuming process. Title to, and the area of, mineral concessions may be disputed. Although the Corporation believes it has taken reasonable measures to ensure proper title to its properties, there is no guarantee that title to any of its properties will not be challenged or impaired. Third parties may have valid claims underlying portions of the Corporation's interests.
Market Prices
If the Corporation seeks to bring a property to production, the profitability of its operations will be dependent in part upon the market price of the minerals. Mineral prices fluctuate widely and are affected by numerous factors beyond the control of the Corporation. The level of interest rates, the rate of inflation, the world supply of and demand for mineral commodities, and exchange rate stability can all cause significant price fluctuations. Such external economic factors are in turn influenced by changes in international investment patterns, monetary systems and political developments. The price of commodities has fluctuated widely in recent years, and future price declines could cause commercial production to be impracticable, thereby having a material adverse effect on the Corporation's business, financial condition and results of operations.
Competition
The mining industry is intensely competitive in all of its phases and the Corporation will compete with many companies possessing greater financial and technical resources than itself. Competition in the mining industry is primarily for: mineral rich properties which can be developed and produced economically; the technical expertise to find, develop, and operate such properties; the labour to operate the properties; and, the capital for the purpose of funding such properties. Many competitors not only explore for and mine minerals, but conduct refining and marketing operations on a world-wide basis. Such competition may result in Lithium being unable to acquire desired properties (due to the auction process involved in property acquisition), to recruit or retain qualified employees or to acquire the capital necessary to fund its operations and develop its properties. Existing or future competition in the mining industry could materially adversely affect the Corporation's prospects for mineral exploration and success in the future.
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
- 12 -
Additional Financing
The exploration and development of the Corporation's properties, including continuing exploration and development projects, and the construction of mining facilities and the commencement of mining operations, will require substantial additional financing. Failure to obtain sufficient financing will result in a delay or indefinite postponement of exploration development or production on any or all of the Corporation's properties or even a loss of a property interest. Sources of funds now available to Lithium are limited and may include the sale of equity capital, properties, royalty interests, the entering into of future joint ventures and the exercise of outstanding options and warrants. Additional financing may not be available when needed or, even, if available, the terms of such financing might not be favourable to the Corporation and might involve substantial dilution to existing shareholders. Failure to raise capital when needed would have a material adverse effect on the Corporation's business, financial condition and results of operations.
Competition for Key Personnel
The Corporation will be dependent upon the continued support and involvement of a number of key management personnel. The loss of the services of one or more of such personnel could have a material adverse effect on the Corporation. The Corporation's ability to manage its exploration and development activities and, hence, its success, will depend in large part on the efforts of these individuals. The Corporation faces intense competition for qualified personnel and there can be no assurance that the Corporation will be able to attract and retain such personnel.
Possible Volatility of Stock Price
The market price of the Corporation's common shares will be subject to wide fluctuations in response to factors such as actual or anticipated variations in the Corporation's consolidated results of operations, changes in financial estimates by securities analysts, general market consolidated and other factors. Market fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations may adversely affect the market price of the Corporation's common shares. Factors such as the price of minerals, announcements by competitors, and changes in stock market analyst recommendations regarding Lithium, and general market conditions and attitudes affecting other exploration and mining companies may have a significant effect on the market price of the Corporation's Shares. Moreover, it is likely that during future quarterly periods, the Corporation's results and exploration activities may fluctuate significantly or may fail to meet the expectations of stock market analysts and investors and, in such event, the market price of the Corporation's Shares could be materially adversely affected.
In the past, securities class action litigation has often been initiated following periods of volatility in the market price of a company's securities. Such litigation, if brought against, could result in substantial costs and a diversion of management's attention and resources, which could have a material adverse effect on the Corporation's business, financial condition and results of operations.
Ability to Manage Growth
The size of the Corporation's business and assets is expected to grow in the coming years. In order to effectively deploy its capital and manage its growth, the Corporation will need to retain additional personnel and augment, improve or replace existing systems and controls. As a result, there can be no assurances that Lithium will be able to effectively manage its growth and, if it is unable to do so, its business, financial conditions and results could be adversely affected.
Ability to Sell Securities
Securities of the Corporation may be subject to resale restrictions under applicable securities legislation. Accordingly, there may be a long time period between the date of purchase of securities and the date that a shareholder is able to sell these securities. In this time, the market price of the Corporation's securities will vary. Additionally, there may be limited liquidity in the market for such securities. As such, there is no assurance that the market price at which a shareholder is able to sell any will equal or exceed the price at which the securities were originally issued by the Corporation.
Acquisition Risk
As part of the Corporation's business strategy, it may seek to grow by acquiring businesses that it believes will complement its current business. The Corporation may not effectively select acquisition candidates or negotiate or finance acquisitions or integrate the acquired businesses and their personnel into its business. The Corporation cannot guarantee that it can complete any acquisition it pursues on favourable terms, or that any completed acquisitions will ultimately benefit its business and the results of operations of the Corporation.
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
- 13 -
The risks inherit with acquisitions include the risks associated with the integration of acquired operations, diversion of management's attention and potential loss of key employees. The Corporation may not be able to successfully integrate products, technologies or personnel of a business acquired in the future. Failure could have a Material Adverse Effect on the business, financial condition and results of operations of the Corporation.
Dividends
To date, the Corporation has not paid any dividends on their outstanding shares and does not expect to do so in the foreseeable future. Any decision to pay dividends on the Corporation's common shares will be made by the Board of Directors of the Corporation on the basis of the Corporation's earnings, financial requirements and other conditions.
Conflicts of Interest
Certain of the directors and officers of the Corporation will be engaged in, and will continue to engage in, other business activities on their own behalf and on behalf of other companies and, as a result of these and other activities, such directors and officers of the Corporation may become subject to conflicts of interest. The Business Corporations Act (Alberta) ("ABCA") provides that in the event that a director has an interest in a contract or proposed contract or agreement, the director shall disclose his interest in such contract or agreement and shall refrain from voting on any matter in respect of such contract or agreement unless otherwise provided under the ABCA. To the extent that conflicts of interest arise, such conflicts will be resolved in accordance with the provisions of the ABCA.
Other Risks
The Corporation also faces a number of risk factors that are outside of its control, generally, including, without limitation, natural disasters, general economic and other conditions.
FINANCIAL REPORTING IN HYPERINFLATIONARY ECONOMIES
Effective July 1, 2018, entities reporting under IFRS are required to apply the inflation adjustment since the applicable conditions for such application have been satisfied.
IAS 29, Financial Reporting in Hyperinflationary Economies, has been applied to these consolidated financial statements as the Corporation's Argentine subsidiaries ("Argentine Subsidiaries") use the Argentine Peso as their functional currency. IAS 29 requires that the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy be adjusted based on an appropriate general price index to express the effects of inflation, and shall be stated in terms of the measuring unit current at the end of the reporting period. To measure the impact of inflation on their financial position and results, the Argentine subsidiaries have elected to use the Retail Price Index (Indice de Precios al Consumidor or "IPC"). This price index has been recommended by the Government Board of the Argentine Federation of Professional Councils of Economic Sciences. The level of the IPC at December 31, 2024 was 7,694,008, which represents an increase of 118% over the IPC at December 31, 2023.
All balance sheet items of Argentine subsidiaries are segregated into monetary and non-monetary items. Monetary items are units of currency held, and assets and liabilities to be received or paid, in fixed or determinable number of units of currency. These monetary items are not restated because they are already expressed in terms of the current monetary unit.
In a period of inflation, an entity holding an excess of monetary assets over monetary liabilities loses purchasing power, and an entity with an excess of monetary liabilities over monetary assets gains purchasing power, to the extent the assets and liabilities are not linked to a price level. The gain or loss on the net monetary position is included in the consolidated statement of loss as Gain on hyperinflation.
Non-monetary assets and liabilities (items which are not already expressed in terms of the monetary unit) are restated by applying the relevant index. After the IAS 29 restatement of non-monetary assets, it is necessary to consider whether the restated amount of the asset might exceed its recoverable amount and may result in an impairment charge. Additionally, the application of IAS 29 results in the creation of temporary differences because the book value of non-monetary assets is adjusted for inflation but no equivalent adjustments are made for tax purposes; the effect of such a temporary difference is a deferred tax liability and the related deferred tax expense that needs to be recognized in profit or loss.
The results and financial position of subsidiaries in Argentina, whose functional currency is the currency of a hyperinflationary economy, are first restated in accordance with IAS 29 and are then translated into the presentation currency.
Lithium Chile Inc.
Management Discussion & Analysis
December 31, 2024
CORPORATE INFORMATION
CONTACT
Head Office
Lithium Chile Inc.
700, 903 – 8th Avenue S.W.
Calgary, Alberta T2P 0P7
Tel: (587) 393-5801
Fax: (587) 393-5812
E-Mail: [email protected]
DIRECTORS AND OFFICERS
Al J. Kroontje, Chairman
Steven Cochrane, President & CEO
Terrence Walker, VP Exploration
Jose de Castro Alem, Manager Lithium Operations
Kenneth Booth, Chair of Audit Committee
Kenneth L. DeWyn
Kelly Kimbley
Jana Lillies, CFO
AUDITORS
MNP LLP
Calgary, Alberta
BANKERS
The Bank of Nova Scotia
Calgary, Alberta
TRANSFER AGENT
Odyssey Trust
Calgary, Alberta
LEGAL
DS Lawyers Canada LLP
SCHEDULE “A”
LITHIUM CHILE INC.
Form 52-110F2
AUDIT COMMITTEE DISCLOSURE
The audit committee (the "Audit Committee") is a committee of the Board established for the purpose of overseeing the accounting and financial reporting process of the Corporation and annual external audits of the financial statements. The Audit Committee has set out its responsibilities and composition requirements in fulfilling its oversight in relation to the Corporation's internal accounting standards and practices, financial information, accounting systems and procedures, which procedures are set out in the Corporation's audit committee mandate.
Audit Committee Charter
The Board has developed a written audit committee charter (the "Charter"). A copy of the Charter is attached hereto as Schedule B to this form.
Composition of the Audit Committee
The Audit Committee consists of Kenneth Booth, Kenneth DeWyn and Kelly Kimbley, all of whom are "financially literate" within the meaning of National Instrument 52-110 Audit Committees ("NI 52-110"). Kenneth Booth, Kenneth DeWyn and Kelly Kimbley are considered to be "independent" within the meaning of NI 52-110.
Relevant Education and Experience of Audit Committee Members
Kenneth Booth – Mr. Booth has an MBA and more than 35 years of experience in exploration, mining and corporate finance and public company administration. In mining corporate finance, he has worked for two of Canada's largest investment banks executing numerous equity financings for both junior and senior companies and was involved in a variety of significant mergers and acquisitions. For over 20 years he has served as an officer and director of several public mining exploration companies including serving as an audit committee member.
Kenneth DeWyn – Mr. DeWyn is a business performance consultant, former and current director with several energy companies, and was Executive Director for CSCE until May 2024. Previously, he was the owner/operator of a private aviation company in Calgary. Mr. DeWyn has also been a former director of, and has served on audit committees, of a number of capital pool companies that were listed on the TSX Venture Exchange.
Kelly Kimbley – Mr. Kimbley has significant experience as a senior officer and board member of numerous Canadian public and private companies. Mr. Kimbley has significant capital markets experience and has served as an audit committee member of several public companies. Mr. Kimbley holds a Bachelor of Laws from the University of Saskatchewan and is a member of The Law Society of Alberta.
Audit Committee Oversight
At no time since the commencement of the Corporation's fiscal year ended December 31, 2024 was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board.
Reliance on Certain Exemptions
At no time since the commencement of the Corporation's most recently completed financial year has the Corporation relied on the exemption in Section 2.4 of NI 52-110 (De Minimis Non-audit Services), in subsection 6.1.1(4) of NI 52-110 (Circumstance Affecting the Business or Operations of the Venture Issuer), in subsection 6.1.1(5) of NI 52-110 (Events Outside Control of Member), in subsection 6.1.1(6) of NI 52-110 (Death, Incapacity or Resignation), or an exemption from NI 52-110, in whole or in part, granted under Part 8 of NI 52-110 (Exemption).
The Corporation is classified as a "venture issuer" within the meaning of applicable securities laws and, accordingly, is relying upon the exemption contained in section 6.1 of NI 52-110.
Pre-Approval Policies and Procedures
The Audit Committee has adopted specific policies and procedures for the engagement of non-audit services as described in the Charter under the heading "Approval of Audit and Remitted Non-Audit Services Provided by External Auditors".
External Auditor Service Fees (By Category)
The following table provides information about the fees billed to the Corporation for professional services rendered by MNP LLP for the fiscal years ended December 31, 2024 and 2023:
| 2024 | 2023 | |
|---|---|---|
| Audit Fees(1) | $110,000 | $98,000 |
| Audit-Related Fees(2) | 8,470 | 6,860 |
| Tax Fees(3) | 11,000 | 8,774 |
| All other Fees(3) | -- | -- |
| Total(4) | $129,470 | $113,634 |
Notes:
(1) Audit fees are for professional services rendered by the auditors for the audit of the Corporation's annual financial statements as well as services provided in connection with statutory and regulatory filings.
(2) Audit-related fees are for services related to performance of limited procedures performed by the corporation's auditors related to interim reports and equity pick-up procedures.
(3) Tax fees are for tax compliance, tax advice and tax planning.
(4) All other fees for services performed by the Corporation's auditors.
(5) These fees only represent professional services rendered and do not include any out-of-pocket disbursements or fees associated with filings made on the Corporation's behalf.
SCHEDULE "B"
AUDIT COMMITTEE CHARTER
LITHIUM CHILE INC.
(the "Corporation")
AUDIT COMMITTEE MANDATE
OVERALL ROLE AND RESPONSIBILITY
The Audit Committee shall:
1.1 Assist the board of directors of the Corporation (the "Board of Directors") in its oversight role with respect to:
(a) the quality and integrity of financial information;
(b) the independent auditor's performance, qualifications and independence;
(c) the performance of the Corporation's internal audit function, if applicable;
(d) the Corporation's compliance with legal and regulatory requirements; and
1.2 Prepare such reports of the Audit Committee required to be included in the information/proxy circular of the Corporation in accordance with applicable laws or the rules of applicable securities regulatory authorities.
MEMBERSHIP AND MEETINGS
The Audit Committee shall consist of three (3) or more Directors appointed by the Board of Directors, the majority of whom shall not be officers or employees of the Corporation or any of the Corporation's affiliates. Each of the members of the Audit Committee shall satisfy the applicable independence and experience requirements of the laws governing the Corporation, and applicable securities regulatory authorities.
The Board of Directors shall designate one (1) member of the Audit Committee as the Audit Committee Chair. Each member of the Audit Committee shall be financially literate as such qualification is interpreted by the Board of Directors in its business judgment. The Board of Directors shall determine whether and how many members of the Audit Committee qualify as a financial expert as defined by applicable law.
STRUCTURE AND OPERATIONS
The affirmative vote of a majority of the members of the Audit Committee participating in any meeting of the Audit Committee is necessary for the adoption of any resolution.
The Audit Committee shall meet as often as it determines, but not less frequently than quarterly. The Committee shall report to the Board of Directors on its activities after each of its meetings at which time minutes of the prior Committee meeting shall be tabled for the Board of Directors.
The Audit Committee shall review and assess the adequacy of this Charter periodically and, where necessary, will recommend changes to the Board of Directors for its approval.
The Audit Committee is expected to establish and maintain free and open communication with management and the independent auditor and shall periodically meet separately with each of them.
SPECIFIC DUTIES
Oversight of the Independent Auditor
- Make recommendations to the Board of Directors for the appointment and replacement of the independent auditor.
- Responsibility for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the Audit Committee.
B-2
- Authority to pre-approve all audit services and permitted non-audit services (including the fees, terms and conditions for the performance of such services) to be performed by the independent auditor.
- Evaluate the qualifications, performance and independence of the independent auditor, including: (i) reviewing and evaluating the lead partner on the independent auditor's engagement with the Corporation, and (ii) considering whether the auditor's quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor's independence.
- Obtain from the independent auditor and review the independent auditor's report regarding the management internal control report of the Corporation to be included in the Corporation's annual information/proxy circular, as required by applicable law.
- Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law (currently at least every five years).
Financial Reporting
- Review and discuss with management and the independent auditor:
- prior to the annual audit the scope, planning and staffing of the annual audit;
- the annual audited financial statements;
- the Corporation's annual and quarterly disclosures made in management's discussion and analysis;
- approve any reports for inclusion in the Corporation's Annual Report, if any, as required by applicable legislation;
- the Corporation's quarterly financial statements, including the results of the independent auditor's review of the quarterly financial statements and any matters required to be communicated by the independent auditor under applicable review standards;
- significant financial reporting issues and judgments made in connection with the preparation of the Corporation's financial statements;
- any significant changes in the Corporation's selection or application of accounting principles;
- any major issues as to the adequacy of the Corporation's internal controls and any special steps adopted in light of material control deficiencies; and
- other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
- Discuss with the independent auditor matters relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information and any significant disagreements with management.
AUDIT COMMITTEE'S ROLE
The Audit Committee has the oversight role set out in this Charter. Management, the Board of Directors, the independent auditor and the internal auditor all play important roles in respect of compliance and the preparation and presentation of financial information. Management is responsible for compliance and the preparation of financial statements and periodic reports. Management is responsible for ensuring the Corporation's financial statements and disclosures are complete, accurate, in accordance with generally accepted accounting principles and applicable laws. The Board of Directors in its oversight role is responsible for ensuring that management fulfills its responsibilities. The independent auditor, following the completion of its annual audit, opines on the presentation, in all material respects, of the financial position and results of operations of the Corporation in accordance with Canadian generally accepted accounting principles.
FUNDING FOR THE INDEPENDENT AUDITOR AND RETENTION OF OTHER INDEPENDENT ADVISORS
The Corporation shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent auditor for the purpose of issuing an audit report and to any advisors retained by the Audit Committee. The Audit Committee shall also have the authority to retain such other independent advisors as it may from time to time deem necessary or advisable for its purposes and the payment of compensation therefor shall also be funded by the Corporation.
B-3
APPROVAL OF AUDIT AND REMITTED NON-AUDIT SERVICES PROVIDED BY EXTERNAL AUDITORS
Over the course of any year there will be two levels of approvals that will be provided. The first is the existing annual Audit Committee approval of the audit engagement and identifiable permitted non-audit services for the coming year. The second is in-year Audit Committee pre-approvals of proposed audit and permitted non-audit services as they arise.
Any proposed audit and permitted non-audit services to be provided by the External Auditor to the Corporation or its subsidiaries must receive prior approval from the Audit Committee, in accordance with this protocol. The Chief Financial Officer shall act as the primary contact to receive and assess any proposed engagements from the External Auditor.
Following receipt and initial review for eligibility by the primary contacts, a proposal would then be forwarded to the Audit Committee for review and confirmation that a proposed engagement is permitted.
In the majority of such instances, proposals may be received and considered by the Chair of the Audit Committee (or such other member of the Audit Committee who may be delegated authority to approve audit and permitted non-audit services), for approval of the proposal on behalf of the Audit Committee. The Audit Committee Chair will then inform the Audit Committee of any approvals granted at the next scheduled meeting.
SCHEDULE "C"
LITHIUM CHILE INC.
Form 58-101F2
CORPORATE GOVERNANCE DISCLOSURE
Corporate governance refers to the policies and structure of the board of directors of a corporation, whose members are elected by and are accountable to the shareholders of the corporation. Corporate governance encourages establishing a reasonable degree of independence of the board of directors from executive management and the adoption of policies to ensure the board of directors recognizes the principles of good management. The Board is committed to sound corporate governance practices, as such practices are in the interests of Shareholders and help to contribute to effective and efficient decision-making.
The Board believes that good corporate governance improves corporate performance and benefits all Shareholders. The Canadian Securities Administrators (the "CSA") have adopted National Policy 58-201 Corporate Governance Guidelines, which provides guidelines on corporate governance practices for reporting issuers such as the Corporation. In addition, the CSA have implemented NI 58-101, which prescribes certain disclosure by the Corporation of its corporate governance practices. This disclosure is presented below.
Board of Directors
NI 58-101, when taken together with Section 1.4 of NI 52-110, provides that a member is "independent" if the member has no direct or indirect material relationship with the issuer, a "material relationship" being one which could, in the view of the issuer's board of directors, be reasonably expected to interfere with the exercise of a member's independent judgment.
The Board is currently comprised of seven (7) members, of which three (3) are independent directors for the purposes of NI 58-101. The independent directors are Kenneth Booth, Kenneth DeWyn and Kelly Kimbley. Al J. Kroontje is not considered to be independent as a result of being the Chairman of the Corporation; Terence Walker is considered to not be independent as a result of being the Vice President – Exploration of the Corporation; Steve Cochrane is considered to not be independent as a result of being President and Chief Executive Officer of the Corporation; and Jose de Castro is considered to not be independent as a result of being Manager – Lithium Operations of the Corporation.
The Board facilitates its exercise of independent judgement in carrying out its responsibilities by carefully examining issues and consulting with outside counsel and other advisors in appropriate circumstances. The Board requires management to provide complete and accurate information with respect to the Corporation's activities and to provide relevant information concerning the industry in which the Corporation operates in order to identify and manage risks. The Board is responsible for monitoring the Corporation's senior officers, who in turn are responsible for the maintenance of internal controls and management information systems.
Directorships
Other than as set forth below, none of the directors hold directorships in other reporting issuers (or the equivalent) in jurisdictions in Canada or a foreign jurisdiction.
| Director | Other Reporting Issuers |
|---|---|
| Al J. Kroontje | San Lorenzo Gold Corp. |
| Stuve Gold Corp. | |
| Hoshi Capital Corp. | |
| Kairos Gold Inc. | |
| Steve Cochrane | Angkor Resources Corp. |
| Stuve Gold Corp. | |
| Kairos Gold Inc. | |
| Kenneth DeWyn | PetroFrontier Corp. |
| Labrador Resources Inc. | |
| Terence Walker | San Lorenzo Gold Corp. |
| Stuve Gold Corp. | |
| Kairos Gold Inc. | |
| Kenneth Booth | Angkor Resources Corp. |
| Heliostar Metals Ltd. | |
| SaLi Lithium Corp. | |
| Jose de Castro Alem | Spey resources Corp. |
| Kelly Kimbley | PetroFrontier Corp. |
| San Lorenzo Gold Corp. |
Orientation and Continuing Education of Board Members
While the Corporation currently has no formal orientation and education program for new Board members, sufficient information (such as policies, recent financial statements, prospectuses, proxy solicitation materials, filing statements, marketing and business plans and various other operating, financial and budget reports) will be provided to any new Board member to ensure that new directors are familiarized with the Corporation's business and the procedures of the Board. In addition, new directors will be encouraged to visit and meet with management on a regular basis and are given the opportunity to meet with counsel to the Corporation to discuss their legal obligations. The Corporation will also encourage continuing education of its directors and officers where appropriate in order to ensure that they have the necessary skills and knowledge to meet their respective obligations to the Corporation.
Measures to Encourage Ethical Business Conduct
The Board encourages and promotes a culture of ethical business conduct through communication and supervision as part of its overall stewardship responsibility. The Board does not currently have a formal written code of ethics. The Board is of the view that the fiduciary duties placed on individual directors pursuant to corporate legislation and the common law, and the conflict of interest provisions under corporate legislation which restricts an individual director's participation in decisions of the Board in which the director has an interest, in addition to the Corporation's code of conduct, have been sufficient to ensure that the Board operates independently of management and in the best interests of the Corporation.
When discussing potential transactions and agreements where a director has an interest, that director will be expected to disclose that interest to the Board and if necessary, the Board may ask that director not to participate in the ensuing discussion and/or voting on that particular transaction and/or agreement
Nomination of Board Members
The Compensation, Corporate Governance and Nominating Committee, together with the Board, will consider the size of the Board each year when it considers the number of directors to recommend to the Shareholders for election at the annual meeting of Shareholders, taking into account the number required to carry out the Board's duties effectively and to maintain a diversity of views and experience. While there are no specific criteria for Board membership, the Corporation will attempt to attract and maintain directors with appropriate competencies and skills which would assist in guiding the officers of the Corporation. As such, nominations will tend to be the result of recruitment efforts by management of the Corporation and discussions among the directors prior to the consideration of the Compensation, Corporate Governance and Nominating Committee and the Board as a whole.
Compensation of Directors and Officers
The Compensation, Corporate Governance and Nominating Committee, together with the Board, is responsible for determining compensation payable to executive officers and directors of the Corporation. The current members of the Compensation, Corporate Governance and Nominating Committee are Al Kroontje (Chair), Kenneth Booth and Kenneth DeWyn. The Compensation, Corporate Governance and Nominating Committee has unrestricted access to the Corporation's personnel and documents and is provided with the resources necessary, including, as required, the engagement and compensation of outside advisors, to carry out its responsibilities.
Other Board Committees
The Corporation has no standing committees at this time, other than the Audit Committee and the Compensation, Corporate Governance and Nominating Committee discussed above.
The purpose of the Compensation, Corporate Governance and Nominating Committee in respect of corporate governance matters includes assisting the Board in the discharge of the Board's duties with respect to adopting and ensuring compliance with the governance policies of the Corporation.
Assessment of Directors, the Board and Board Committees
The Board has not implemented a formal process for assessing its effectiveness or the effectiveness of its individual members or its committees. As a result of the Corporation's size, its stage of development and the limited number of individuals on the Board, the Board consider a formal assessment process to be unnecessary at this time. The Board plans to continue evaluating its own effectiveness on an ad hoc basis.