Lithium Royalty Corp.

Decision

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption from the extension take up requirements in subsection 2.32(4) of National Instrument 62-104 Take-Over Bids and Issuer Bids -- an issuer conducting an issuer bid by way of a modified Dutch auction procedure -- issuer may wish to extend the bid if it is undersubscribed and the market price of the shares at the time is not greater than the range of proposed prices under the bid -- requires relief from the requirement not to extend its issuer bid if all terms and conditions are met unless the issuer first takes up all securities validly deposited and not withdrawn under the issuer bid as all tenders need to be known in order to calculate the purchase price per share -- requested relief granted, subject to conditions.

Applicable Legislative Provisions

National Instrument 62-104 Take-Over Bids and Issuer Bids, ss. 2.32(4) and 6.1.

April 11, 2025

IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO
(the Jurisdiction)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
LITHIUM ROYALTY CORP.
(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) that, in connection with the proposed purchase by the Filer of a portion of its issued and outstanding common shares (the Shares) pursuant to a formal issuer bid commenced on March 25, 2025 (the Offer), the Filer be exempt (the Exemption Sought) from the requirement in subsection 2.32(4) of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104) that the Offer not be extended if all the terms and conditions of the Offer have been complied with or waived unless the Filer first takes up all Shares deposited under the Offer and not withdrawn (the Extension Take Up Requirement).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application);

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Québec, Saskatchewan and Yukon.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 and NI 62-104 have the same meaning if used in this decision, unless otherwise defined herein.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation validly existing under the Canada Business Corporations Act and is in good standing.

2. The registered and head office of the Filer is in Toronto, Ontario.

3. The Filer is a reporting issuer in each of the provinces and territories of Canada and the Shares are listed for trading on the Toronto Stock Exchange (the TSX) under the trading symbol "LIRC". The Filer is not in default of any requirement of the securities legislation in any of the jurisdictions in which it is a reporting issuer.

4. The Filer's authorized share capital consists of: (i) an unlimited number of Shares with no par value; (ii) 30,549,214 convertible common shares (Convertible Common Shares and, together with the Shares, the Equity Shares) with no par value and (ii) an unlimited number of preferred shares with no par value. As of March 20, 2025, there were 25,005,827 Shares, 30,549,214 Convertible Common Shares and no preferred shares issued and outstanding.

5. On March 19, 2025, the last full trading day prior to the public announcement of the Filer's intention to make the Offer, the closing price of the Shares on the TSX was $4.25 per Share. On the basis of this closing price, on such date the Equity Shares had an aggregate market value of approximately $236,108,924 (on a non-diluted basis).

6. The board of directors of the Filer (the Board) believes that the Offer is in the best interests of the Filer and its shareholders (Shareholders), and is an advisable use of the Filer's financial resources, given its available cash resources and its ongoing cash requirements as well as the Filer's belief that its Shares are undervalued. The Offer provides the Filer with the opportunity to return up to $7,000,000 of capital to Shareholders who elect to tender, while at the same time increasing the proportionate share ownership of Shareholders who do not elect to tender.

7. As at March 20, 2025, Royalty Capital I LP, Royalty Capital II LP, Royalty Capital I-II LP and Royalty Capital II-II LP (collectively, the Waratah Funds) are the beneficial owners of an aggregate of 30,549,214 Convertible Common Shares, representing approximately 55.0% of all issued and outstanding Equity Shares. Riverstone VI LRC B.V. (Riverstone) is the beneficial owner of, or exercise control or direction over, 15,912,472 Shares, representing approximately 28.6% of all issued and outstanding Equity Shares.

8. Waratah Capital Advisors Ltd., acting as investment manager to the Waratah Funds, has advised the Filer that it will not convert any of its Convertible Common Shares into Shares and will not deposit those Shares pursuant to the Offer. Riverstone has advised the Filer that it will not deposit any Shares pursuant to the Offer.

9. Each director and officer of the Filer has advised the Filer that he or she does not intend to deposit Shares under the Offer.

10. The Offer commenced on March 25, 2025 and will expire at 5:00 p.m. (Eastern time) on April 30, 2025 unless withdrawn, extended or varied by the Filer (the Expiration Date).

11. The issuer bid circular dated March 25, 2025 prepared and filed by the Filer in connection with the Offer (the Circular) specifies that the Filer proposes to purchase, at a purchase price payable per Share (the Purchase Price) to be determined by the Filer, by way of a modified "Dutch auction" procedure in the manner described below, up to $7,000,000 of the issued and outstanding Shares (the Specified Maximum Dollar Amount) at a purchase price of not less than $4.50 and not more than $5.20 per Common Share (the Price Range).

12. If the Purchase Price is determined to be $4.50 (which is the minimum price per Share under the Offer), the maximum number of Shares that may be purchased by the Filer is 1,555,555 Shares. If the Purchase Price is determined to be $5.20 (which is the maximum price per Share under the Offer), the maximum number of Shares that may be purchased by the Company is 1,346,153 Shares.

13. The Offer is made only for Shares and is not made for any convertible securities or other rights to acquire Shares, such as convertible common shares, stock options, restricted share units, or deferred share units of the Filer. Pursuant to subsection 2.8(b) of NI 62-104, the Filer also sent the Offer to each holder of convertible securities that, before the expiry of the deposit period of the Offer, are convertible into Shares. Any holder of such convertible securities who wishes to accept the Offer must, to the extent permitted by the terms thereof and applicable law, fully exercise, convert or exchange, or make arrangement for settlement of, as applicable, the convertible securities or other rights to acquire Shares in order to deposit the resulting Shares in accordance with the terms and conditions of the Offer, prior to the expiry of the deposit period of the Offer.

14. After giving effect to the Offer, the Board believes that the Filer will continue to have sufficient financial resources and working capital to conduct its ongoing business and operations and the Offer is not expected to preclude the Filer from pursuing its foreseeable business opportunities or the future growth of the Filer's business.

15. The Filer will fund the purchase of Shares pursuant to the Offer, together with fees and expenses of the Offer, using available cash on hand. The Offer is not conditional upon the receipt of any financing.

16. A Shareholder wishing to tender to the Offer will be able to do so in one of two ways:

(a) by making an auction tender pursuant to which the tendering Shareholders agree to tender a specified number of Shares at a specified price per Share (an Auction Price) within the Price Range in increments of $0.10 per Share (an Auction Tender); or

(b) by making a purchase price tender pursuant to which the tendering Shareholders do not specify a price per Share, but rather agree to have a specified number of Shares purchased at the Purchase Price to be determined by the Auction Tenders (a Purchase Price Tender).

17. Shareholders may deposit some of their Shares pursuant to an Auction Tender and deposit different Shares pursuant to a Purchase Price Tender. Shareholders may not deposit the same Shares pursuant to both an Auction Tender and a Purchase Price Tender or pursuant to an Auction Tender at more than one price.

18. Shareholders who tender Shares without making a valid Auction Tender or Purchase Price Tender will be deemed to have made a Purchase Price Tender.

19. Any Shareholder who beneficially owns fewer than 100 Shares (Odd Lot) and tenders all of such Shareholder's Shares pursuant to an Auction Tender at or below the Purchase Price or pursuant to a Purchase Price Tender will be considered to have made an Odd Lot Tender.

20. The Filer will determine the Purchase Price promptly after the expiry of the Offer by taking into account the number of Shares deposited pursuant to Auction Tenders and Purchase Price Tenders and the Auction Prices specified by Shareholders depositing Shares pursuant to Auction Tenders. The Purchase Price will be the lowest price per Share that enables the Filer to purchase that number of Shares validly deposited and not properly withdrawn pursuant to the Offer having an aggregate purchase price not exceeding the Specified Maximum Dollar Amount. For the purposes of determining the Purchase Price, Shares deposited pursuant to a Purchase Price Tender will be deemed to have been deposited at a price of $4.50 per Share (which is the minimum price per Share under the Offer).

21. If the aggregate purchase price for Shares validly tendered pursuant to Auction Tenders (at Auction Prices at or below the Purchase Price) and Purchase Price Tenders would result in an aggregate purchase price greater than the Specified Maximum Dollar Amount, the Filer will purchase a portion of the Shares so deposited pursuant to Auction Tenders (at or below the Purchase Price) and Purchase Price Tenders, determined as follows:

(a) first, the Filer will purchase all such Shares tendered at or below the Purchase Price by Shareholders pursuant to Odd Lot Tenders at the Purchase Price; and

(b) second, the Filer will purchase Shares at the Purchase Price on a pro rata basis according to the number of Shares deposited or deemed to be deposited at a price equal to or less than the Purchase Price by the depositing Shareholders, for an aggregate purchase price of the Specified Maximum Dollar Amount less the aggregate purchase price of the Shares purchased from Odd Lot Tenders.

22. All Shares purchased by the Filer pursuant to the Offer will be purchased at the Purchase Price. Shareholders will receive the Purchase Price in cash. All Auction Tenders and Purchase Price Tenders will be subject to adjustment to avoid the purchase of fractional Shares, rounding down to the nearest whole number of Shares. All payments to Shareholders will be subject to deduction of applicable withholding taxes.

23. The Purchase Price will be denominated in Canadian dollars and the payment of amounts owing to Shareholders whose Shares are taken up under the Offer will be made in Canadian dollars. However, Shareholders may elect to receive the Purchase Price in United States dollars by indicating that in the letter of transmittal for the Offer. The exchange rate that will be used to convert payments from Canadian dollars into U.S. dollars will be the rate available from the depositary and foreign exchange service provider under the Offer, on the date on which the funds are converted, which rate will be based on the prevailing market rate on such date.

24. All Shares tendered to the Offer and not taken up by the Filer will be returned to the appropriate Shareholders promptly after the Expiration Date, without expense to the Shareholder.

25. Shares tendered by a Shareholder pursuant to an Auction Tender will not be purchased by the Filer pursuant to the Offer if the price per Share specified by the Shareholder is greater than the Purchase Price.

26. Until expiry of the Offer, all information about the number of Shares tendered and the prices at which the Shares are tendered will be required to be kept confidential by the depositary and the Filer, until the announcement of the results of the Offer.

27. Certificates for all Shares not purchased under the Offer (including Shares deposited pursuant to an Auction Tender at prices greater than the Purchase Price, Shares not purchased due to proration, improper tenders, or Shares not taken up due to the termination of the Offer), or properly withdrawn before the Expiration Date will be returned (in the case of certificates representing Shares all of which are not purchased), or replaced with new certificates representing the balance of Shares not purchased (in the case of certificates representing Shares of which less than all are purchased), as soon as practicable after the Expiration Date or termination of the Offer or the date of withdrawal of the Shares, without expense to the depositing Shareholder. In the case of Shares tendered through book-entry transfer, such Shares will be credited to the appropriate account, without expense to the Shareholder.

28. Shareholders who do not accept the Offer will continue to hold the same number of Shares held before the Offer and, assuming Shares are validly tendered to the Offer, their proportionate Share ownership will increase following completion of the Offer.

29. The Filer may elect to extend the Offer without first taking up all the Shares deposited and not withdrawn under the Offer if the aggregate purchase price for Shares validly tendered pursuant to Auction Tenders and Purchase Price Tenders is less than the Specified Maximum Dollar Amount. Under the Extension Take Up Requirement contained in subsection 2.32(4) of NI 62-104, an issuer may not extend an issuer bid if all the terms and conditions of the issuer bid have been complied with or waived unless the issuer first takes up all the securities deposited and not withdrawn under the issuer bid.

30. The Filer will not extend the Offer if all the terms and conditions of the Offer have been complied with or waived by the Filer by the Expiration Date, and the aggregated purchase price for the Shares validly tendered and not withdrawn pursuant to Auction Tenders and Purchase Price Tenders is equal to or greater than the Specified Maximum Dollar Amount.

31. As the determination of the Purchase Price requires that all Auction Prices and the number of Shares deposited pursuant to both Auction Tenders and Purchase Price Tenders be known and taken into account, the Filer will be unable to take up the Shares deposited and not withdrawn under the Offer as of the Expiration Date prior to extending the Offer because the Purchase Price will not and cannot be known as additional Auction Tenders and Purchase Price Tenders may be made during the extension period that will impact the calculation of the Purchase Price. Accordingly, the Exemption Sought is required in connection with an extension of the Offer to enable the Filer to make a final determination regarding the Purchase Price, taking into account all Shares tendered prior to the Expiration Date and those tendered during any extension period.

32. Shares deposited pursuant to the Offer, including those deposited prior to the Expiration Date, may be withdrawn by the Shareholder at any time prior to the expiration of any extension period in respect of the Offer.

33. The Filer is relying on the exemption from the formal valuation requirements applicable to issuer bids under Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions (MI 61-101) set out in subsection 3.4(b) of MI 61-101 (the Liquid Market Exemption).

34. The Filer has obtained a liquidity opinion (the Liquidity Opinion) from Cormark Securities Inc. confirming that, subject to customary qualifications, assumptions and restrictions, there will be a market for holders of Shares who do not tender to the Offer that is not materially less liquid than the market that existed at the time of making the Offer. A copy of the Liquidity Opinion is attached to the Circular.

35. The Board has reached a determination in connection with its approval of the Offer that there was a "liquid market" for the Shares, as such term is defined in MI 61-101, as of the date of the making of the Offer because the criteria in Subsection 1.2(1)(b) of MI 61-101 was satisfied based on the Liquidity Opinion.

36. Based on the Liquidity Opinion, the Filer has determined that it is reasonable to conclude that, following the completion of the Offer, there will be a market for holders of Shares who do not tender their Shares pursuant to the Offer that is not materially less "liquid" than the market that existed at the time of the making of the Offer.

37. The Filer has disclosed in the Circular relating to the Offer the following information:

(a) the mechanics for the take up of and payment for Shares as described herein;

(b) explains that, by tendering Shares under an Auction Tender at the lowest price in the Price Range or by tendering Common Shares under a Purchase Price Tender, a Shareholder can reasonably expect that the Shares so tendered will be purchased at the Purchase Price, subject to proration and other terms of the Offer as specified herein;

(c) that the Filer has applied for the Exemption Sought;

(d) the manner in which any extension of the Offer will be communicated to Shareholders;

(e) that Shares deposited pursuant to the Offer may be withdrawn at any time prior to the Shares being taken up by the Filer;

(f) if known after reasonable inquiry, the name of every person named in Item 11 of Form 62-104F2 who has accepted or intends to accept the Offer and the number of Shares in respect of which the person has accepted or intends to accept the Offer;

(g) the facts supporting the Filer's reliance on the Liquid Market Exemption and the Liquidity Opinion; and

(h) the disclosure prescribed by applicable securities laws for issuer bids.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make this decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted, provided that:

(a) the Filer takes up and pays for Shares validly deposited pursuant to the Offer and not withdrawn, in each case, in the manner set out in the Circular and described herein;

(b) the Filer is eligible to rely on the Liquid Market Exemption;

(c) the Filer complies with the requirements of Regulation 14E promulgated under the 1934 Act in respect of the Offer; and

(d) the Filer will issue and file a press release announcing receipt of the Exemption Sought promptly, and in any case, no later than one (1) business day following receipt of the Exemption Sought.

"David Mendicino"
Manager, Corporate Finance Division
Ontario Securities Commission