Lithium Americas (Argentina) Corp. Common Shares

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 AG fourth quarter and full year 2024 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. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star 1 again. We kindly 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, and ESG. Please go ahead.

Thank you for the introduction. I want to welcome everyone to our earnings conference call this morning. Joining me on the call today to discuss the fourth quarter results is Sam Peggett, President and CEO. Alex Shoga, VP and CFO will also be available during the Q&A session. Before we begin, I would like to cover a few items. Our fourth quarter and 2024 full year earnings press release was issued last evening and the corresponding documents are available on our company website. I remind you that some of those statements Made during this call, including any production guidance, expected company performance update on the regional development plan. 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 presentation and DNA and news release. I will now turn the call over to Sam.

Thanks Kelly. Good morning everyone. And thank you for joining us today. This year was a landmark year for us, and I'm very proud of what the team was able to accomplish. First and foremost, Kachari Oloraz not only met, but exceeded its annual production targets, becoming the largest producer of lithium carbonate in Argentina. Working closely with our partner Ganfang, we enhanced the organization at Kachari, adding experienced talent, pulling from both companies to strengthen the operations team. I believe the team's dedication to innovation and focus on operational excellence will continue to set us apart in 2025 and beyond. We will discuss this later in more detail, but on the balance sheet, through several strategic transactions and financing, we were able to bring down project level debt and extend maturities. At the same time, corporate costs were substantially reduced with more focus on the operations. Finally, we completed a corporate migration. where in recent months we moved our corporate domicile to Switzerland. This decision was driven by our shareholders, where we received over 99% approval for the migration. The move should give us added strategic and financial flexibility going forward. On the call today, I will discuss the 2024 operational and financial results and expand on opportunities we see to create value for our shareholders. During 2024, our goal was to produce 20,000 to 25,000 tons and we exceeded the high end of this range, producing 25,400 tons. As targeted, we delivered these strong volumes as a result of consistently increasing production month on month. We ended the year reaching over 90% capacity in December, demonstrating the capabilities of this plant and our team. The operations also achieved a significant milestone by receiving three distinct ISO certifications, reaffirming our commitment to excellence and responsible business practices. We are proud of our track record, given the well-known challenges in the industry ramping up new chemical plants or expansions. We attribute this success to the experience brought by our joint venture partner, Ganfeng, and also the culture of collaboration and a single team effort in Hohui. We expect production volumes during 2025 to exceed production volumes seen in 2024 and have set guidance of between 30 and 35,000 tons. With the ramp up last year, we identified a number of opportunities to reduce maintenance costs and improve recoveries in both the ponds and at the plant. We are taking several actions to implement changes this year and expect the related plan plant downtime will impact production during the first half of the year. Accordingly, production volumes during the second half of the year expected to be higher than the first half, and this is reflected in our full year guidance. These actions should result in stronger performance for years to come. As mentioned, We surpassed production guidance during 2024, achieving 85% operating capacity during the fourth quarter. With the achievement of commercial production and in an effort to provide greater transparency, we have included cash costs for 2024. We were quite proud that average cash costs during the year were $7,100 per ton. During the fourth quarter, the costs were $6,600 per ton, showing the operation's ability to bring down unit costs as we move closer to design capacity. For 2025, we expect operating costs to be similar to those in 2024, with sustaining capex around $600 to $700 per ton. In January, we updated our technical report on stage one with a long-term cash operating cost estimate of $6,500 based on our current operating performance. We feel quite confident in this long-term estimate and believe that as we continue to optimize costs and look at new processing technologies, which we'll touch on later, we could bring these costs down even further. On the Lithium Argentina side, we maintain a healthy balance sheet with a cash balance of $86 million and no material funding requirements expected at the project level. In 2024, we decreased our general and administrative costs by 30%, succeeding our 25% reduction target and maintaining a clean corporate model. Over the last year, we've been able to improve our lithium margins under challenging market conditions. In 2024, fast markets' battery-quality lithium carbonate price fell another 27%. Lithium carbonate being sold from Kachari Olderaz today is largely going to our partner, Ganfang, for use in the LFP market. Our pricing is based on battery-quality market price adjusted for the quality of the product, which contains trace levels of impurities. During 2024, as quality improved, we were able to decrease the pricing discounts significantly. For 2025, it was further reduced, leading to an over 50% improvement from our first sales. Overall, we are very pleased with our current pricing arrangement, which is supported by third-party quotes. As market prices recover, we expect this adjustment to shrink significantly, as roughly 50% relates to fixed costs. Looking forward, we continue to focus on improving and stabilizing our product quality and to maintain flexibility to be able to sell our product directly to customers globally as the LFP market develops. Alongside the operational success, we also improved and de-risked the financial position of Kachari Oloraz throughout the year. Project level debt was reduced from $350 million at the start of last year to $210 million on a 100% basis. This was accomplished by reducing debt at the joint venture with a significant portion of the proceeds from the Pasos Grandes transaction and favorable changes in the FX. We were also able to replace the short-term dollar-linked debt with long-term bonds and bank facilities. In November, in response to Miele's financial reforms, we were able to raise $50 million in a domestic Argentina bond offering at an 8% interest rate with a three-year term. Working with Ganfeng, we were able to access low-cost debt from international banks, A further $100 million of short-term debt was replaced with long-term bank facility at attractive rates. And more recently, we received an additional $150 million bank facility, which we expect to be available in Q2 to draw on as needed to give us additional financial flexibility. The terms are even better than our existing long-term debt and highlight the benefits GenFang brings both technically and financially to this project. With that, it's clear that we've built a strong foundation to support our future growth plans. Working with our partner, Ganfeng, as the global leader in lithium processing, we see a strong opportunity to leverage advanced processing technologies to enhance these plans. As part of this, we are excited to announce that we will be installing a 5,000 ton per annum DLE demo plant at site. This plant is expected to leverage higher concentration brine from the solar evaporation pre-lining concentration pond and use a technology that includes a solvent extraction-based DLE that was developed by Ganfeng. The demo plant will integrate at the stage one, where it is expected to streamline the downstream process to lower reagents, increase recoveries, improve product quality, and keep water usage low. This new technology has been validated in China using brine from Kachari Olaraz and will now be demonstrated at site with the commercial-scale demo plant. In early March, the province of Lihue granted the required permits and development is underway on the plant in China. Commissioning is expected to begin by the end of 2025. Based on the ongoing development work, we expect this new technology to support our future growth plans for stage two at Kachari-Ovaraz and is being used for regional growth plans in Solta. We remain optimistic about the continued need for low cost and large scale lithium operations like Kachari to meet growing demand. especially for projects with existing infrastructure, strong processing expertise, and proven teams that can lower costs and reduce execution risks. With our partner, Ganfeng, we are considering plans outlining over 200,000 tons per annum of LTE capacity in Argentina. While we are not committing to any significant capital investment today, given the long lead time items and successful results from stage one, we are accelerating development work to define our long-term plans at Kachari and in the region. At Kachari, we are considering an additional 40,000 tons per annum of LTE capacity for stage two. We've completed substantial work on the upstream pond design and look to integrate this work with new processing technologies. Similarly, we continue to advance a regional development plan on our properties in Salta. Here, in collaboration with Ganseng, we are in advanced stages of finalizing a multi-phase development plan with a combined LTE capacity targeting 150,000 tons per annum using similar solar evaporation ponds and DLE process. This plan incorporates resources from GENFANC's Pazuelos Pasos Grandes project and our jointly owned Pasos Grandes and Selva Lapuna projects. We believe that the newly passed RIGI regime will provide several very attractive fiscal incentives to support large scale investments like this in the country and will help support the development of our comprehensive growth pipeline. In closing, We have strong fundamentals and a clear vision. We will build on success of the largest lithium operation in Argentina, incorporating the latest and best technology available for our brine resources and advancing future growth plans while we take advantage of the new RIGI incentives available in Argentina. Our performance has demonstrated the strength of our team and our ability to execute at scale. We are optimistic about our strategic position in the lithium market, a low-cost operation, world-class portfolio projects, and a collaborative partner put us in an excellent position to capitalize on this growing market. That concludes our prepared remarks, and we will now open up the line for questions.