Lithium Royalty Corp (LITRF) Navigates Market Volatility with Strategic Fortitude

Lithium Royalty Corp (LITRF) reported its Q1 2025 earnings, revealing a company navigating lithium’s cyclical downturn with discipline and foresight. Despite a marginal decline in quarterly revenue and an expanded adjusted EBITDA loss, LITRF’s robust balance sheet and strategic moves position it to capitalize on long-term demand growth. Here’s what investors need to know.

Financial Resilience Amid Falling Lithium Prices

LITRF’s Q1 royalty revenue dipped to $629,000, a 0.3% decline from Q1 2024, as spodumene prices fell 17%. The adjusted EBITDA loss widened to $1.1 million from $662,000, driven by ongoing stock-based compensation costs tied to its IPO. However, the company maintained a strong liquidity position with $32 million in cash, no debt, and a recent $28 million partial sale of its Tres Cabral royalty. This transaction underscores LITRF’s ability to monetize assets during market volatility.

Strategic Moves to Leverage the Lithium Cycle

LITRF is executing a two-pronged strategy:
1. Project Execution: Key assets are advancing toward production:
- Mariana Project (Argentina): Revenue expected in H2 2025 after its February inauguration.
- Tres Cabratas (Argentina): Production to begin in Q3 2025, targeting 20,000 tons/year of lithium.
- Sigma Lithium Phase 2 (Brazil): Aims to add 250,000 tons/year of spodumene concentrate at full capacity.

1. Acquisition Opportunities: With $32 million in cash, LITRF is targeting distressed assets in stable jurisdictions. CEO Ernie Ortiz emphasized the company’s focus on high-grade, low-cost projects that can thrive even in low-price environments.

Demand Drivers and Long-Term Outlook

The lithium market faces near-term headwinds, with prices down 88% from November 造2022 peaks to $800–$900/ton for spodumene and $10,000/ton for lithium carbonate. Yet, management remains bullish on long-term demand:
- EV Growth: Global EV sales rose 29% YoY in Q1 2025, led by China (36% growth) and Europe (22% growth).
- Energy Storage: Sales surged 120%, with Tesla’s energy storage division up 154%.

CEO Ortiz highlighted lithium’s 25–30% annual demand growth trajectory, driven by EV adoption and energy storage. LITRF’s portfolio of 35 royalties, including exposure to emerging commodities like cesium (discovered at its Case Lake project), provides diversification and upside potential.

Risks and Challenges

• Price Volatility: Prolonged low prices could delay project returns, though LITRF’s royalty model insulates it from production costs.
• Project Delays: Tres Cabratas’s revenue could slip to early 2026 if production starts late in Q3 2025.
• Geopolitical Risks: U.S. tariffs and trade policies remain a concern, though LITRF’s assets in Nevada/Arizona and Argentina/Brazil position it to benefit from domestic manufacturing incentives.

Share Buybacks and Valuation

LITRF announced a Substantial Issuer Bid (SIB) expiring April 30, 2025, to repurchase undervalued shares. With a stock beta of -0.21, LITRF often moves counter to broader markets, offering a defensive play. Management argues shares are “substantially undervalued” relative to its cash flow growth pipeline, though GuruFocus flagged five warning signs (e.g., margin erosion, rising G&A).

Conclusion: A Patient Play on Lithium’s Long-Term Boom

LITRF’s Q1 results reflect the lithium sector’s current challenges but highlight its strategic strengths:
- Liquidity: $32 million in cash provides flexibility for acquisitions or buybacks.
- Operational Leverage: Projects like Sigma and Mariana are poised to amplify revenue if prices rebound.
- Demand Tailwinds: EV and energy storage growth remain structurally robust, with lithium’s role critical to decarbonization goals.

Investors should focus on project execution timelines and lithium price trends. If Tres Cabratas and Sigma meet their 2025/2026 milestones, LITRF could deliver free cash flow growth even in a low-price environment. While near-term risks linger, LITRF’s focus on high-quality assets and financial discipline make it a compelling long-term bet on lithium’s secular boom.

In short, LITRF is a company to watch for investors willing to endure lithium’s cyclical downturn for the chance to participate in its eventual recovery—and the EV revolution.