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spk01: Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Lithium Argentina fourth quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question during that time, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. We do ask that you please limit your questions to one and one follow-up. I would now like to turn the conference over to Kelly O'Brien, Vice President, Investor Relations. Please go ahead.
spk00: Thank you, Regina. I want to welcome everyone to our first earnings conference call. Joining me on the call today to discuss the fourth quarter and full year 2023 results is Sam Pigott, President and CEO of Lithium Argentina. Alex Shoga, VP and CFO. Alec Meikle, Business Development. Ignacio Solorio, Executive Vice President, Legal, Government, and External Affairs, will also be available during the Q&A session. Our earnings were released after the market closed yesterday, and you'll find the press release, the MD&A, and the financial statements posted on our website. We also filed our annual information form last night. I remind you that some of the statements made during this call, including any production guidance, expected company performance, Don Fang's proposed investment in Pastos Grandes, the timing of our projects and market conditions may be considered forward-looking statements. Please note the cautionary language about forward-looking statements in our MD&A annual information form and news release that was filed last night. Now, I would like to introduce Sam Piggott, our president and CEO. He joined Lithium Argentina on Monday. However, he is not a stranger to the lithium industry or Lithium Argentina. He joins the company from Gangtang Lithium, and we are happy to officially have him on the team. I now turn the call over to Sam.
spk07: Thank you, Kelly, for the introduction, and thank you, everyone on the line, for joining our first earnings conference call. It is great to be here this morning, having just published our 2023 results. This is our first earnings conference call, and we thought it would be well-timed on the back of the first lithium sales and our transition from development to operations at Kachari Oleras. As we mentioned yesterday in our earnings release, 2023 was a historic year for Lithium Argentina and everyone involved with the development, construction, and now operations of Kachari Algorand. This $1 billion development is the result of the talented and dedicated team of professionals at both Lithium Argentina and Ganfe. Since joining the company, I have had detailed meetings with the operators and various members of the team and feel very confident in the production guidance outlined in the earnings release. 2024 is expected to be another positive year as the project improves product quality and increases production volumes. Overall, the ramp-up is going well. It's been approximately nine months since first production and four months in operations with the first KCL train, and we are already operating at levels consistent with other projects in Argentina. The Charly Oloraz is currently producing at approximately 50% of capacity And in March, the plant has demonstrated it can operate at around 75% capacity over a limited period. It will take time to work through these typical ramp-up issues to sustain these higher levels of production, and we expect to be operating at close to design capacity by the end of 2024 on a steady state basis. We recognize that the current lithium price environment raises concerns amongst investors about corporate strategies, especially around capital-intensive growth strategies. So Lithium Argentina is quite simple. By far our highest priority is to support the successful ramp-up of Kachari-Olaraz stage one and ensure we remain well capitalized through the cycle. Kachari-Olaraz is a world-class project and we are focused on increasing production volumes and product quality as this will maximize cash flow and give us the most optionality going forward. In line with keeping our focus on Kachari-Olaraz and an effort to maximize longer-term optionality with our growth assets, and ensure a further cushion to our balance sheet, we entered into a transaction on March 5th whereby Ganfeng has agreed to invest $70 million for an approximate 15% stake in Pasos Grandes. As part of the transaction, Ganfeng will lead a regional development plan in the Salta Province of Argentina that will incorporate three distinct large and high quality assets, those being Pazuelos Pasos Grandes, owned by Ganfeng, Pasos Grandes, owned by Lithium Argentina, which is a joint venture between Lithium Argentina and Ganfeng. The regional development plan is expected to be finalized by the end of 2024. To reiterate, this transaction has provided a cushion to our balance sheet and allows Lithium Argentina to advance a regional development study at minimal cost and without distracting the existing teams currently focused on Kachari Olerogs. It also builds on the successful partnership with Ganfeng at Kachari where we have seen the benefits of their expertise and experience in commissioning the chemical plant and bringing processing technologies and skills not currently available outside of China to Argentina. During the remainder of the year, I look forward to the completion of the commissioning at Kachari Olraz, preparation of a development plan for Paso Grande's basin in collaboration with Ganfeng, maintaining a strong financial position for Lithium Argentina, and having the opportunity to work with a talented multinational and diverse group of individuals. That concludes the prepared remarks. Now we'll open the line for questions. Thank you.
spk01: At this time, if you'd like to ask a question, simply press star 1 on your telephone keypad, and we do ask that you limit your questions to one and one follow-up. Our first question will come from the line of Joel Jackson with BMO Capital Markets. Please go ahead.
spk09: Hi, good morning, everyone. Sam, welcome to the job first week officially. Can we talk a little bit about, so you're not disclosing what sales volumes were out of XR or LAC for the fourth quarter, but it looks like you are talking about 20, $20 million gain from the JV from XR in the fourth quarter. Can you talk about Are you able to give a little color about what kind of sales run rates are and when you give a production guide? And, you know, if it's $20 million, that wouldn't seem to imply that you had some healthy profits on these tons, even if the quality wasn't quite what you want yet. And then you're giving a 20, 25 to 5,000 ton production guidance out of Khashoggi this year. Would we assume that's what the sales would be volumes also out of the out of Khashoggi?
spk07: Maybe I'll take the second part of that question first. So yeah, the guidance is 20-25,000 metric tons of production this year. That guidance obviously reflects the variability in a typical ramp up. I think things are going very well and there's room to improve there, but obviously that guidance is a reflection of what we believe is achievable today and incorporates some of the expected ramp up issues that are typical in a project like this. I think for the first part of your question, I'd turn it over to Alex Shulga to answer around the $20 million.
spk06: Alex?
spk03: Thanks, Sam. This is Alex, CFO. The $16 million for the full year is not only a large share of the joint venture operating profit, It does include a large share of the JV results of operations, but in addition to that, it includes other elements, including a significant non-cash foreign exchange gain on some of the local BCS PASA-denominated dollar-link intercompany loans. Because of the significant devaluation in the end of 2023, the JV recognized the non-cash and realized foreign exchange gain on such loans in accounting. and these 16 million reflects life's share of this gain. For more details on this, please refer to Disclosure Note 8 on page 24 and 25 of the company's financial statements, and I'm happy to follow up or email if you have any more detailed questions.
spk09: Okay, I'll ask one more question. Sam and team, can you talk about the trade-off that you're looking at, you know, for product quality. So you got to look at, you know, what kind of quality can you get, battery grade, if there's different floating definitions of battery grade versus technical grade, and you got to look at how much volume you can get out. You know, we know Ola Rose, their phase two across the road there is just focusing on technical grade. Trouble to trade off in trying to push as much volume as possible. But maybe deciding, you know, maybe more technical grade might be the optimal path and upgrading it to battery grade later, sort of elsewhere, maybe by Ganfeng. Just talk about the trade-offs that you're sort of looking about as you start to ramp the operation and try to maximize profit. Thanks.
spk07: Sure. Well, I think I'll start by just saying that, you know, the plant is designed to produce battery grade. And our focus today is on ramping up volumes. As a function of increasing volumes, we also expect quality to improve. As we reach higher and higher rates at steady state, there will be less variability flowing into the product. So the intention right now is to move to battery grade. Obviously, you know, we will do whatever is in the best interests of shareholders in maximizing value, and we consistently kind of review that with our joint venture partner, but the plan is to ramp production volumes, increase improvement in product quality, and move towards battery grade.
spk01: Our next question will come from the line of Ben Isaacson with Scotiabank. Please go ahead.
spk05: Thank you very much, and good morning, everyone, and congrats on the first call, and Sam, congrats as well. First question is, can you talk about the weather-related power disruptions and what exactly happened and how long has it been going on for and what is the meeting going forward?
spk07: Sure. I'd say in the first couple months of this year, really February and March, the Puna area in Argentina experienced a really unusual number of electrical storms. which impacted some of the reliability of our power to site. So this is something that we're working on to mitigate going forward, just increasing the support systems there, improving redundancies. It's something that we're well advanced and taken care of. So it was just unusual weather.
spk05: So how should we – so is there still risk? And will that risk be eliminated entirely when you're done, like in a quarter or whenever?
spk07: I mean, the plan is, yes, to mitigate these power-related issues. I would say that as we push throughput through the plant, it obviously puts more strain on the power system, but we've identified what needs to be fixed, and we're pursuing a solution.
spk05: Perfect. And then my follow-up question is, you talked in the press release about expectations for positive cash flow from operations this year. Can you give us just some color on your assumptions in terms of the economics to achieve positive CFO? What kind of pricing are you thinking about, et cetera?
spk06: Well, we're thinking about recent pricing, so maybe just take an average of year to date.
spk01: Our next question will come from the line of David Dickelbaum with TD Cowan. Please go ahead.
spk08: Good morning, everyone, and congrats again, Sam, and the team on the first inaugural call here. Perhaps just to dig into the weeds a little bit more, I was hoping just on the guidance side, if you might opine on what your expected operating cost now is on a per ton basis, sort of
spk07: x x ddna um in this first year and then what what you're thinking now as you get to capacity relative to your original expectations so i mean i think most people appreciate we're we're in the middle of a ramp up at kachari older odds um costs are largely tied to volumes um and as we reach steady state will provide more details. I would say on the cost side of things, we're also going through a transition from construction to development. And so the cost will change. The cost structure will change. So I think it's too early to provide you with any of that guidance. But when we have a cleaner sense, once we reach more steady state production, we'll obviously be providing that information along with our partner GAN funds. But in terms of operating costs, I mean, what we have said is that we expect to be operating cash flow positive in 2024 based on recent pricing, which Ben's question is kind of an average of battery quality China year-to-date.
spk08: I appreciate that. Maybe just further into some of the guidance details, I'm trying to get a sense of I think you all announced that in light of the current environment, you're reducing corporate overhead and spend by 25%. You know, obviously, as we think about the Kachari expansion, it seems like that's a wait and see. How do we think about the capital that you're looking to spend this year? I know that you know that you're going to do away with sort of excessive exploration work at Pastos Grande. But how do you see just this base CapEx evolving this year, or is it kind of iterative right now as you're considering multiple different, you know, opportunities that are out there?
spk07: Yeah, I mean, I'd say that we're in a very fortunate position to not have material capital commitments going through this year. As disclosed in our documents, we have $13 million of CapEx remaining to be spent. You know, the priority for us is to get through ramp up as a steady state production. Stage two will follow that. It will follow a successful completion once we get up to capacity by the end of this year. In terms of our decision to cut back on other corporate expenses, it's in part related to the transaction with Genseng and the development plan that they will be leading for the Pasos Grandes region. So we didn't anticipate, we don't anticipate spending material capital on that plan, given that we already have a wealth of information from the work that's already been done by us and our predecessors on the Pasos Grandes Basin.
spk01: Your next question will come from the line of Santosh Sisadri with HSBC. Please go ahead.
spk02: Yeah, hi, good morning everyone. And congratulations, Sam, for your new role. So I have a couple of questions here. Firstly, can you provide some timeline on the ramp up to battery grade specifications? Because I was under the impression that de-bottlenecking your KCL plant will help you achieve higher production rate as well as battery grade product. I can see your production rates are increasing, but you're still producing technical grade product. So if you can provide some color on that, that will be helpful.
spk06: Yeah, I mean, I think that the priority... Sorry. Sorry, there was a second question.
spk02: Yeah, go ahead. I'll wait for the second part of the question.
spk07: Okay. Yeah, the priority for us is ramping up volumes and getting to this steady near-NIC-like capacity by the end of the year. Volume or full quality will improve as we push through production. As we increase throughput and achieve steady state production and ever greater throughput, it's going to help with the variability of our product and the product quality will improve.
spk06: The battery plant is designed to do battery quality specifications.
spk02: Great. And how to think about the pricing discount to your JV partner, Gangfeng, given the product quality differences?
spk07: Yeah, the pricing today that we receive is tied to battery quality prices, which are then adjusted based on product quality and the cost to further process this product by Ganseng in China. So, you know, as the product improves, which we've already seen, the discount to battery quality that we receive is expected to narrow.
spk06: Yeah, so it's tied to battery rate, less an adjustment for power quality, which is improving.
spk01: Our next question will come from the line of Noel Parks with Tuohy Brothers. Please go ahead.
spk04: Hi, good morning. Sorry if you already addressed this, but I was just wondering, looking at this stage of production and operations at the stage one, I'm just wondering, do you have any rough sense of sort of the delta in terms of cost inflation, you know, now live in production versus what sort of the original planned levels were? Just kind of a sense of where we've come versus kind of the original studies.
spk06: I mean, I'd say that the largest cost
spk07: on an operating basis for any brine project are the reagents, and reagent prices have been very volatile. There has been quite a bit of inflation since the technical report was announced, but we expect that our costs will be on a steady-state basis reflective of other operations in the vicinity.
spk04: Great. And just looking ahead, I guess, just to the expanse of resources, including personnel and so forth, as the region continues to build out among several different areas with new projects getting off the ground, do you have any sense of any particular constraints, resource constraints, just looking out over the next few phases, the next few years?
spk07: I mean, human capital is hugely important because we all know Argentina is very active in terms of lithium projects. So we're very happy that we've built the team along with Genseng within the joint venture project. But that's certainly an area that I think the country will face challenges is attracting appropriate talent. I think in our case, we're very fortunate to have a joint venture partner in Ganseng and access to their world-class expertise in commissioning and operating these very large lithium chemical plants. I mean, the other area is kind of logistics. There's a lot of reagents that move through the northwest part of Argentina, and that'll just increase as more projects come online. And this is part of the thinking around the investment that Gansang made into Pasos Grandes and kind of assessing a regional development plan for Pasos Grandes where we can be better coordinated with our existing joint venture partner, Kachari, which is Gansang.
spk01: Our final question is a follow up from the line of David Deckelbaum with TD Cowan. Please go ahead.
spk08: Sorry to come back for seconds here, but I was hoping to ask just sort of what information we might expect to receive with this regional development plan. What's going to be included in that around planning and disclosures? And should we think about this as a fulsome development plan for Qatari, Pasos Grande, and beyond over sort of like the next several years? And will there be additional feasibility studies that go into that?
spk07: You know, the plan right now is for, again, saying to leave this regional development plan focused on the assets in Salta. That would include as well as Pasos Grandes, Pasos Grandes, and Selva La Puna.
spk06: You know, we expect to have more information towards the end of the year. Fair enough. Thank you, guys.
spk01: With that, I'll hand the call back over to Kelly for any closing remarks.
spk00: Thank you. I want to thank everyone for joining the call today, and we look forward to your participation next quarter. Have a great day.
spk01: Thank you all for joining. This will conclude today's meeting. You may now disconnect.
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