EX-99.2 3 lac-ex992_7.htm EX-99.2 lac-ex992_7.htm

 

Exhibit 99.2

 

CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2019 (Expressed in US Dollars)

 

 


 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Directors of Lithium Americas Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Lithium Americas Corp. and its subsidiaries (together, the Company) as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive income/(loss), changes in equity and cash flows for the years then ended, including the related notes (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 of December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

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 (United States) (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 of these consolidated financial statements 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 of material misstatement, whether due to error or fraud. 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 error or fraud, and performing procedures that respond to those risks. Such procedures included 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 our audits provide a reasonable basis for our opinion.

 

 

(Signed) “PricewaterhouseCoopers LLP”

 

Chartered Professional Accountants

 

Vancouver, Canada

March 12, 2020

 

We have served as the Company's auditor since 2015.

 

 

PricewaterhouseCoopers LLP

PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7

T: +1 604 806 7000, F: +1 604 806 7806

 

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.


 

LITHIUM AMERICAS CORP.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in thousands of US dollars)

 

 

 

 

 

 

December 31,

 

 

December 31,

 

 

 

Note

 

2019

 

 

2018

 

 

 

 

 

$

 

 

$

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents¹

 

4

 

 

83,614

 

 

 

41,604

 

Receivables, prepaids and deposits

 

 

 

 

2,595

 

 

 

1,947

 

Deferred financing costs

 

 

 

 

1,190

 

 

 

1,767

 

Inventories

 

 

 

 

1,236

 

 

 

1,617

 

 

 

 

 

 

88,635

 

 

 

46,935

 

Assets held for sale

 

 

 

 

4,279

 

 

 

-

 

 

 

 

 

 

92,914

 

 

 

46,935

 

 

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

 

 

 

 

 

Restricted cash

 

 

 

 

150

 

 

 

150

 

Loans to Joint Operation

 

5

 

 

37,959

 

 

 

12,609

 

Investment in Joint Venture

 

5

 

 

-

 

 

 

35,282

 

Property, plant and equipment

 

6

 

 

158,924

 

 

 

5,423

 

Exploration and evaluation assets

 

7

 

 

3,852

 

 

 

3,540

 

 

 

 

 

 

200,885

 

 

 

57,004

 

TOTAL ASSETS

 

 

 

 

293,799

 

 

 

103,939

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

 

 

11,879

 

 

 

2,822

 

Current portion of long-term liabilities

 

8

 

 

3,111

 

 

 

539

 

 

 

 

 

 

14,990

 

 

 

3,361

 

LONG-TERM LIABILITIES

 

 

 

 

 

 

 

 

 

 

Credit facility

 

8

 

 

83,043

 

 

 

17,356

 

Joint Operation borrowings

 

8

 

 

28,845

 

 

 

-

 

Decommissioning provision

 

 

 

 

633

 

 

 

269

 

Foreign withholding tax liability

 

15

 

 

1,445

 

 

 

-

 

Other liabilities

 

8

 

 

5,222

 

 

 

671

 

 

 

 

 

 

119,188

 

 

 

18,296

 

TOTAL LIABILITIES

 

 

 

 

134,178

 

 

 

21,657

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

Share capital

 

 

 

 

200,913

 

 

 

197,991

 

Contributed surplus

 

 

 

 

28,404

 

 

 

26,172

 

Accumulated other comprehensive loss

 

 

 

 

(3,867

)

 

 

(4,293

)

Deficit

 

 

 

 

(65,829

)

 

 

(137,588

)

TOTAL SHAREHOLDERS’ EQUITY

 

 

 

 

159,621

 

 

 

82,282

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

293,799

 

 

 

103,939

 

 

1 Cash and cash equivalents as at December 31, 2019 include the Company’s 50% share ($52,495) of the Joint Operation’s cash and cash equivalents of $104,989.

 

Subsequent events (Note 19)

Approved for issuance on March 12, 2020

On behalf of the Board of Directors:

 

“Gary Cohn”

 

“George Ireland”

Director

 

Director

 

2

 


 

LITHIUM AMERICAS CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

 

 

 

 

Years Ended December 31,

 

 

 

Note

 

2019

 

 

2018

 

 

 

 

 

$

 

 

$

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

Exploration expenditures

 

12

 

 

(8,525

)

 

 

(10,015

)

General and administrative

 

11

 

 

(6,692

)

 

 

(8,750

)

Stock-based compensation

 

9

 

 

(4,119

)

 

 

(4,592

)

Share of income/(loss) in Joint Venture

 

5

 

 

3,648

 

 

 

(347

)

 

 

 

 

 

(15,688

)

 

 

(23,704

)

OTHER ITEMS

 

 

 

 

 

 

 

 

 

 

Gain on dilution of interest in Joint Venture

 

5

 

 

74,492

 

 

 

-

 

Gain on increase of interest in Joint Venture

 

5

 

 

-

 

 

 

6,104

 

Transaction costs

 

5

 

 

(1,102

)

 

 

(974

)

Foreign exchange (loss)/gain

 

 

 

 

(326

)

 

 

3,828

 

Finance costs

 

 

 

 

(2,928

)

 

 

(343

)

Finance and other income

 

 

 

 

855

 

 

 

1,267

 

 

 

 

 

 

70,991

 

 

 

9,882

 

NET INCOME/(LOSS) BEFORE TAX

 

 

 

 

55,303

 

 

 

(13,822

)

Tax expense

 

15

 

 

(1,445

)

 

 

-

 

NET INCOME/(LOSS) BEFORE DISCONTINUED OPERATIONS

 

 

 

 

53,858

 

 

 

(13,822

)

LOSS FROM DISCONTINUED OPERATIONS

 

18

 

 

(2,193

)

 

 

(14,445

)

NET INCOME/(LOSS)

 

 

 

 

51,665

 

 

 

(28,267

)

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME/(LOSS)

 

 

 

 

 

 

 

 

 

 

ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO NET INCOME/(LOSS)

 

 

 

 

 

 

 

 

 

 

Unrealized gain/(loss) on translation to reporting currency

 

 

 

 

426

 

 

 

(4,179

)

 

 

 

 

 

 

 

 

 

 

 

TOTAL COMPREHENSIVE INCOME/(LOSS)

 

 

 

 

52,091

 

 

 

(32,446

)

INCOME/(LOSS)  PER SHARE FROM CONTINUING OPERATIONS

 

 

 

 

 

 

 

 

 

 

Income/(loss) per share - basic

 

 

 

 

0.60

 

 

 

(0.16

)

Income/(loss) per share - diluted

 

 

 

 

0.59

 

 

 

(0.16

)

INCOME/(LOSS)  PER SHARE

 

 

 

 

 

 

 

 

 

 

Income/(loss) per share - basic

 

 

 

 

0.58

 

 

 

(0.32

)

Income/(loss) per share - diluted

 

 

 

 

0.56

 

 

 

(0.32

)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-

BASIC

 

 

 

 

89,138

 

 

 

88,598

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-

DILUTED

 

 

 

 

91,750

 

 

 

88,598

 

 

 

 

 

3

 


 

LITHIUM AMERICAS CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of US dollars and shares in thousands)

 

 

 

Share capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

 

 

Amount

 

 

Contributed

surplus

 

 

Accumulated

other

comprehensive

loss

 

 

Deficit

 

 

Shareholders’

equity

 

 

 

of Shares

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Authorized share capital:

  Unlimited common shares without par value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

 

88,479

 

 

 

197,390

 

 

 

20,812

 

 

 

(114

)

 

 

(109,321

)

 

 

108,767

 

Shares issued on conversion of RSUs and exercise of options

 

 

249

 

 

 

601

 

 

 

(592

)

 

 

-

 

 

 

-

 

 

 

9

 

Stock-based compensation (Note 9)

 

 

-

 

 

 

-

 

 

 

4,684

 

 

 

-

 

 

 

-

 

 

 

4,684

 

DSUs and RSUs issued in lieu of directors' fees and salaries

 

 

-

 

 

 

-

 

 

 

1,268

 

 

 

-

 

 

 

-

 

 

 

1,268

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(28,267

)

 

 

(28,267

)

Other comprehensive loss

 

 

-

 

 

 

 

 

 

 

-

 

 

 

(4,179

)

 

 

-

 

 

 

(4,179

)

Balance, December 31, 2018

 

 

88,728

 

 

 

197,991

 

 

 

26,172

 

 

 

(4,293

)

 

 

(137,588

)

 

 

82,282

 

Shares issued on conversion of RSUs, DSUs, and exercise of stock options

 

 

1,115

 

 

 

2,922

 

 

 

(2,354

)

 

 

-

 

 

 

-

 

 

 

568

 

Stock-based compensation (Note 9)

 

 

-

 

 

 

-

 

 

 

4,128

 

 

 

-

 

 

 

-

 

 

 

4,128

 

DSUs issued in lieu of directors' fees

 

 

-

 

 

 

-

 

 

 

458

 

 

 

-

 

 

 

-

 

 

 

458

 

Credit to equity as a result of the Project Investment (Note 5)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,094

 

 

 

20,094

 

Net Income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

51,665

 

 

 

51,665

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

426

 

 

 

-

 

 

 

426

 

Balance, December 31, 2019

 

 

89,843

 

 

 

200,913

 

 

 

28,404

 

 

 

(3,867

)

 

 

(65,829

)

 

 

159,621

 

 

 

 

4

 


 

LITHIUM AMERICAS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of US dollars)

 

 

 

Years Ended December 31,

 

 

 

2019

 

 

2018

 

 

 

$

 

 

$

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income/(loss) for the year

 

 

51,665

 

 

 

(28,267

)

Items not affecting cash:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

4,128

 

 

 

4,731

 

Depreciation

 

 

1,062

 

 

 

1,364

 

Foreign exchange loss/(gain)

 

 

326

 

 

 

(3,828

)

Share of (income)/loss in Joint Venture

 

 

(3,648

)

 

 

347

 

Inventories write down

 

 

-

 

 

 

326

 

Gain on dilution of interest in Joint Venture

 

 

(74,492

)

 

 

-

 

Gain on increase of interest in Joint Venture

 

 

-

 

 

 

(6,104

)

Impairment of Organoclay property, plant and equipment

 

 

-

 

 

 

11,580

 

Accrued interest and other expenses

 

 

744

 

 

 

987

 

Changes in non-cash working capital items:

 

 

 

 

 

 

 

 

Decrease/(increase) in receivables, prepaids and deposits

 

 

2,011

 

 

 

(264

)

Decrease in inventories

 

 

343

 

 

 

443

 

Increase in accounts payable and accrued liabilities

 

 

214

 

 

 

141

 

Net cash used in operating activities

 

 

(17,647

)

 

 

(18,544

)

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Loans to Joint Venture (Note 5)

 

 

(66,250

)

 

 

(24,000

)

Repayment of loans to Joint Venture and accrued interest (Note 5)

 

 

8,778

 

 

 

25,000

 

Contribution to Joint Venture

 

 

(1,019

)

 

 

(11,337

)

Cash acquired as a result of Joint Operation accounting (Note 5)

 

 

79,984

 

 

 

-

 

Additions to exploration and evaluation assets

 

 

(560

)

 

 

(1,416

)

Release of restricted cash

 

 

-

 

 

 

1,666

 

Additions to property, plant and equipment

 

 

(29,290

)

 

 

(586

)

Net cash used in investing activities

 

 

(8,357

)

 

 

(10,673

)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

568

 

 

 

9

 

Drawdowns from the credit facility (Note 8)

 

 

66,250

 

 

 

17,500

 

Debt financing costs paid

 

 

-

 

 

 

(1,550

)

Finance lease repayments

 

 

(269

)

 

 

(52

)

Repayment of long-term borrowings

 

 

(135

)

 

 

(129

)

Other (Note 8)

 

 

1,500

 

 

 

-

 

Net cash provided by financing activities

 

 

67,914

 

 

 

15,778

 

EFFECT OF FOREIGN EXCHANGE ON CASH

 

 

100

 

 

 

(351

)

CHANGE IN CASH AND CASH EQUIVALENTS

 

 

42,010

 

 

 

(13,790

)

CASH AND CASH EQUIVALENTS - BEGINNING OF THE YEAR

 

 

41,604

 

 

 

55,394

 

CASH AND CASH EQUIVALENTS - END OF THE YEAR

 

 

83,614

 

 

 

41,604

 

 

 

 

Supplemental disclosure with respect to cash flows (Note 14).

Cash flow of discontinued operation (Note 18).

 

 

 

 

5

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

1.

NATURE OF OPERATIONS

Lithium Americas Corp. (“Lithium Americas” or the “Company”) is a Canadian-based resource company focused on the advancement of two significant lithium projects: the Cauchari-Olaroz project (“Cauchari-Olaroz”), located in Jujuy Province of Argentina, and the Thacker Pass project (“Thacker Pass”), located in north-western Nevada, USA.  Cauchari-Olaroz is a lithium brine project and is owned by a legal entity in Argentina, Minera Exar S.A. (“Minera Exar”). The Company and Ganfeng Lithium Co. Ltd., (“Ganfeng”) are joint operation partners in Minera Exar. Thacker Pass is a sedimentary-based lithium property located in the McDermitt Caldera in Humboldt County, Nevada, and is owned by the Company’s wholly owned subsidiary, Lithium Nevada Corp. (“Lithium Nevada”).

The Company’s common shares are listed on the Toronto Stock Exchange and the New York Stock Exchange under the symbol "LAC".

The Company’s head office and principal address is Suite 300, 900 West Hastings Street, Vancouver, British Columbia, Canada, V6C 1E5.

To date, the Company has not generated significant revenues from operations and has relied on equity and other financings to fund operations. The underlying values of exploration and evaluation assets and property, plant and equipment are dependent on the existence of economically recoverable reserves, securing and maintaining title and beneficial interest in the properties, the ability of the Company to obtain the necessary financing to complete permitting, development, and to attain future profitable operations.

Upon closing of the previously announced Project Investment (as defined in Note 5 below) on August 16, 2019, the Cauchari-Olaroz project is accounted for as a joint operation and the Company recognizes its share of any assets, liabilities, revenues and expenses of the project (refer to Note 5).

 

 

2.

BASIS OF PREPARATION AND PRESENTATION

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These consolidated financial statements were approved for issuance by the Board of Directors on March 12, 2020.

These consolidated financial statements are expressed in US dollars, the Company’s presentation currency, and have been prepared on a historical cost basis. The accounting policies set out in Note 3 have been applied consistently to all years presented in these consolidated financial statements, unless otherwise stated.

 

 

 

 


 

6

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.

SIGNIFICANT ACCOUNTING POLICIES

Critical Accounting Estimates and Judgments

Significant areas where judgment is applied, apart from those involving estimations, are:

Joint Arrangements

If a company is a party to an arrangement over which it does not have sole control, judgment is required in determining whether joint control over this arrangement exists and, if so, which parties have joint control and whether an arrangement is a joint venture or joint operation. In assessing whether joint control exists, the Company analyzes the activities of each arrangement and determines which activities most significantly affect the returns of the arrangement over its life. These activities are determined to be the relevant activities of the arrangement. If unanimous consent is required over the decisions about the relevant activities, the parties whose consent is required would have joint control over the arrangement. The judgments around which activities are considered the relevant activities of the arrangement are subject to analysis by each of the parties to the arrangement and may be interpreted differently. When performing this assessment, the Company generally considers decisions about activities such as managing the asset while it is being designed, developed and constructed, during its operating life and during the closure period. The Company may also consider other activities including the approval of budgets, expansion and disposition of assets, financing, significant operating and capital expenditures, appointment of key management personnel, representation on the board of directors and other items. When circumstances or contractual terms change, the Company reassesses the control group and the relevant activities of the arrangement.

If a company has joint control over the arrangement, an assessment of whether the arrangement is a joint venture or joint operation is required. This assessment is based on whether a company has rights to the assets and obligations for the liabilities relating to the arrangement or whether a company has rights to the net assets of the arrangement. In making this determination, the Company reviews the legal form of the arrangement, the terms of the contractual arrangement and other facts and circumstances. In a situation where the legal form and the terms of the contractual arrangement do not give the Company rights to the assets and obligations for the liabilities, an assessment of other facts and circumstances is required, including whether the activities of the arrangement are primarily designed for the provision of output to the parties and whether the parties are substantially the only source of cash flows contributing to the arrangement. The consideration of other facts and circumstances may result in the conclusion that a joint arrangement is a joint operation. This conclusion requires judgment and is specific to each arrangement.

On closing of the Project Investment (as defined in Note 5) Lithium Americas and Ganfeng implemented certain amendments to the Shareholders Agreement governing the Cauchari-Olaroz joint arrangement, including the provision of equal representation on the Minera Exar board of directors and the Management Committee governing the project and an obligation to purchase all of the output of Minera Exar at market price.

 

Facts and circumstances have led the Company to conclude that upon closing of the Project Investment, Minera Exar and Exar Capital B.V. are a joint operation for the purposes of the Company’s consolidated financial statements. The other facts and circumstances considered include the provision of output to the parties of the joint arrangement, agreement by the Company and Ganfeng to fund the construction of the project, jointly control the project’s budget, be the sole source of funding for Minera Exar, and distribute the project’s free cash flow (as defined in the Shareholders’ Agreement) upon commencement of commercial production. For Minera Exar, the Company and Ganfeng will take their share of the output from the assets directly over the life of the arrangement. Exar Capital B.V. is subject to the same constraints and controls as Minera Exar.

 

7

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.

SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Prior to closing of the Project Investment, Minera Exar and Exar Capital B.V. were accounted for as a Joint Venture under the equity method. The accounting treatment for these entities may be reassessed in 2020 in case the most recent transaction with Ganfeng is closed (refer to Note 19, Subsequent Events).

 

Impairment of exploration and evaluation assets

The application of the Company’s accounting policy for impairment of exploration and evaluation assets requires judgment to determine whether indicators of impairment exist including information such as, the period for which the Company has the right to explore including expected renewals, whether substantive expenditures on further exploration and evaluation of resource properties are budgeted and evaluation of the results of exploration and evaluation activities up to the reporting date. Management has performed an impairment indicator assessment on the Company’s exploration and evaluation assets and has concluded that no impairment indicators exist as of December 31, 2019.

Impairment of the Company’s share of the Joint Operation’s property, plant and equipment

The application of the Company’s accounting policy for the impairment assessment of its share of the Joint Operation’s property, plant and equipment requires judgment to determine whether indicators of impairment exist. A review of impairment indicators is performed at the Joint Operation’s level and includes consideration of both external and internal sources of information, including factors such as market and economic conditions, taxation, prices and forecasts, capital expenditure requirements, future operating costs and production volumes. Management has performed an assessment and concluded that no impairment indicators exist as of December 31, 2019.

Functional currency

Items included in the financial statements of each of the Company’s subsidiaries and the Joint Operation are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). Effective January 1, 2018, the functional currency of Minera Exar was changed from the Argentine peso to the US dollar as a result of the start of significant construction activities, denominated mainly in US dollars, adoption of the construction budget and in anticipation of the US dollar denominated indebtedness to be undertaken by Minera Exar in 2018 to finance the construction.

 

Principles of Consolidation

These consolidated financial statements include the accounts of Lithium Americas Corp. and its wholly-owned USA subsidiaries Lithium Nevada Corp., KV Project LLC, and RheoMinerals Inc., and Canadian wholly-owned subsidiary 2265866 Ontario Inc. All inter-company transactions and balances have been eliminated.

Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

 

8

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.

SIGNIFICANT ACCOUNTING POLICIES  (continued)

Joint Arrangements

A joint arrangement is defined as one over which two or more parties have joint control, which is the contractually agreed sharing of control over an arrangement. This exists only when the decisions about the relevant activities (being those that significantly affect the returns of the arrangement) require the unanimous consent of the parties sharing control. There are two types of joint arrangements: joint operations and joint ventures.

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and are the only source of funding the liabilities relating to the arrangement. In relation to the Company’s interest in the joint operation, the Company recognizes its share of any assets, liabilities, revenues and expenses of the joint operation.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Investments in joint ventures are accounted for using the equity method. On acquisition, an equity method investment is initially recognized at cost. The carrying amount of equity method investments includes goodwill identified on acquisition, net of any accumulated impairment losses. The carrying amount is adjusted by the Company’s share of post-acquisition net income or loss; depreciation, amortization or impairment of the fair value adjustments made on the underlying balance sheet at the date of acquisition; dividends; cash contributions; and the Company’s share of post-acquisition movements in Other Comprehensive Income (“OCI”).

Foreign Currency Translation

Functional and Presentation Currency

Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in US dollars. The functional currency of all subsidiaries in the Company’s group is the US dollar, while the functional currency of Lithium Americas Corp. is the Canadian dollar. The functional currency of Minera Exar S.A., the Company’s Joint Venture, is the US dollar.

Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss. They are deferred in equity if they are attributable to part of the net investment in a foreign operation. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction.  

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognized in other comprehensive income.

 

9

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.SIGNIFICANT ACCOUNTING POLICIES (continued)

Parent and Subsidiary Companies

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

 

assets and liabilities for each reporting date are translated at the closing rate at that reporting date;

 

income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and

 

all resulting exchange differences are recognized in other comprehensive loss.

The Company recognizes its share of the exchange differences of its joint ventures which result from translation of the results and financial position of its foreign joint ventures from the functional currency to the presentation currency.  

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from the item are considered to form part of the net investment in a foreign operation and are recognized in other comprehensive income.

When an entity disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in other comprehensive income related to the foreign operation are recognized in profit or loss. If an entity disposes of part of an ownership interest in a foreign operation which remains a subsidiary or a joint venture, a proportionate amount of foreign currency gains or losses accumulated in other comprehensive income related to the subsidiary is reallocated between controlling and non-controlling interests. Ownership interest is treated solely as a percentage ownership in a subsidiary or a joint venture.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash held with banks and highly liquid short-term investments which can be withdrawn at any time, which is subject to an insignificant risk of changes in value.

Exploration and Evaluation Assets

Exploration expenditures not including the acquisition costs and claim maintenance costs are expensed until the establishment of technical feasibility and commercial viability based on a combination of the following factors:

 

The extent to which mineral reserves or mineral resources as defined in National Instrument 43-101 (“NI 43-101”) have been identified through a feasibility study or similar document;

 

The status of environmental permits; and

 

The status of mining leases or permits.

 

 

10

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.

SIGNIFICANT ACCOUNTING POLICIES (continued)

Costs incurred relating to the acquisition and claim maintenance of mineral properties, including option payments and annual fees to maintain the property in good standing, are capitalized and deferred by property until the project to which they relate is sold, abandoned, impaired or placed into production.  After recognition, the Company uses the cost model for exploration and evaluation assets.

The Company assesses its exploration and evaluation assets for indications of impairment on each balance sheet date and when events and circumstances indicate a risk of impairment.  A property is written down or written off when the Company determines that an impairment of value has occurred or when exploration results indicate that no further work is warranted. Exploration and evaluation assets are tested for impairment immediately prior to reclassification to mineral property development costs.

Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company’s title.  Such properties may be subject to prior agreements or transfers, or title may be affected by undetected defects.

Property, Plant and Equipment

On initial recognition, property, plant and equipment are valued at cost. Cost includes the purchase price and directly attributable cost of acquisition or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company, including appropriate borrowing costs and foreign exchange losses or gains on borrowings and related cash used to construct qualifying assets as defined under IFRS. During the development and commissioning phase, pre-production expenditures, net of incidental proceeds from sales during this period, are capitalized to the asset under construction and equipment. Capitalization of costs incurred ceases when commercial production commences in the manner intended by management.  The Company applies judgment in its assessment of when the asset is capable of operating in the manner intended by management.

Property, plant and equipment are subsequently measured at cost less accumulated depreciation, less any accumulated impairment losses, with the exception of land which is not depreciated.  When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items or major components.

Property, plant and equipment that are currently in use are depreciated as follows:

 

Process testing facility equipment included in “Equipment and machinery” – straight-line basis over the estimated useful life of 10 years;

 

Office equipment included in “Other” – declining balance method at 20% annual rate; and

 

Other equipment included in “Other” – straight-line basis over the estimated useful life of 7-15 years.

The assets’ residual values, useful lives and depreciation methods are reviewed and adjusted, if appropriate, at each financial year-end.  The gain or loss arising on the disposal of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognized in profit and loss.

 

11

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.

SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of Property, Plant and Equipment

Property, plant and equipment are assessed for impairment indicators at each reporting date or when an impairment indicator arises if not at a reporting date. Impairment indicators are evaluated and, if considered necessary, an impairment assessment is carried out.  If an impairment loss is identified, it is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.  The recoverable amount is the higher of an asset’s fair value less cost of disposal and value in use.  

Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. 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 of the time value of money and the risks specific to the asset.  For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).  These are typically individual mines, plants or development projects.  

Where the factors which resulted in an impairment loss subsequently reverse, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years.  A reversal of an impairment loss is recognized immediately in profit or loss.

Non-current assets (or disposal groups) held for sale and discontinued operations

 

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.

 

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

 

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

 

Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.

 

 

12

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.

SIGNIFICANT ACCOUNTING POLICIES (continued)

 

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are

presented separately in the statement of profit or loss.

 

Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assesses whether the contract involves the use of an identified asset, whether the Company has the right to obtain substantially all of the economic benefits from use of the asset during the term of the arrangement and if the Company has the right to direct the use of the asset. At inception or on reassessment of a contract that contains one or more lease components, the Company allocates the consideration in the contract to each lease component on the basis of their relative standalone prices.

The Company leases offices, buildings, equipment and cars. Lease contracts are typically made for fixed periods of 3 to 5 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.

Until the year ended December 31, 2018, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.

From January 1, 2019, leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

 

fixed payments (including in-substance fixed payments), less any lease incentives receivable;

 

variable lease payment that are based on an index or a rate;

 

amounts expected to be payable by the lessee under residual value guarantees;

 

the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

 

payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

 

 

13

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.SIGNIFICANT ACCOUNTING POLICIES (continued)

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the following:

 

the amount of the initial measurement of lease liability;

 

any lease payments made on or before the commencement date less any lease incentives received;

 

any initial direct costs; and

 

restoration costs.

Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.

Inventories

Organoclay products, in-process and stockpile inventories are recorded at the lower of average cost and net realizable value. The cost of finished goods and work-in-progress is determined by the weighted average cost method and comprises raw materials, direct labour, and other direct costs, as well as related production overheads including applicable depreciation on property, plant and equipment.  Net realizable value is the estimated selling price less applicable selling expenses.  

When inventories have been written down to net realizable value, a new assessment of net realizable value is made in each subsequent period.  When the circumstances that caused the write down no longer exist, the amount of the write down is reversed.  

Materials and supplies inventories are valued at the lower of average cost and net realizable value.  Cost includes acquisition, freight and other directly attributable costs.

Financial Instruments

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.  

On initial recognition, financial assets and liabilities are classified as and measured at: amortized cost, fair value through profit or loss (“FVTPL”) or fair value through other comprehensive income (“OCI”) according to their contractual cash flow characteristics and the business models under which they are held.

Financial assets are measured at amortized cost if they are held for the collection of contractual cash flows where those cash flows solely represent payments of principal and interest. The Company’s intent is to hold these financial assets in order to collect contractual cash flows and the contractual terms give rise to cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding. All of the Company’s financial assets fall under this category.

Financial liabilities are measured at amortized cost unless they are required to be measured at FVTPL.      

Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.    

 

14

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.

SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of financial assets.

The Company assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortized cost and fair value through OCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach permitted by IFRS 9, Financial Instruments (“IFRS 9”), which requires expected lifetime losses to be recognised from initial recognition of the receivables.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of assets requiring a substantial period of time to get ready for their intended use or sale are capitalized as part of the cost of that asset. Capitalization of borrowing costs begins when there are borrowings and activities commence to prepare an asset for its intended use. Capitalization of borrowing costs ends when substantially all activities necessary to prepare a qualifying asset for its intended use are complete. When proceeds of project specific borrowings are invested on a temporary basis, borrowing costs are capitalized net of any investment income.  

Provisions

Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.  Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

Close down and restoration costs include dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas.  Estimated close down and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs, based on the net present value of estimated future costs.  The cost estimates are updated during the life of the operation to reflect known development, such as revisions to cost estimates and to the estimated lives of the operations, and are subject to formal reviews at regular intervals.  The initial closure provision together with changes resulting from changes in estimated cash flows or discount rates are capitalized within capital assets.  These costs are then depreciated over the lives of the asset to which they relate, typically using the units of production method.  The amortization or unwinding of the discount applied in establishing the net present value of provisions is charged to the statement of comprehensive (loss)/income as a financing cost.  Provision is made for the estimated present value of the costs of environmental cleanup obligations outstanding at the statement of financial position date.

Income Taxes

Income tax expense comprises current and deferred tax.  Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity.  Current tax expense is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at period-end, adjusted for amendments to tax payable with regards to previous years.

 

15

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.

SIGNIFICANT ACCOUNTING POLICIES (continued)

Deferred tax is recorded using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.  Temporary differences are not provided for the initial recognition of assets or liabilities that affect neither accounting or taxable loss, nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.  The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.  To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is not recorded.

Share Capital

Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity.

Revenue

The Company recognizes revenue from the sales of products when a customer obtains control of the product and the Company has satisfied its performance obligation.  

These criteria are generally met at the time the product is shipped or delivered to the customer and, depending on the delivery conditions, title and risk have passed to the customer and acceptance of the product, when contractually required, has been obtained.  Revenue is measured based on the price specified in the sales contract, net of discounts, at the time of sale.

Earnings/(Loss) per Share

Basic earnings/(loss) per share is computed by dividing the net earnings or loss attributable to shareholders of the Company by the weighted average number of common shares outstanding during the reporting period. The diluted earnings/loss per share calculation is based on the weighted average number of common shares outstanding during the period, plus the effects of dilutive common share equivalents. This method requires that the dilutive effect of outstanding options and warrants issued should be calculated using the treasury stock method.  This method assumes that all common share equivalents have been exercised at the beginning of the period (or at the time of issuance, if later), and that the funds obtained thereby were used to purchase common shares of the Company at the average trading price of the common shares during the period, but only if dilutive.

Stock-Based Compensation

From time to time the Company grants stock options to buy common shares of the Company to directors, officers, employees and service providers.  The fair value of stock options granted by the Company is treated as compensation costs in accordance with IFRS 2, Share-based Payment.  These costs are charged to the statement of comprehensive (loss)/income over the stock option vesting period.  

 

16

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

3.

SIGNIFICANT ACCOUNTING POLICIES (continued)

Each tranche in an award is considered a separate award with its own vesting period and grant date fair value.  Fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model.  Compensation expense is recognized over the tranche’s vesting period based on the number of awards expected to vest, by increasing contributed surplus.  The number of awards expected to vest is reviewed at least annually with any impact being recognized immediately. Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the statement of comprehensive (loss)/income, unless they are related to the issuance of shares.  Amounts related to the issuance of shares are recorded as a reduction of share capital.  When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model.  

The Company’s equity incentive plan also allows the grant of restricted share units, performance share units and deferred share units. The cost of equity-settled payment arrangements is recorded based on the estimated fair value at the grant date and charged to earnings over the vesting period.

Newly adopted accounting standards and amendments

 

Leases

The Company adopted IFRS 16, Leases, as at January 1, 2019 in accordance with the transitional provisions outlined in the standard, using a cumulative catch-up approach where the leases were recorded from that date forward and comparative information was not restated. The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance sheet on January 1, 2019. The Company recorded right-of-use assets of $296 within property, plant and equipment, measured at either an amount equal to the lease liability or their carrying amount as if IFRS 16 had been applied since the commencement date, discounted using the Company’s incremental borrowing rate on January 1, 2019. As a result, the Company recorded lease liabilities of $296 as at January 1, 2019.

As part of the initial application of IFRS 16 the Company elected to apply the following practical expedients:

 

the previous determination of whether a contract is, or contains, a lease pursuant to IAS 17 and IFRIC 4 has been maintained for existing contracts;

 

not recognize a right-of-use asset or lease liability for leases where the lease term ends within 12 months of the date of initial application;

 

rely on the Company’s assessment of whether leases are onerous contracts as an alternative to an impairment review;

 

exclude initial direct costs from the right-of-use asset; and

 

use hindsight when assessing the lease term.

The weighted average incremental borrowing rate for lease liabilities initially recognized as of January 1, 2019 was 5% per annum.

Accounting policy for leases, disclosed earlier in this section, has been applied as of January 1, 2019 on adoption of IFRS 16.

 

 


 

17

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

4.

CASH AND CASH EQUIVALENTS

 

 

 

As at December 31,

 

 

As at December 31,

 

 

 

2019

$

 

 

2018

$

 

Cash

 

 

53,894

 

 

 

2,905

 

Short-term bank deposits

 

 

29,720

 

 

 

38,699

 

 

 

 

83,614

 

 

 

41,604

 

 

As at December 31, 2019, $388 of cash was held in Canadian dollars (December 31, 2018 – $215), $1,011 of cash was held in US dollars (December 31, 2018 – $2,691) and the Company’s $52,495 share of Joint Operation’s cash was held in US dollars. Cash at bank balances earn interest between 0.25-1.5%. Short-term bank deposits are held in US dollars and earn interest between 1.0-2.81%.

 

5.

JOINT OPERATION

The Company and Ganfeng are shareholders in Minera Exar, the jointly controlled company that holds the Cauchari-Olaroz project located in Jujuy province of Argentina. In addition, the Company and Ganfeng are shareholders in Exar Capital B.V., the jointly controlled company in the Netherlands that provides financing to Minera Exar for the purpose of advancing the construction of the Cauchari-Olaroz project.

On August 16, 2019, the Company closed the transaction agreement whereby Ganfeng agreed to subscribe, through a wholly-owned subsidiary, for 141 million newly issued shares of Minera Exar, for cash consideration of $160,000 (such transaction, the “Project Investment”). As a result, Ganfeng increased its direct interest in Minera Exar from 37.5% to 50%, and diluted Lithium Americas’ interest from 62.5% to 50%, each subject to the rights of JEMSE (a company owned by the Government of Jujuy province) to acquire an 8.5% interest in Minera Exar. The Company’s and Ganfeng’s interests in Exar Capital B.V. remained unchanged.

On closing of the Project Investment, Minera Exar repaid an $8,000 loan made by the Company, together with accrued but unpaid interest thereon.

During the year ended December 31, 2019, the Company recognized $1,102 of transaction costs related to the Project Investment as an expense in the statement of comprehensive income/(loss).

Beginning on August 16, 2019, and as at December 31, 2019, the Company recognized its share of the assets and liabilities of Minera Exar and Exar Capital B.V., including its share of Minera Exar’s cash and cash equivalents of $52,495 and its share of Minera Exar’s property, plant and equipment of $159,851. Upon transition from Joint Venture accounting to Joint Operation accounting (refer to Note 3), $20,094 was credited to the Company’s deficit as a result of a difference between the proportion of the Company’s and Ganfeng’s loan funding of and the respective ownership interests in Exar Capital B.V.

The Joint Operation’s Cauchari-Olaroz project is in the development phase and accordingly, all costs directly attributable to the project are capitalized.

 

18

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

5.

JOINT OPERATION (continued)

Gain on Dilution of interest in Joint Venture

Upon closing of the Project Investment the Company recognized a $74,492 gain on dilution of its interest in the Joint Venture which was calculated as follows:

 

 

 

$

 

Company’s 50% share of the $160,000 increase in Minera Exar's share capital

 

 

80,000

 

Carrying value of the Company's diluted share in Investment in Joint Venture

 

 

(5,508

)

Gain on dilution of interest in Joint Venture

 

 

74,492

 

 

Investment in Joint Venture

Prior to the closing of the Project Investment on August 16, 2019 Minera Exar and Exar Capital B.V. were accounted for as a Joint Venture:

 

 

 

Minera Exar

S.A.

 

 

Exar Capital

B.V.

 

 

Total

 

 

 

$

 

 

$

 

 

$

 

Investment in Joint Venture, as at December 31, 2017

 

 

19,637

 

 

 

-

 

 

 

19,637

 

Share of (loss)/income of Joint Venture

 

 

(1,077

)

 

 

730

 

 

 

(347

)

Contribution to Joint Venture

 

 

11,403

 

 

 

7,390

 

 

 

18,793

 

Return of the investment

 

 

(8,004

)

 

 

-

 

 

 

(8,004

)

Increase in Company's share

 

 

6,104

 

 

 

-

 

 

 

6,104

 

Elimination of unrealized gain on intercompany transactions

 

 

(833

)

 

 

(68

)

 

 

(901

)

Investment in Joint Venture, as at December 31, 2018

 

 

27,230

 

 

 

8,052

 

 

 

35,282

 

Share of (loss)/income of Joint Venture

 

 

(414

)

 

 

4,062

 

 

 

3,648

 

Contribution to Joint Venture

 

 

1,059

 

 

 

37,423

 

 

 

38,482

 

Elimination of unrealized gain on intercompany transactions

 

 

(334

)

 

 

(1,576

)

 

 

(1,910

)

Share of increase in Minera Exar net assets as a result of the Project Investment, less diluted interest

 

 

74,492

 

 

 

-

 

 

 

74,492

 

Transition to Joint Operation accounting

 

 

(102,033

)

 

 

(47,961

)

 

 

(149,994

)

Investment in Joint Venture, as at December 31, 2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

19

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

5.

JOINT OPERATION (continued)

Loans to Minera Exar and Exar Capital B.V.

The Company has entered into the following loan agreements with Minera Exar and Exar Capital B.V., the terms of which are summarized below:

 

 

 

$

 

Loans to Joint Venture, as at December 31, 2017

 

 

11,479

 

Loans granted to Minera Exar in 2018, maturity 7 years, interest rate LIBOR+7.57%

 

 

16,500

 

Repayment of principal and accrued interest

 

 

(18,740

)

Accrued interest

 

 

1,697

 

Loans granted to Exar Capital B.V., maturity 7 years, interest rate LIBOR+9.89%

 

 

7,500

 

The difference between the face value and the fair value of loans to Exar Capital B.V.

 

 

(5,827

)

Loans to Joint Venture, as at December 31, 2018

 

 

12,609

 

Accrued interest

 

 

3,791

 

Loans granted to Exar Capital B.V., maturity 7 years, interest rate LIBOR+9.89%

 

 

66,250

 

The difference between the face value and the fair value of loans to Exar Capital B.V.

 

 

(37,423

)

Repayment of loan to Minera Exar and accumulated interest thereon

 

 

(8,778

)

Share of loans of the Joint Operation

 

 

23,241

 

Elimination of loans as a result of Joint Operation accounting

 

 

(21,731

)

Loans to Joint Operation, as at December 31, 2019

 

 

37,959

 

 

The interest on the loans to Minera Exar is accrued semi-annually on a non–compounding basis. The proceeds from the loans are being used by Minera Exar for project exploration, mining construction and development purposes. As part of the Project Investment, Minera Exar repaid $8,778 in loans and accrued interest to the Company.

The loans to Exar Capital B.V. are non-interest bearing and are provided to fund the construction of the Cauchari-Olaroz project. The loans are accounted for initially at fair value and subsequently at amortized cost. The fair value of the loans at inception was calculated using discounted cash flow technique applying market interest rates. The difference between the face value and the fair value of $37,423 in the reporting period was previously recognized as part of Investment in Joint Venture. On transition to Joint Operation accounting, the uneliminated difference between the face value and the fair value of loans provided to the Joint Operation as a result of a difference between the proportion of the Company’s and Ganfeng’s loan funding of and the respective ownership interests in Exar Capital B.V. was recognized in deficit in accordance with IFRS 11.

Upon closing of the Project Investment and transition to Joint Operation accounting, the Company recognized its $23,241 share of loans of Exar Capital B.V. to Minera Exar. At the same time $21,731 of the Company’s loans to Exar Capital B.V. were eliminated, which represents 62.5% of the total amount of loans granted by the Company to Exar Capital B.V.

 

20

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

5.

JOINT OPERATION (continued)

Joint Operation Commitments and Contingencies

As at December 31, 2019, the Company’s 50% share of the Joint Operation’s commitments and contingencies is as follows:

 

Annual royalty of $100 due in May of every year and expiring in 2041;

 

Community programs agreements with six communities located in the Cauchari-Olaroz project area have terms from five to thirty years. The annual fees due are $186 in 2020, $198 in 2021 and $278 between 2022 and 2061, assuming that these agreements will be extended for the life of the project. The annual fees are subject to change. The Joint Operation’s obligations to make the payments are subject to continued development of the project and commencement and continuation of production operations on the project.

 

Commitments related to contracts for construction of evaporation ponds and other construction contracts of $14,596.

Los Boros Option Agreement

On September 11, 2018, the Joint Venture exercised a purchase option agreement (“Option Agreement”) with Grupo Minero Los Boros (“Los Boros”), entered into on March 28, 2016, for the transfer of title to the Joint Venture of certain mining properties that comprised a portion of the Cauchari-Olaroz project.

Under the terms of the Option Agreement, the Joint Venture paid $100 upon signing and exercised the purchase option for the total consideration of $12,000 to be paid in sixty quarterly instalments of $200. The first installment becomes due upon occurrence of one of the following two conditions, whichever comes first: the third anniversary of the purchase option exercise date or the beginning of commercial exploitation with a minimum production of 20,000 tons of lithium carbonate equivalent. As security for the transfer of title to the mining properties, Los Boros granted to the Joint Venture a mortgage over those mining properties for $12,000. In accordance with the Option Agreement, on November 27, 2018 Minera Exar paid Los Boros a $300 royalty which was due within 10 days of the commercial plant construction start date.

According to the Option Agreement, a 3% net profit interest royalty will have to be paid to Los Boros by the Joint Venture for 40 years, payable in Argentinian pesos, annually within the 10 business days after calendar year end.

The Joint Venture can cancel the first 20 years of net profit interest royalties in exchange for a one-time payment of $7,000 and the next 20 years for an additional payment of $7,000.  

JEMSE Arrangement

During 2012 Minera Exar granted a conditional right to Jujuy Energia y Mineria Sociedad del Estado (“JEMSE”), a mining investment company owned by the government of Jujuy Province in Argentina, to acquire an 8.5% equity interest in Minera Exar for one US dollar and the provision of management services as required to develop the project.  

If the conditions are met and it exercises its right, JEMSE will be required to provide its pro rata (8.5%) share of the financing requirements for the construction of the Cauchari-Olaroz project.  These funds will be loaned to JEMSE by the shareholders of Minera Exar and will be repayable out of one‑third of the dividends to be received by JEMSE over future years from the project. The distribution of dividends to JEMSE and other shareholders in the project will only be considered once all annual commitments related to the project debt have been met.

 

21

 


LITHIUM AMERICAS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of US dollars, except for per share amounts; shares in thousands)

 

6.

PROPERTY, PLANT AND EQUIPMENT

 

 

 

Cauchari-Olaroz Project1

 

Land

 

 

Buildings

 

 

Equipment

and machinery

 

 

Organoclay

plant

 

 

Other2

 

 

Total

 

 

 

$

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at December 31, 2017

 

 

-

 

 

386

 

 

 

2,143

 

 

 

5,562

 

 

 

11,495

 

 

 

636

 

 

 

20,222

 

Additions

 

 

-

 

 

-

 

 

 

-

 

 

 

624

 

 

 

-

 

 

 

187

 

 

 

811

 

Disposals

 

 

-

 

 

-

 

 

 

-

 

 

 

(1,120

)

 

 

(24

)

 

 

-

 

 

 

(1,144

)

As at December 31, 2018

 

 

-

 

 

386