Lithium Royalty Corp

TSX:LIRC

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen, and welcome to the Lithium Royalty Corp.'s Second Quarter 2025 Results Conference Call. [Operator Instructions] This call is being recorded on Friday, August 15, 2025. I would now like to turn the conference over to Jonida Zaganjori, Vice President of Investor Relations at Lithium Royalty Corp. Please go ahead.

[Jonida Zaganjori, executive]

Good morning, and welcome to the Lithium Royalty Corp. Second Quarter 2025 Earnings Call. Please note that our complete financial results are available on our website, lithiumroyaltycorp.com under the Investors tab and on SEDAR+. This event is being webcast live. A replay of this call will be available on our website. Joining us today are Ernie Ortiz Ortega, President and CEO of Lithium Royalty Corp.; and Dominique Barker, Chief Financial Officer at LRC.

Ernie will begin with introductory remarks, followed by Dominique, who will provide an overview of our financial results. After the presentations, we will transition to a Q&A session where our executive team will respond to your questions.

We would like to remind participants that today's commentary may contain forward-looking information. For more details and other important notices, please refer to our press release dated August 14, 2025, available on our website and on SEDAR+. Please note that all figures referred to on today's call are in U.S. dollars unless otherwise noted. I will now turn the call over to Ernie.

[Ernie Ortiz Ortega, executive]

Thank you, Jonida, and good morning, everyone. Revenue in the quarter was $127,000. This figure declined materially compared to the year ago level due to several factors. First, the timing of shipments of an LRC operator were delayed such that we received less revenue in the quarter, which should be made up in the second half of the year. Next, the second quarter of 2024 was the final quarter of shipments for core lithium before the operation was placed on care and maintenance, negatively affecting the year-over-year comparison. Lastly, spodumene prices declined by 36% year-over-year. And by the end of June 2025, prices were 25% lower than at the beginning of April.

This sharp inter-quarter drop created heightened volatility, which negatively impacted our revenue performance. Since the end of June, lithium prices have increased by approximately 50%. Spodumene prices were trading in the $600 per tonne range near the end of the second quarter and spodumene quotations this week are trading north of $100 per tonne.

Given LRC's strong balance sheet, coupled with our belief that LRC shares remain undervalued, LRC was able to capitalize on the volatility by buying back shares through both our announced substantial issuer bid and our normal course issuer bid.

Through the SIB, we acquired CAD $3.2 million worth of shares at an average price of $5.70 a share. Subsequent to the SIB, we acquired 150,000 additional shares through our NCIB at an average price of $5.34. This brought capital deployment to share repurchases in the quarter to roughly 711,000 shares or CAD $4 million at an average price of $5.52 per share. We reduced the outstanding shares by approximately 1.3% and the float by 9% through these actions. The quarter brought on discrete challenges due to the heightened price volatility.

That said, we believe revenue performance is not representative of ongoing operations and that revenue performance should improve in the second half of the year due to several factors, such as recognition of delayed shipments from the second quarter at much higher prices than if they were sold in June, Ganfeng Lithium's continued ramp-up of the Minas lithium project, the anticipated startup of Seen Mining's Trescarbadas lithium project and improved lithium pricing that has now increased by 50% since the lows seen in June 2025.

Lithium Royalty Corp. benefits from a large portfolio of 35 royalties that span 7 countries. When looking across the royalty in the lithium sector, LRC has one of the highest organic growth profiles across both categories. Notwithstanding the volatility in the second quarter, that robust growth profile remains intact and has improved recently by the firming in spot prices and the continued progression of our portfolio companies.

Even in the face of the lowest lithium prices over the last 4.5 years, many of our portfolio companies continue to advance their projects. This progress has incubated a catalyst-rich period for our portfolio that should materialize over the next 6 to 12 months. The following positive developments have all occurred in the low commodity price backdrop. But in a better pricing environment, some of these initiatives could potentially be accelerated to further drive organic growth.

Key portfolio developments include Ganfeng Lithium progressed the minor lithium project through its commissioning period. According to guidance from Ganfeng, they expect production to commence in the second half of the year with revenue to LRC to also occur in the second half of the year.

During the second quarter, we had the opportunity to visit the leadership of Zijin in Xiamen, China and also toward the 3Q site in Argentina. We are grateful for the hospitality shown by Zijin to LRC. Phase 1 of the project, which is 20,000 tons LCE has completed construction with production expected to start in the second half of 2025.

Zijin has other brine assets in China for which it is evaluating learnings they can translate from China to Tres Quebradas as they continue to develop the Phase 2 capacity of an additional 30,000 tons per year. Zijin emphasized the importance of Tres Quebradas to its growth ambitions within lithium as they aim to produce between 250,000 and 300,000 tonnes LCE across its portfolio by 2028.

Core Lithium released its fined restart study in May 2025. The restart study disclosed several positives for LRC. Most importantly, the new management team has identified several cost reduction opportunities such that the anticipated cash cost of the business is expected to be between $450 and $510 per tonne on an FOB Australia basis. This cost level is very competitive across the global peer group.

Second, Core simplified the flow sheet and debottleneck operations such that nameplate production is now expected to be 205,000 tonnes of SE6 concentrate compared to the prior feasibility study target of 175,000 tonnes per year.

At current spot prices, nameplate production would translate to approximately $4.6 million of gross revenue to LRC on an annual basis. Lastly, Core Lithium has hired Morgan Stanley Australia to lead the financing process for the restart.

On August 4, Atlas Lithium reported its SK 1300 compliant definitive feasibility study and maiden resource report over the Das Neves Lithium project, for which LRC holds a 3% gross overriding revenue royalty. The DFS supports an initial 7-year mine life with an average production of 146,000 tonnes per year of 5.5% spodumene concentrate.

Atlas expects to extend the life of mine as additional mining fits are granted in the future. The DFS states an all-in sustaining cost of the operation of $595 per tonne, ranking as one of the lowest cost operations globally across both hard rock and brine. Furthermore, with an estimated $57.5 million left in capital expenditures and an expected $40 million to come from its offtake partners,

Atlas is well positioned to fully fund the asset and bring Das Neves into production. At current spot price, the annual royalty revenues from nameplate production would be approximately $3.6 million to LRC.

Lastly, Power Metals announced its native mineral resource a quarter of 13,000 tonnes at 2.4% Cesium oxide. The company also outlined an exploration target of 11,000 to 15,000 tonnes solely from the West Joe Dike. Power Metals expects to be in production in 2026 as it is a simple quarry with low capital expenditure requirements.

As discussed, the foundation that underpins the organic growth for LRC has improved materially since the start of the year. For LRC, 2025 is shaping up to deliver 2 b asset start-ups, potential restarts from Australia, advancement to one of the lowest cost hard rock assets through Atlas Lithium and near-term cash flow from Cesium via power Metals royalty.

As you can see from Page 12 of our corporate presentation available on our website, these advancements result in approximately 60% of our net asset value on track to be either in production or construction by year-end 2025.

This rich organic growth profile exists in the context of LRC maintaining a strong balance sheet that finished the quarter with $28 million in cash and no debt. Our pipeline remains strong and robust. The quality of opportunities continues to improve with an increasing number of prospects emerging from more advanced assets. Our preference remains for assets that are cash flowing or soon to be cash flowing, and we are being selective to ensure attractive accretion from a financial and qualitative perspective.

As we already have royalties from some of the best assets globally, we will remain prudent on when to deploy additional capital. I will now -- Dominique will discuss our financial results.

[Dominique Barker, executive]

Thank you, Ernie. Our royalty revenue this quarter was $127,000, down from $1.5 million in the same period last year. I trust that many in the investment community listened to Sigma's Q2 call held earlier this morning. But for those of you who did not have a chance to dial in, Sigma indicated they held back some inventory for commercial reasons.

This has proven fortuitous because as we now know, June was the low in lithium price with a bottom of around $600 per tonne for spodumene concentrate. You can see inventory on Sigma's financials. So we would expect a normalized production number of around 60,000 tonnes in the quarter plus the inventory that's held at Sigma.

In addition, depending on what happens to pricing to the end of Q3 ended September 30, we could finally see some positive QP adjustments given the price move to date since June and the knowledge that there are open shipments currently out there. Each shipment of around 20,000 tonnes at Sigma is equivalent to approximately $100,000 of revenue to us using today's spot price of $900 per tonne for spodumene concentrate.

In addition, one of our operators, Core Lithium continues to hold approximately 15,000 tonnes of spodumene in inventory, including fines. Using today's spot price of around $900 per tonne, the value to us is approximately $300,000 of revenue. General and admin expenses was $1.6 million in the quarter compared to $1.5 million in the same period last year.

Noncash G&A stock-based compensation was $474,000 in the quarter compared to $522,000 in the same period last year.

Taking this into account, our cash G&A was $1.2 million this quarter compared to $1.4 million last quarter and $1.1 million in the same period last year. We are focused on managing what's within our control, namely our G&A expenses. LRC's adjusted EBITDA was a loss of $1.5 million in the quarter compared to an EBITDA of $138,000 in the same period last year.

The loss is primarily due to the decline in revenue as we only had the 1 producing asset this quarter compared to 3 in the same period last year. With regards to balance sheet, our position is robust. We had $28 million of cash at quarter end and no debt. In fact, we earned approximately $330,000 in interest income in the quarter. As Ernie mentioned in his remarks, we purchased CAD 4 million of our shares in the quarter at an adjusted -- at an average price of $5.62.

After the quarter, we did renew our NCIB, which allows us to purchase up to 1.2 million shares through to July 2026. We are optimistic we are past the low and expect several projects to progress materially in the balance of the year, notably Mariana, Tres Quebradas and Das Neves. While lithium is volatile, lithium demand is growing. We are living in a generational change in the energy system, transitioning from molecular energy to electric energy or from piped energy to wired energy, and that has been and will continue to be positive for lithium demand.

One thing to note, the entire lithium industry is only sized at around $12 billion annually. Think of this compared to the oil industry. At 100 million barrels per day, its value trades $6 billion per day or $2 trillion per year. Bottom line is that it does not take much to destabilize the lithium market because it is so small, and that's going to result in large amplitude on the upside and the downside. We remain fully confident in the long-term growth trajectory of lithium demand. I will now pass the call back to Ernie for closing remarks.

[Ernie Ortiz Ortega, executive]

Thank you, Dominique. Lithium demand growth remains unimpeded by the volatility in the macroeconomic environment. The growth is being led by a continued surge in electric vehicles and energy storage usage. Equally important, the continued cost declines for lithium-ion batteries are allowing for new demand drivers to proliferate such as robotics, humanoids, commercial trucking and electrical vertical takeoff and landing.

Global electric vehicle sales grew by 28% year-on-year during the first half of 2025. China remained the global leader in EV sales with growth of 32%, followed by Europe with 26% and in North America with mid-single-digit growth. Due to the continued rise in Chinese exports, the rest of the world grew by 40%, having the fastest region globally led by countries like Thailand, South Korea and Brazil.

In the first quarter, we saw leading EV and battery companies such as BYD, CATL and Xiaomi raised $15 billion combined to continue their pursuit of long-term growth. The momentum continued as Xiaomi unveiled their new electric SUV in China, the YU7, which secured almost 300,000 orders in the first hour, which are noncancelable. In Europe, affordability and consumer choices improved, which led to surging battery electric vehicle sales.

For the first half of 2025, battery electric vehicle sales grew by 35% in the U.K. and Germany, 28% in Italy and 84% in Spain. While growth is already strong, it could accelerate even further going into year-end and into 2026, driven by recently unveiled incentive programs across the U.K., France, Italy and Germany.

In the U.K., the government launched a GBP 650 million program, providing EV incentives for mass market vehicles. In France, the government announced the return of its EV leasing program for low-income households, providing EUR 370 million of support for EVs starting on September 30.

In Italy, the government unveiled a EUR 600 million incentive regime for EVs that starts in September. Finally, Germany announced an accelerated depreciation program for EVs to accelerate growth and promote consumption. The U.K., France and Italian subsidies alone are worth over EUR 1.7 billion, which are likely to enhance growth in the European EV sector.

North American sales grew by mid-single digits and could experience heightened volatility in the second half of the year due to the removal of the EV consumer subsidy in the U.S., which expires on September 30. Energy Storage grew by 54% year-on-year in the first half of the year with a surge in shipments in the first quarter given the tariff volatility in April.

Due to tariff volatility, U.S.-based energy storage producers such as LG Energy Solutions have reported a surge in orders. LG Energy Solutions recently unveiled a backlog of 50 gigawatt hours as it ramps up its Michigan 16.5 gigawatt hour facility. In July, LG Energy Solutions announced that it won the contract for a $4.3 billion order to supply LFP energy storage batteries, underscoring the continued momentum for ESS.

And while the largest segments of demand emanate from EVs and energy storage today, we are seeing encouraging signs of new demand applications that are likely not reflected in current consensus estimates. These demand areas include robots, humanoids, commercial trucks and EV toll. Each robot consumes approximately 2 kilograms of lithium carbonate on the current configurations and some forecast for robot usage extends to over hundreds of millions of units by 2030, offering rapid new sources of demand. So the supply-demand environment is improving as demand growth remains robust, while supply growth slows down.

For example, supply growth averaged 30% annually between 2021 and 2024. However, over the next 4 years, supply growth is forecast to be cut in half to 15% a year as deferrals, delays, low prices and a lack of funding in the sector over the last 2.5 years has slowed down delivery of tons into the market.

Over the last 6 weeks, we've seen lithium prices increase by approximately 50% from the lows seen in late June. June 2025 happened to mark the 31st month of the current downturn compared to the prior downturn from 2018, which lasted 34 months. This price upswing has been exacerbated by recent supply cuts emanating from Chinese low price assets. The Chinese government unveiled an anti-involution campaign, which seeks to prevent over competition on July 1 of this year.

This was followed by several lithium mines in China either entering prolonged maintenance, certain firms stopping spot market sales and certain mines needing to recertify their mineral resources and apply for lithium mining certificates. One major mine in China has already shut down for what is reported to be the balance of the year. There are a handful of other mines in Jiangxi that need to update the reserve statements by the end of this quarter, which has to potential further supply disruptions.

While the market was on a path to rebalancing given strong demand and reduced supply growth, further shutdowns are likely to accelerate the rebalancing. To conclude, LRC is well positioned to thrive in the quarters and years ahead. LRC is a strong balance sheet with $28 million in cash for which we continue to evaluate attractive opportunities. In the meantime, the organic growth profile of the business continues to mature and improve as our 2 brackets commence production and become a source of revenue for LRC.

Core Lithium is actively evaluating its restart having partnered with Morgan Stanley Australia to pursue its funding path, while Atlas Lithium recently released its definitive feasibility study, highlighting it as one of the lowest cost operations and lowest capital requirements to reach production globally.

Also, Power Metals continues to target production in 2026. The sector is on a rebalancing path led by robust demand growth and diminished supply growth. Any incremental shutdowns from more mines are likely to accelerate the rebalancing. Our pipeline remains robust with capital ready to deploy are progressing and the sector is entering a more favorable operating environment. As the leading royalty company in this space, LRC is well positioned to capture future growth and deliver value to shareholders. With that, I will now pass it back to Jonida for Q&A.

[Jonida Zaganjori, executive]

Thank you. Operator, we're now ready to answer questions. Could we please open up the lines for Q&A?

[Operator]

[Operator Instructions] Your first question comes from the line of Patrick Cunningham from Citi.

[Unknown Analyst]

This is Rachel Lee on for Patrick. Given the positive developments on near-term project catalysts, improved pricing and reversal of shipment timing, could you maybe put that all together and walk us through your expectations for royalty income growth in the back half and into next year, considering the natural lag between production, shipments and royalty revenue?

[Ernie Ortiz Ortega, executive]

Sure. I think it's premature for us to comment on potential financial implications of all the moving pieces. As we've seen just in the last 6 weeks, this is a very dynamic situation where pricing has increased by 50%. So we'll have to see kind of the sustainability of that pricing momentum. And not to mention, like we've seen with other past ramp-ups, we have to see the time lag between production for mine start-ups and then the eventual shipments that happen following that initial production.

So I think at this point in time, there are likely too many moving pieces for us to provide any concrete guidance. But as the business matures and as these assets continue to develop and get into production, we can look into providing additional commentary.

[Dominique Barker, executive]

Yes. And maybe I would just add, there's just 3 factors that help with our view. There's volume, which we think we're in a good shape. We've got a couple of new projects we expect will come online. There's the QP adjustments, which will finally go in a better direction, positive and then pricing. As we've said, June is -- we've experienced the lows, and so things are moving in the right direction. So I'll leave you to -- it's in your capable hands to make prediction what actually happens.

[Unknown Analyst]

Got it. That's very helpful. And on the Finniss restart study and the lower projected cash costs, how are you currently assessing market conditions necessary for restart? And what are your views on the timing?

[Ernie Ortiz Ortega, executive]

Sure. So -- and the public discourse is catching up with the company, they've tried to position the operation for being able to thrive in any market environment, even at the lows that we saw in June. The latest reported research study shows kind of a USD 500 per tonne FOB Australia basis. So on an LCIF basis, it would still be very competitive. with the lows that we saw in June. So that's how they're trying to position the operation.

And of course, with the 50% increase in prices in June, that only improved the margin profile of the business. They've done a great job identifying many potential improvements from a future restart versus now they're looking at owning the equipment as opposed to leasing it in the past. They're now fully committing to underground for many of the bits as well. So they've done a great job also on the recovery profile of the business, which leads to the cost reductions. So that's very, very positive.

They are underway with the Morgan Stanley financing process, which is advanced, but I'll defer to Core as to when the next announcement that they're looking to make. But we are pleased with the outcomes, and we're hopeful that in the near term, we'll have additional news flow with regards to that. But given the market prices where they are today, they are -- they would be in a very strong margin position, and they would likely would have been still at a favorable position with the latest restart study economics.

[Operator]

Your next question is from the line of Ben Isaacson from Scotiabank.

[Ben Isaacson, analyst]

So Ernie, I think at the end of your comments, you said that you have capital ready to deploy. I didn't hear any context or magnitude. Can you talk about how much or how much do you want to -- how do you frame that?

[Ernie Ortiz Ortega, executive]

So you're correct. We are looking to deploy opportunities, and we are trying to prioritize opportunities that are either cash flowing or relatively advanced and with a kind of clear path to cash flow. So by sheer nature of those being more advanced, they do encapsulate larger ticket sizes. So I would probably put it between $20 million to $50 million as the potential ticket sizes that we're looking at within those potential opportunities.

It could be kind of outside those range, but that's a probably a good level of confidence kind of at this point in time. And we do think there's multiple ways that we could potentially fund that potential -- those potential transactions, whether it's cash on hand, kind of additional debt, introducing milestone payments to delay potential initial consideration and disbursements and also potential co-investors.

We've had a lot of interested parties that would co-invest alongside Lithium Royalty Corp. So we can get into in future calls as we announce something on the potential funding path. But I would say that's the general range of the opportunities that we're looking at for at least for the advanced assets that we're prioritizing.

[Ben Isaacson, analyst]

Okay. The next question is, I really appreciate your comments on why you think lithium prices have increased by 50%. But I would be very interested to hear what your confidence level is as to the sustainability of that and why.

We saw prices go down and now the market is tightening up and prices, as you said, have gone back up, but this is a commodity after all. And why won't that just attract more supply into the market and will go right back down again?

[Ernie Ortiz Ortega, executive]

Yes. Good question. As you alluded to, it is very volatile. So a few things that I guess, makes us somewhat confident is that we thought that the market was rebalancing anyways. So if you look at the strong demand numbers we've seen from EVs and energy storage year-to-date, that implies the market is growing 28% to 30% a year and compare that to the latest consensus demand forecast that we've seen, that's -- the performance is tracking along better than expectations.

So that should naturally ease into some of the surplus that has been built up over the last year or 2. So we thought we were already on a balancing path. These additional shutdowns only accelerate that. This latest mine that shut down in China, the estimates are that it's about a 5% impact to supply.

Obviously, we'll see how long that's off the market for, but that will be -- that will have a major impact. And the timing of it will have a major impact on how long the kind of pricing momentum or the volatility of the price ends up occurring. So I think that the fact that demand remains strong, I think it gives us some amount of confidence. But of course, these shutdowns and then going into September 30 will add a lot more volatility.

And then as far as looking out to '26 and '27, as I alluded to in my prepared remarks, supply growth is diminishing. And correct, if prices go up, we are likely to see potential restarts. But the restarts are likely to happen from the care and maintenance assets like the cores, the Catlins that we have exposure to.

But there's very little greenfields that has had financing and the proper work done in the last 18 months, 24 months because of the downturn. So that should likely limit potential greenfield growth from '26 and '27, so that even if we do see an improved pricing situation, supply growth is probably capped in the near term, but then, of course, can incentivize medium-term operations in the future.

[Ben Isaacson, analyst]

Okay. And just one more, if I may, Ernie. On Page 6 of your slide deck, you have -- it's called market commentary. And in the lower right section, there's a table, which has consensus 2030 demand of 2.8 million tonnes. And then I think you have some implied CATL of 4.4 million. That's a huge range for something that's 4 years out. What is -- I didn't see what the company's view is on 2030 demand. What is your view on 2030 demand? And kind of where in that range does it fit and why?

[Ernie Ortiz Ortega, executive]

Yes, I would say it probably fits in between those levels. I think that -- just to give additional context, the team took a trip to China in May. We met with some of the top battery makers, cathode makers and the like. And one of the key feedbacks that we received was that there was not enough attention being paid to new demand drivers such as robotics, humanoids, electric tags, flying taxes and so forth.

So that gives us confidence that there's probably room for upside than what is kind of currently in the consensus estimate. And then also underpinned by the faster growth that we've seen in Europe this year that likely translates into future -- into faster growth in '26 as well as long as well as energy storage continuing to perform quite well. So I would say it's probably in the middle of that. Of course, the CATL number, to your point, is very robust. So I think we probably have to want to see -- don't want to get ahead of ourselves and want to see a few more years before we can make that level of predictions. But I would say it's in between that, and we are pretty encouraged by the new demand drivers that I think are not getting a lot of attention today.

[Operator]

[Operator Instructions] Your next question comes from the line of Mohamed Sidibe from National Bank Financial.

[Mohamed Sidibe, analyst]

So thank you for providing some color on the expectation of contribution from Mariana on that one. And did I hear that you also visited the Tres Quebradas site. And I know you mentioned that commissioning is expected in the second half of 2025. In terms of revenue contribution, is that more of a 2026 event, just given the typical lag in contribution? If you could give us some color on that, please?

[Ernie Ortiz Ortega, executive]

Sure. So I think there is a chance that revenue contribution could be in 2026 because as you alluded to in your question, the lag that we see normally between production and shipments. It's really going to be dependent on how much production they get over the balance of the year and when they ship it.

One thing that could also incentivize them to get more tons out in 2025 is the improved pricing dynamic that we've seen recently. So that does help improve the overall margin profile of the business. So I think it's probably still premature for us to comment on the exact timing of when the revenue will hit in the quarter, but we are encouraged by the fact that the asset has completed construction and by the company reaffirming to us that it's a very important price for them as they're deploying significant capital towards Phase 2 and that they do expect to start production in the second half of the year.

[Mohamed Sidibe, analyst]

Great. And then just if I could continue within your portfolio. So we got the feasibility study for the Das Neves project. And I think you mentioned with the financing in place, they're well on track to complete construction there. Is there a stated target or public target in terms of production start at the project for Atlas Lithium and Das Neves project?

[Ernie Ortiz Ortega, executive]

Sure. So they're working very diligently on moving the asset forward as we saw with the I'll probably have to defer to what the public filings have said with regards to time line. I think the next key catalyst for them according to their presentation and public comments is the receipt of the $40 million from the off takers. I think at that point in time, they should likely provide additional commentary.

But one thing that we'll also mention is that they are very advanced. And as we've seen, Brazil is one of the fastest geographies to move projects to market. The DMS plant is already in Minas Gerais, Brazil and has been fully paid for. So the time lag between getting the funding and production is not as severe as kind of a more junior development asset. So they are fairly advanced, but I'll defer to their disclosure and then probably an update that they likely put out whenever they get the offtake funding.

[Mohamed Sidibe, analyst]

Great. And then I guess just finally on the power metals case Lake CM potential there. So we've seen with the CSM opportunity even with just direct shipping or the ability to generate quite a bit of revenue there. In terms of -- I know we've only got in the mineral resource estimate and probably something that you can't comment on that. But in terms of the potential that this could represent for you, are there any additional color that you could provide that we maybe are not aware of?

[Ernie Ortiz Ortega, executive]

No, sure. So I think they are trying to fast track production. It is their view that it will be -- the permit requirements are very minimal. It's a quarry type operation and the capital expenditure requirements are low. They are working with a financial institution currently to bring in additional partners and strategics to help advance the asset, and there seems to be a good level of interest.

But at this point in time, they haven't released a PEA yet that we could show and identify to the broader community about what the financial implications could be. But as that is released and there's additional information, we'll be sure to put it out to the market.

[Operator]

Your next question comes from the line of Mac Whale from Cormark Securities.

[MacMurray Whale, analyst]

You spoke, Ernie, about some of the advanced project work you're doing on some cash flowing opportunities. I'm just wondering, in general, can you speak to the nature of the market for new royalties? Is it -- is this price environment making it more difficult or easier? Or do you have a sense about -- has it changed the urgency, either your part or on the part of your counterparties? Like can you just give us an idea of just general market for those new royalties?

[Ernie Ortiz Ortega, executive]

Sure. So I think the pipeline continues to grow on kind of all the various categories. On the exploration development side, we probably get a new opportunity a day -- but we want to be conscious of just staying true to our priorities and trying to focus on cash flowing deals. Not to say we wouldn't do exploration development, but that's our current priority. The current pricing environment hasn't changed the actual mechanics of the negotiations all that much.

I think when discussing pricing conditions and kind of modeling of pricing, we usually take -- we rely on consensus and something that's more less volatile than the prevailing kind of spot price environment. So that hasn't impacted all that much, although I would say valuations have definitely improved over the last 2.5 years for various royalty transactions.

But I think we're still viewed of as a partner of choice. Sellers are still interested in partnering with LRC, whether it's an exchange for LRC shares or partnering with us. I would say probably what we're working through right now is just a natural due diligence process for some of these advanced assets and looking at milestones for some of these assets as opposed to being more pricing or market dependent.

[MacMurray Whale, analyst]

Okay. And then secondly, you did talk about this already, but I thought I'd approach it from a different angle. The the risk to the risk on the pricing of restarts and ramp-ups outside of China relative to the changes in production within China. Does that -- how is your view on that to play out in the sense of maybe it's pricing impact?

Like I'm wondering, for instance, do you have insight into those new projects, even though they're Chinese partners, is there -- are there agreements on offtakes that somewhat isolate these projects to impacting the broader market? I'm wondering what your thoughts, like is this -- and is the brine space a little bit different than the hard rock space when it comes to pricing impact of new supply? It's a bit of a rambling question, but I think you understand what I'm trying to get at.

[Ernie Ortiz Ortega, executive]

Sure. So I don't think there will likely be price differentials between brine or Hard Rock. And I think we've seen probably the differentials across geographies that maybe were more severe in prior years, especially with Japan, Korea versus China. That has seemed to converge more quickly, especially as more liquidity has been driven into the market with the likes of GEX and a bunch of other future exchanges.

So we likely probably continue to see the convergence towards the global price, and we're starting to see even convergence amongst the price reporting agencies. Probably a year or 2 years ago, there was quite a big range for the same type of product across different PRAs, but now it's starting to be more similar and the standard deviation has diminished. So that is good to see.

There is a possibility that at a certain point in price, which slightly higher than where we are today, but it does incentivize some of the restarts say, in Australia or other parts of the world. But even if prices -- I think the long-term consensus expectation today is around $1,300 per tonne. If we were to reach those levels and even plateau at those levels, LRC would be in a very strong financial position, and we're thriving in that environment.

[Dominique Barker, executive]

But Mac, if I understand your question correctly, I think you're wondering also if it's sort of vertically integrated and therefore, if the pricing is agreed to privately, all of our -- most of our contracts, all of our contracts are based on publicly pricing on benchmarks. So even if those are done and there's transfer pricing internally, our royalty revenue is based on benchmark pricing.

[Operator]

At this time, we have no further questions. I'll turn the call back over to Jonida for closing remarks. Please go ahead, ma'am.

[Jonida Zaganjori, executive]

Thank you to everyone who joined us today. This concludes our second quarter 2025 results conference call and webcast. Goodbye.

[Operator]

Ladies and gentlemen, this concludes our conference call for today. We thank you for your participation and ask that you disconnect your lines. Thank you.