Announcement PDF LITHIUM AUSTRALIA LIMITED ACN 126 129 413 Annual Report For the Year Ended 30 June 2024 Lithium Australia Limited ACN 126 129 413 +61 (0) 3 7017 2656 info@lithium-au.com lithium-au.com Annual Report For the Year Ended 30 June 2024 Table of Contents Table of Contents Corporate Directory ...................................................................................................................... 1 Chair’s Letter................................................................................................................................. 2 Directors’ Report ........................................................................................................................... 3 1 Director’s Report ................................................................................................................................... 3 2 Review of Operations ............................................................................................................................ 7 3 Remuneration report (audited) ........................................................................................................... 16 4 Governance .......................................................................................................................................... 20 Auditor’s Independence Declaration ......................................................................................... 22 Consolidated Statement of Comprehensive Income for the Year Ended 30 June 2024 ......... 23 Consolidated Statement of Financial Position for the Year Ended 30 June 2024................... 24 Consolidated Statement of Changes in Equity for the Year Ended 30 June 2024 .................. 25 Consolidated Statement of Cash Flows for the Year Ended 30 June 2024 ............................. 27 Notes to the Consolidated Financial Statements for the Year Ended 30 June 2024 .............. 28 Note 1 Statement of material accounting policies ..................................................................... 28 Note 2 Revenue .............................................................................................................................. 36 Note 3 Other income ..................................................................................................................... 36 Note 4 Finance costs ..................................................................................................................... 36 Note 5 Auditor’s remuneration ..................................................................................................... 36 Note 6 Expenses from ordinary activities ................................................................................... 37 Note 7 Income tax expense .......................................................................................................... 37 Note 8 Trade and other receivables ............................................................................................. 38 Note 9 Inventory ............................................................................................................................ 38 Note 10 Financial assets ................................................................................................................. 38 Note 11 Capitalised exploration expenditure ............................................................................... 38 Note 12 Intangible assets ............................................................................................................... 39 Note 13 Property, plant and equipment ......................................................................................... 39 Note 14 Trade and other payables ................................................................................................. 40 Note 15 Leases ................................................................................................................................ 40 Note 16 Provisions .......................................................................................................................... 41 Note 17 Loans and borrowings ...................................................................................................... 41 Note 18 Capital management ......................................................................................................... 42 Note 19 Issued capital ..................................................................................................................... 42 Note 20 Reserves ............................................................................................................................. 43 Note 21 Financial instruments ....................................................................................................... 44 Note 22 Loss per share ................................................................................................................... 45 Note 23 Cash flow ............................................................................................................................ 46 Note 24 Operating segments .......................................................................................................... 46 Note 25 Contingent liabilities ......................................................................................................... 48 Lithium Australia Ltd Page i Annual Report For the Year Ended 30 June 2024 Table of Contents Note 26 Related party transactions ............................................................................................... 48 Note 27 Controlled entities and consolidated entity disclosure ................................................ 48 Note 28 Parent entity ....................................................................................................................... 49 Note 29 Commitments ..................................................................................................................... 49 Note 30 Share based payments ..................................................................................................... 50 Note 31 Subsequent events............................................................................................................ 51 Directors’ Declaration ................................................................................................................. 52 Independent Auditor’s Report .................................................................................................... 53 Additional ASX Information ........................................................................................................ 59 5 Additional ASX Information ................................................................................................................ 59 Lithium Australia Ltd Page ii Annual Report For the Year Ended 30 June 2024 Corporate Directory Corporate Directory Lithium Australia Corporate Directory Directors Managing Director and CEO: Simon Linge (Appointed Managing Director on 21 August 2023) Non-Executive Chair: George Bauk Non-Executive Directors: Kristie Young Phil Thick Executive Management Chief Financial Officer: Stuart Tarrant Joint-Company Secretary: Catherine Grant-Edwards Melissa Chapman Business Details Registered Office: Suite 1, 79 - 83 High Street, Kew VIC 3101 Principal Place of Business: Suite 1, 79 - 83 High Street, Kew VIC 3101 Phone: +61 (0) 3 7017 2656 Email: info@lithium-au.com Website: www.lithium-au.com Stock Exchange Listing: Lithium Australia Limited securities are listed on Australian Securities Exchange (ASX Codes: LIT, LITOA, LITOB) Other Details Bank: National Australia Bank, 100 St Georges Terrace, Perth WA 6000 Auditors: Hall Chadwick WA Audit Pty Ltd (Hall Chadwick), 283 Rokeby Road, Subiaco WA 6008 Share Registry: Automic Group on 1300 429 179 (domestic calls) or +61 2 7208 4522 (international calls) or by email at corporate.actions@automicgroup.com.au Lithium Australia Ltd Page 1 Annual Report For the Year Ended 30 June 2024 Chair’s Letter Chair’s Letter Dear Shareholders, It is my pleasure to present Lithium Australia’s FY24 annual report. Lithium Australia has achieved several milestone accomplishments this year across our Battery Recycling, Lithium Chemicals, and Battery Materials businesses. Our considerable progress was underpinned by transitioning our battery recycling commercial model, signing landmark recycling agreements, and making rapid advances under our joint development agreement (JDA) with Mineral Resources. Firstly, our battery recycling division concluded FY24 on a high note, achieving maiden operating cash profits in the final quarter. This success directly results from our strategic transition towards an upstream service model, driving robust revenue growth and enabling a greater proportion of revenue to be received upfront. A record total of 1,542 tonnes of batteries were collected for recycling during FY24. Notably, we collected 514 tonnes of large-format lithium-ion batteries (LIBs), more than doubling our previous year’s collection volumes (FY23: 191 tonnes). This represents a significant improvement in the large-format LIB collection mix to ~33%, underscoring the success of our strategic focus on exclusive recycling agreements with leading OEMs and battery manufacturers. We anticipate continued increases in large-format LIB collections as a significant value driver for our recycling operations. During the year, we signed a 3-year binding off-take agreement with SungEel HiTech (SungEel), who will purchase a minimum of 60% of our annual Mixed Metal Dust (MMD) production from recycling processing. SungEel and Lithium Australia are now discussing a joint development agreement, which includes SungEel’s investment in our recycling operations to enhance processing capacity. As a key customer since 2020, we are excited to continue our collaboration with SungEel. One of our Lithium Chemicals opportunities, LieNA®, moved forward commercially with a JDA entered with Mineral Resources, providing funding for the piloting plant and engineering studies for a demonstration plant. Since signing in early FY2024, we have made significant progress under the JDA, including completion of the final stage of piloting. The remaining activities—product analysis, refining, and demonstration plant engineering study—are all on track to be completed by the end of 2024. Subject to these results, Lithium Australia will form a 50:50 joint venture with Mineral Resources to commercialise the LieNA® technology through a licensing model. We are thrilled to be approaching this landmark achievement alongside our partner, as the commercialisation of LieNA® presents an opportunity to capture significant value. Within the Battery Materials division, we entered a number of MOU’s regarding the potential development of an LFP and LMFP manufacturing plant. We are focused on two strategic commercialisation pathways: 1) an Australian demonstration plant with funding from federal and state governments, as well as strategic partners, or 2) an offshore semi-commercial plant alongside strategic partners. Subsequent to the year-end (July 2024), Lithium Australia executed a placement and launched a share purchase plan to help drive key growth and business development initiatives across the battery recycling and battery materials divisions. Our accomplishments in the past year position us exceptionally well as we head into FY25. Our recycling operations have delivered operating cash profits and are well placed to capitalise on the global trend toward electrification. Our patented technologies are ready for commercialisation, with LieNA® nearing this goal through our partnership with Mineral Resources. Lithium Australia will focus on accelerating revenue growth through exclusive recycling agreements while aiming to complete LieNA® JDA activities and formalise a joint venture with Mineral Resources. We will continue to seek partners for growth across our businesses to achieve our aspirations. I would like to express my gratitude to Simon Linge and the entire Lithium Australia team for their hard work and execution of our growth strategy throughout the year. We also extend our thanks to our shareholders for their unwavering support as we advance toward our long-term vision for Lithium Australia. George Bauk Non-Executive Chair Lithium Australia Ltd Page 2 Annual Report For the Year Ended 30 June 2024 Directors’ Report Directors’ Report The Directors present their report on Lithium Australia Limited (“LIT” or the “Group”) and its controlled entities (the “Group”) for the year ended 30 June 2024 (the “year”). 1 Director’s Report 1.1 Board of Directors The names and details of the Group’s directors in office during the year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Board of Directors Managing Director and CEO: Simon Linge (Appointed Managing Director on 21 August 2023) Non-Executive Chair: George Bauk Non-Executive Directors: Kristie Young Phil Thick 1.2 Information on Directors Information on Directors Managing Director and CEO Name: Simon Linge Experience: Mr Linge has over 30 years’ experience in manufacturing, logistics and infrastructure. Mr Linge has held multiple senior leadership positions. These included an executive role at Pact Group, a leader in the circular economy focused on minimising waste through packaging, reuse, and recycling solutions. He also served as Managing Director & CEO of Bradken Limited, a global manufacturer of designed alloyed steel components, with a primary focus on the mining sector. Prior to these roles, Mr Linge also held senior executive positions with BlueScope throughout Australia, Asia, New Zealand, and USA. Qualifications: BEco (Hons), MAICD Other directorships in listed entities held in the past three years: None Non-Executive Chair Name: George Bauk Experience: Mr Bauk is an experienced Group director with over 15 years’ experience as a listed Group director in Australia with the resources industry in both production and exploration with assets in Western Australia, Australia and internationally. He is an experienced executive, with 30 years’ experience in the resources industry. Mr Bauk holds a Bachelor of Business (Accounting and Finance) from Edith Cowan University, is a Fellow of the CPA and has an MBA from the University of New England. Mr Bauk has held global operational and corporate roles with WMC Resources and Western Metals. Mr Bauk has a strong background in strategic management, business planning, building teams, finance and capital/debt raising, and experience with a variety of commodities in particular rare earths, gold and industrial minerals. During his time as Managing Director of Northern Minerals Ltd, he led its rapid development from a greenfields heavy rare earth explorer to one of a few global producers of high value dysprosium outside of China. Mr Bauk is a passionate member of the WA resources industry having previously held a number of senior governing positions with the Chamber of Minerals and Energy including Vice President. Corporate governance committee roles: • • Member of the Audit & Risk Committee Member of the Remuneration & Nominations Committee Other directorships in listed entities held in the past three years: • • Non-Executive Chairman – PVW Resources Limited Executive Chairman – Thunderbird Resources Limited (Formerly Valor Resources Limited) Non-Executive Director – Firetail Resources Limited (Appointed 6 September 2023) Non-Executive Chairman – Gascoyne Resources Limited (Resigned 31 January 2022) Non-Executive Chairman – Evion Group NL (Resigned 23 November 2023) • • • Lithium Australia Ltd Qualifications: BBus, MBA, GAICD Page 3 Annual Report For the Year Ended 30 June 2024 Directors’ Report Information on Directors Non-Executive Director Name: Kristie Young Experience: Corporate governance committee roles: Other directorships in listed entities held in the past three years: BEng (Hons) Mining, Post Grad Dip (Education), GAICD, FAusIMM Ms Young has over 25 years’ experience in industry with a focus on the resources sector, coupled with over 15 years' experience on boards and committees. Experience spans across technical mining engineering, project evaluation, strategy, growth, marketing, commercial, client management, governance, executive search and business development (BD) including BD Director roles with both EY and PwC. Ms Young is Non-Executive Director with MinEx CRC and four ASX listed entities. She holds a BEng(Mining)Hons, Post Grad DipEd (Maths, IT), Cert IV(HR), is a Graduate and Member of the AICD and a Fellow of the AusIMM. • Chair of the Audit & Risk Committee • Member of the Remuneration & Nominations Committee • • • • • • Qualifications: Non-Executive Director – Corazon Mining Limited (Appointed 1 September 2023) Non-Executive Director - Brazilian Rare Earths Ltd (Appointed 21 December 2023) Non-Executive Director – Tasmea Ltd (Appointed 29 April 2024) Non-Executive Chairperson – ChemX Materials Limited (Resigned 3 February 2023) Non-Executive Director – Tesoro Resources Limited (Resigned 5 October 2023) Non-Executive Director – Primero Group Limited (Delisted 24 February 2021) Non-Executive Director Name: Phil Thick Experience: Phil Thick has over 30 years’ senior executive experience in oil and gas, mining and chemical processing in large multinational companies, smaller ASX listed companies and privately owned companies. In addition, Mr Thick has extensive experience in NonExecutive Director roles and has chaired many of those boards for extended periods. Mr Thick had a 20-year career with Shell in Australia and overseas and for the last 3 years was Downstream Director on the Board of Shell Australia. This was followed by 5 years as a director and CEO of Coogee Chemicals and then 4 years as CEO of New Standard Energy. Prior to joining the Group, Mr Thick led Tianqi Lithium Australia, a subsidiary of Tianqi Lithium Corp out of China, one of the world’s largest lithium companies. Tianqi owns 51% of the Greenbushes mine in Western Australia, the world’s best hard-rock lithium resource, and Mr Thick was charged with building the world’s largest lithium hydroxide plant in Kwinana south of Perth, an investment of nearly $1billion. Mr Thick also chairs the boards of the Chamber of Arts and Culture WA and Perth Symphony Orchestra. Corporate governance committee roles: • • Chair of the Remuneration & Nominations Committee Member of the Audit & Risk Committee Other directorships in listed entities held in the past three years: • Non-Executive Chairman – Patriot Lithium Limited 1.3 Qualifications: BE (Hons), FAICD, FIEAust Joint Company Secretary Ms Melissa Chapman (Certified Practicing Accountant (CPA), AGIA/ACIS, GAICD) and Ms Catherine GrantEdwards (Chartered Accountant (CA)) are directors of Bellatrix Corporate Pty Ltd (Bellatrix), a company that provides company secretarial and accounting services to a number of ASX listed companies. Between them, Ms Chapman and Ms Grant-Edwards have over 30 years’ experience in the provision of accounting, finance and company secretarial services to public listed resource and private companies in Australia and the UK, and in the field of public practice external audit. 1.4 Principal activities The principal activities of the Group during the financial year were to lead and enable the global transition to sustainable lithium production. The Group operates Australia’s market leading lithium-ion battery recycler, develops leading-edge processing technology to produce lithium ferro phosphate (LFP), and develops patented lithium extraction technology. There were no significant changes in the nature of the Group’s principal activities during the financial year. Lithium Australia Ltd Page 4 Annual Report For the Year Ended 30 June 2024 Directors’ Report 1.5 Results of operations The operating loss after income tax of the Group for the year ended 30 June 2024 was $10,759,502 (2023: loss of $7,406,066). The key movements between the financial years are summarised in the following graphic: • Gross Profit: In FY24, our Battery Recycling Division, Envirostream, increased collection volumes, tightly controlled cost of sales and introduced a new upstream service. • New Provision: In FY24, the Group received a further statement of claim valued at $4.1 million, regarding damage caused by a fire in January 2019. • Reversal of Provision: In FY23, prior litigated claims in relation to the fire in January 2019 were settled by Envirostream’s insurance Group to the value of $1.7 million. • Tenement Sales: The achieved sales in FY24 totalled $2.0 million (FY23: $3.1 million). • Other: Lower primarily due to reduced amortisation on intangible assets. Net assets of the Group for the year ended 30 June 2024 were $3,362,157 (2023: $17,362,703). The key movements between the financial years are summarised in the following graphic: • Current Assets: Cash expenditure and reduced valuation of listed investments. • Non-Current Assets: Due to $2.7 million on LieNA® development costs in accordance with the joint development agreement (JDA) with Mineral Resources. Lithium Australia Ltd Page 5 Annual Report For the Year Ended 30 June 2024 Directors’ Report • Current Liabilities: Due to loans and borrowings of $3.1 million relating to drawdowns under the Convertible Note Deed with Mineral Resources and an increase of provision of $4.1 million relating to the fire in January 2019. • Non-Current Liabilities: No material movements. The Group’s working capital deficit, being current assets less current liabilities was $6,654,497 at 30 June 2024 (2023: working capital surplus $10,261,445). The working capital deficit for year ended 30 June 2024 included legal claims against the group of $7,458,589 relating to a fire at the premises of Envirostream Australia Pty Ltd, a wholly owned subsidiary for the Group. It is expected that insurances are sufficient to meet the liabilities (refer to Note 16 for further details). In the Directors’ opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. 1.6 Dividends There are no dividend or distribution reinvestment plans in operation and there have been no dividend or distribution payments during the financial year ended 30 June 2024 (30 June 2023: Nil). Lithium Australia Ltd Page 6 Annual Report For the Year Ended 30 June 2024 Directors’ Report 2 Review of Operations 2.1 Overview 2.1.1 About Lithium Australia Lithium Australia Limited (‘Lithium Australia’ or ‘the Company’) aims to lead and enable the global transition to sustainable lithium production. The Company is aiming to achieve this through its three business divisions: Battery Recycling, Lithium Chemicals, and Battery Materials. Lithium Australia is well-placed, via its patented technologies and market leading battery recycling business, to capitalise on favourable market dynamics including the continued global demand growth for lithium-ion batteries and growing diversification and adoption of alternatives within global lithium supply chains. 2.1.2 Funding Subsequent to year end, Lithium Australia announced the successful capital raising of $1.8m from a placement agreement with The Lind Partners, with minimum funding of $3.5m secured and total funding of up to $7.5m available. Alongside the placement agreement, the Company also launched a Share Purchase Plan (SPP) to provide an opportunity for eligible shareholders to support our strategic initiatives. Funds raised will help drive key growth and business development initiatives across the battery recycling and battery materials divisions. Additionally, the Company received $2.2m in government grants and tax incentives during the financial year. 2.1.3 Strategic Investments During the year, Lithium Australia completed the sale of the Company’s remaining interest in the Lake Johnston Lithium Project to Charger Metals NL (ASX:CHR), receiving $2.0m from the transaction. The sale supports Lithium Australia’s transition away from non-core assets, while also strengthening the Company’s balance sheet. Lithium Australia retains a first right of refusal for offtake for up to 30% of lithium produced by the Lake Johnston Lithium Project. The Company’s current investment holdings include 7.6m shares in Charger Metals NL (ASX:CHR) and 12.6m shares in Evion Group NL (ASX:EVG). The Company also holds a 30% joint venture interest in the Bynoe Lithium Project with Charger Metals. 2.1.4 Environmental, Social and Governance (‘ESG’) Lithium Australia is committed to sustainability through its businesses, ongoing ESG compliance and remains on track with the standard and policies set out. Key ESG metrics are included below: ESG Metrics Pillars Items # Safety Year to date lost time injury incidents 1 People Agreements with First Nation’s Peoples at year end 0 Environment Outstanding closure matters at year end 11 Corporate governance Year to date bribery and / or corruption incidents 0 For further information related to ESG, please refer to the Company’s FY2024 Sustainability Report. 1 Relates to Ravensthorpe rehabilitation Lithium Australia Ltd Page 7 Annual Report For the Year Ended 30 June 2024 Directors’ Report 2.2 Battery Recycling Division 2.2.1 Overview Lithium Australia’s fully owned subsidiary, Envirostream Australia Pty Ltd. (“Envirostream”) is Australia’s leading battery recycler. Under an updated commercial model, an upfront service fee is received once batteries are collected. Lithium-ion batteries are processed at the Company’s Victoria-based facilities which operate using state-of-the-art safety and processing standards. Envirostream has secured its future supply of lithiumion batteries (LIBs) collections through exclusive recycling agreements with leading OEMs 2 and battery manufacturers. The processed output from recycled batteries, including Mixed Metal Dust (MMD) and other metals, are sold to customers such as leading global battery recycler SungEel HiTech Ltd. 2.2.2 Maiden operating cash profit During Q4 FY24, the Company Envirostream achieved the significant milestone of delivering positive operating profits. The achievement was driven by the Company’s strategic transition towards a ‘fee for service’ upstream service model. This both increases revenues and delivers a higher proportion of revenues early in the working capital cycle. This shift reduces the Company’s exposure to market and pricing volatility related to the sales of MMD and other downstream commodities. In FY24, Envirostream achieved revenue of $6.7m and gross profit of $2.2m. Increasing collection volumes, tightly controlled cost of sales and the new upstream service model delivered significant improvements in key unit rates across FY24. These are represented in the table below which demonstrates an uplift in revenue unit rates and decrease of cost of sales unit rates throughout FY24. Battery recycling – quarterly financial information3 Unit Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 Revenue $m $1.26 $1.19 $1.54 $2.71 Cost of sales $m $1.25 $0.99 $1.12 $1.14 Gross profit $m $0.01 $0.20 $0.42 $1.57 Gross margin % 1% 17% 27% 68% Revenue unit rate $/kg $3.05/kg $3.52/kg $4.48/kg $5.63/kg Cost of sales unit rate $/kg $3.01/kg $2.92/kg $3.27/kg $2.13/kg OEM = Original equipment manufacturer Summary financials are unaudited and represent the battery recycling business only (i.e. financials presented do not represent Lithium Australia on a consolidated basis) 2 3 Lithium Australia Ltd Page 8 Annual Report For the Year Ended 30 June 2024 Directors’ Report 2.2.3 Record LIB collections growth A record total of 1,542 tonnes of batteries was collected for recycling during FY24, representing a 14% increase on FY23. Notably, a record 514 tonnes of large-format LIBs were collected for recycling, representing a 170% increase relative to the previous year (FY23: 191 tonnes). This has driven a significant shift in the battery collections mix, with large-format LIBs now representing ~33% of total battery collections in FY24 (FY23: 14%). The rapid collections growth and shift in battery mix highlights the success behind the Company’s strategic focus on large-format LIBs due to the strong forecasted growth within the category, attractive unit economics associated with large-format LIBs, and greater MMD conversion efficiency to drive downstream revenue. Refer to the figure below for additional information on collection volumes and mix. Battery collections volume and mix (FY23 to FY24) Collection volume (Tonnes) 500 80% 70% 400 60% 50% 300 40% 200 30% 20% 100 10% 0 0% Q1 FY23 Q2 FY23 Q3 FY23 Large-format LIBs 2.2.4 Q4 FY23 Q1 FY24 Q2 FY24 Small-format LIBs Other Q3 FY24 Q4 FY24 % of LIBs Exclusive recycling and off-take agreements The improved financial and operational performance is underpinned by the exclusive recycling agreements the Company has signed with leading OEMs and battery manufacturers throughout FY24. During the year, exclusive agreements were signed with leading OEMs including: LG Energy Solution, Hyundai Glovis and Volvo Group Australia. These agreements have driven the strong uplift in large-format LIB collections volumes, with further discussions underway with various other OEMs and battery manufacturers. Lithium Australia has also signed an MMD off-take agreement with SungEel HiTech Ltd. (“SungEel”), a leading South Korean battery recycler. During the 3-year term, SungEel will purchase a minimum of 60% of Lithi