Lithium Americas (Argentina) Corp. Common Shares

Hello and thank you for standing by. My name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to the Lithium Argentina second quarter 2025 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 that time, Simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Kelly O'Brien, Vice President of Investor Relations. Kelly, please go ahead.

Thank you, Tiffany. I want to welcome everyone to our earnings conference call this morning. Joining me on the call today to discuss our second quarter results is Sam Piggott, President and CEO. Alex Shulga, VP and CFO will also be available during the Q&A session. Before we begin, I would like to cover a few items. Our second quarter 2025 earnings press release was issued earlier this morning, and the corresponding documents are available on our company website. I remind you that some of the 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, MD&A, and news release. I will now turn the call over to Sam.

Good morning, everyone. Thank you for joining us. We will begin on slide three with a review of key highlights and milestones from the second quarter. At Kachari-Olaroz, we delivered strong operational results with higher production volumes and lower costs quarter over quarter. With the completion of the first half, we feel confident in reaching our full-year production guidance of 30,000 to 35,000 tons. We also strengthened our financial position, securing $120 million in new bank facilities at Kachari-Olaroz to support working capital as operations advance. Together with our partner, Ganfang, we made meaningful progress towards consolidating the Pazuelos-Pazos Grandes basins. We expect to give the market an update shortly. as we work diligently to position these assets for long-term growth and to develop a platform for what is expected to be one of the largest lithium operations globally. On slide four, we delivered solid performance in the second quarter. You can see a summary of the key operating financial metrics. Revenue increased despite softer market prices, reflecting the benefit of higher output. The team has done an excellent job executing safely and efficiently. And during the second quarter, the operations consistently produced 85% of main plate capacity delivering 8,500 tons of lithium carbonate for the second quarter and 15,700 tons in the first half. While market prices have been quite volatile in recent weeks, we realized an average price of $7,400 for the second quarter, an 8% decrease compared to the first. We emphasized the reduction of costs quarter on quarter and turning to the next slide, we will discuss this in more detail. In the second quarter, We brought operating costs down approximately 8% compared to the first quarter, reaching $6,100 per ton. This decreases a function of many different cost reduction efforts across the operation. There are structural, long-term changes, and part of our transition to a steady-state operator. We are quite proud of these optimization efforts, which bring our current costs below latest feasibility study estimates. The scale and quality of Kachari-Oloraz, coupled with efficient operations and low production costs, reinforces our position as a resilient producer that is able to sustain profitability across market cycles. Moving to slide six, in recent months, we have seen increased volatility in lifting prices. Today, prices are just over $10,000 per ton. We do not believe that these lower prices are sustainable, given strong global growth and the need for new supply, which is often significantly higher cost. We have positioned the business to withstand a lower for longer price environment and remain focused on what we can control, namely safe, low cost and reliable operations. We believe this environment favors low cost brine operations, which are well positioned on the cost curve and able to execute and grow through the cycles. On slide seven, we have outlined our platform for growth. As we look ahead, we're excited by the scale of opportunity emerging across our platform in Argentina. Our growth strategy targets over 200,000 tons per year of lithium carbonate equivalent capacity, leveraging both expansion at our producing operation and at our regional growth projects with Gansang, where through consolidating our projects in the Pizuelos and Pasos Grandes basins, we are targeting approximately 150,000 tons of capacity. We've made significant progress in advancing the regional development plan in Salta. Very soon, we expect to combine these three high-quality assets that together cover two entire solars, something unique in our industry. This positions us to participate in what is expected to be one of the largest lithium projects in the world, with the benefits of scale and advanced technology. This partnership will allow Lithium Argentina and Ganfeng to bring together their respective strengths in large-scale brine development. building on the capabilities and collaboration already proven at Kachari-Olaroz. We expect to have an update shortly on the consolidation and a feasibility study complete by the end of the year. Both Lithium Argentina and Ganfeng are working together to advance financing plans, including project debt and potential minority equity investments from customers. In addition to our regional growth plans, stage two of Kachari remains a key component of the pipeline, expected to contribute an additional 40,000 tons. Our approach is to create a more efficient operating structure that harnesses new technologies, economies of scale, and builds off our track record at Kachari-Olaroz. As we advance these longer-term growth initiatives, we are focused on strengthening the balance sheet while preserving and maximizing shareholder value. In closing, on slide eight, we remain focused on executing our core priorities, unlocking value, operational efficiency, and financial flexibility. Looking ahead to the second half of the year, our priorities are clear. At Kachari Olaraz, our focus is on continuing our efficient operations and maintaining our position as one of the lowest cost producers in the industry. We plan to advance the unified development plan for Pesuelos Pasos Grandes Basins, positioning this world-class asset for long-term scalable growth. At the corporate level, we continue to strengthen our balance sheet and preserve financial flexibility without diluting shareholders. Above all, we will execute with discipline focus on delivering against our targets, and ensure we close out 2025 in a position of even greater strength and opportunity. Thank you for your continued support. And with that, I think we'll open up to questions.

At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star one again. We kindly ask that you limit your questions to one and one follow-up for today's call. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Katie LaChapelle with Canaccord Genuity. Please go ahead. Hi, Sam and team.

Congrats on a good quarter. I just want to talk about the surge in lithium futures we saw overnight on reports of CATL shutting down one of their major mines in China. We've seen a number of news outlets suggest that this is not only necessarily a permit-related action, but could be part of a broader push by the government to address overcapacity and domestic competition, which has been leading to some price destruction. So I'd just be curious, what's your view on China's anti-involution policies specifically, and how do you see these measures impacting the lithium market and the potential longevity of the recent price moves?

Thanks, Katie. I mean, we've been following these developments for sure. fairly recent, very closely. Yeah, I mean, I think this anti-involution policy is not just specific, obviously, to lithium, but looking across industries and trying to reduce the amount of rapid competition that's ongoing. So it's something we're monitoring. I don't think we have anything kind of novel to contribute to the discussion around that. I think from our position and the strategy with the business is that we've set this business up to manage price volatility. I think, you know, in Q2, this was evidenced in where our costs came in, really focused on ensuring that we can get through any price environment. So yeah, I mean, we're very pleased with where costs are. Obviously, if we have some support from pricing, that's great. But again, we've kind of set this business up to withstand this volatility. I'd say it's like a more general comment, and it's something that I think the industry has been talking a lot about over the past 12 months. It's just the view that pricing that we've experienced so far this year is really, you know, unsustainable in the long term. Looking at kind of demand expectations, the need for new supply, you know, where pricing is right now, we just think pricing is, you know, long term unsustainable. As to the short term nature, I think it's not for us to comment.

Great. And then maybe a follow up on the regional growth strategy at both Qatari as well as in Salta. Are there specific project milestones that need to be achieved to make a formal investment decision on either of those projects? Or what market signals are you guys waiting on to make a go ahead decision there?

So, I mean, first and foremost, we're still kind of pushing ahead with the feasibility study, which is expected to be complete this year. I think prior to that, we plan to, in the very near term, to disclose a plan for how we're going to consolidate all of these assets with a view to participating as LAR and one of the largest lithium projects globally. So it's extraordinarily exciting. In terms of a formal investment decision, I mean, the feasibility study needs to be complete. Beyond that, we've had preliminary discussions with certain customers, and there is a lot of interest to participate in very large, high-quality brine projects, particularly based on the track record that we've been able to demonstrate at Kachari. So I think a formal decision on going ahead, we'll have to wait for certainly the feasibility study. But for us, it's important to grow, but important to also manage our balance sheet, you know, look at non-dilutive measures in order to finance growth projects.

Got it. Thanks again, guys, and congrats on the good quarter.

Thanks, Katie. Your next question comes from the line of Corrine Blanchard with Deutsche Bank. Please go ahead.

Hey, good morning. Thank you for taking my question. Two questions. Can you talk about the pricing discount that you receive this quarter and how that compares versus Q1 and maybe what you're thinking you could be getting for the rest of the year? And then the other question is on the cost. I mean, you obviously did a great job here and delivered quite significant decrease quarter over quarter. How much more can we expect going into 3Q and 4Q in 2026? Or do you think you have reached kind of your run rate at $6,000-ish per ton? Thank you.

Sure. So addressing your first question, the discount to the reference price was approximately $2,000, so very similar to what was achieved in Q1. You know, that reflects obviously taxes as well as a reprocessing cost for the material in China. I think this year, last year was all about ramping up. This year is about operational stability at much higher production volumes. And so we're seeing product stability improve, and we expect that to continue through Q3 and Q4. So there may be room to reduce that reprocessing fee, but I think from our perspective, The focus really is on volumes and cost. And if we can deliver on those, then I think the product quality will also improve throughout the end of the year. I think it's important to note we're very much aligned with GenFang in terms of being able to supply customers with our product, global customers. So these are customers outside of China. um, going into 26 and certainly going into 27. So it is, it is a high priority. Um, and we, you know, we'll have more to disclose on that certainly into next year on the cost side. Yeah. I mean, we've been very focused on costs. Um, I think, you know, every company in the lithium industry has been for, for very good reason. And we continue to be some of, you know, a lot of these cost reduction efforts are a function of entering into, you know, steady state operations. Last year during a ramp up, it's really hard to kind of, in a sense, freeze things and really, you know, take serious efforts to optimize while you're ramping up. This year, that's exactly what we're doing. And the cost, you know, the cost savings we've achieved, there's not one single bucket that kind of represents a significant portion. It's kind of spread over a number of different initiatives. And these are structural, so they're long-term initiatives. I think going forward, there will be probably some volatility through this year in terms of where costs are just as a function of these optimization efforts, but the trend is certainly one that we expect to continue through 2026.

Your next question comes from the line of Joel Jackson with BMO Capital Markets. Please go ahead.

Hi, Sam and team. I don't see your answer to the last question. So cash cogs were down $600 a ton, like you said, but reporter cogs were about flat. Is that because of reprocessing costs? And then since it's $600 a ton, cash cost savings not flow through the end? I'm sort of confused if I missed that. Sorry.

Alex, do you want to take that one off?

I'm sorry, I'm. Sorry, Joey, your question with respect to. So I'm sure.

Well, you're caught. Yeah, you're caught. The JV cogs about a ton was flat quarter of a quarter. But your cash cogs pretend as you disclose it are down to kind of all the time. So I was trying to understand the difference between the two. Why was the cogs about a by ten flat quarter of a quarter cash cogs down?

Yeah, I need to remember that cost of sales also includes depreciation. We started depreciation in Q4 of last year when we reached commercial production. So that's one item. And then in addition, we have some logistics costs and some other costs that are included in cost of sales, but mostly depreciation impacted The cost was a bit higher in Q2, which sort of resulted in a bit higher cost of sales than, I guess, cash costs.

Okay. And then I guess I'm going to sneak a two-part question to my second question. So the first part would be, what kind of visibility do you have into Q3 and Q4 in terms of your order book? Obviously, as Sam said, tribes have been whipsawing all over in China now for the last month and a half. including today. So kind of, and I know you have some reprocessing and again, I don't know if that adds a bit of length to your order book. Like when, so we're kind of visible in that and on cost should we expect on a COGS to be similar in Q3 cash and normal. And then the second part of that question would be, you know, Sam, what are your thoughts here? You know, Q2 is the bottom of the market. You came in, probably the JV came in, maybe slightly negative in cash flow. Maybe you can comment on that. What does that think about your business here across the cycle? Thanks.

Yeah, I mean, costs. Yeah, I think expecting costs with some minor variability in Q3, Q4 on what we experienced in Q2 is probably a fair way to to assess it, cost of goods sold. I mean, Alex, it's really a function of depreciation, the delta between that and operating costs.

Yeah, I think cost of sales per ton will generally follow cash flows per ton in next quarters.

And then in terms of, you know, in terms of the order book, I mean, the vast majority of our product is under offtake and the vast majority of that goes to Ganfeng. And so it's, you know, it's all well spoken for. I think there's obviously very strong demand from Ganfeng pulling that material through.

Is that like a one-month lag, Sam, a two-month lag, a three-month lag? How should we think about it? Just in terms of the pricing flow through? The kind of benchmark pricing we can see on the indices and things, features. I don't know, Alex.

What have you disclosed on that?

I think we do have some lag. I would say several weeks of lag on average.

And how the business did in Q2 at the bottom?

Yeah, I mean, we're obviously very happy with where the business is today and where we expect it to be over the next six months, 12 months, 18 months. This is a world-class operation that has some of the lowest Patrick Corbett- costs in the industry and and you know we obviously this even with realized pricing being at $7,400 on an operating basis, we were very marginally. Patrick Corbett- Operating. Patrick Corbett- At a marginal operating profit, I think, beyond that the the free cash flow that you referred to as largely tied into working capital which. necessarily higher in Q1 and Q2 given the increase in volume production. I think as we spoke to on the last call in terms of the cadence of production first half versus second half, you know, we still expect the second half to be the larger volume half of the year.

Your next question comes from the line of Mohamed Sidibe with National Bank Financial. Please go ahead.

Morning, everyone. Just a follow-up question on the pricing discount that you've seen. And in the past, you've guided to that $22,000 per ton to $2,100 per ton. Is that something that we should still expect for 2025? And then just if you could help us reconcile the price realized to call it the lithium carbon and average prices of $9,000 per ton. I think maybe it gets to do with Jules' question around the lag on the sales price receipt. Thank you.

Yeah, the discount was approximately $2,000. I mean, that's comprised of about a 50% fixed, 50% variable associated with taxes. You know, I think Ganfang and LAR are very aligned in terms of what we want to accomplish this year, which was really getting volume production up, ensuring that operations stabilize at these higher levels and then driving costs down. So that's been the priority this year. I think this... I think that going into 2026 and 2027, given that we're both aligned in the ability to supply global customers outside of China with our product, you know, the focus will shift. So for the remainder of the year, I think the pricing discount that we're receiving today is likely to continue going into 2026. You know, I think the priorities and the focus of both Ganfeng and LAR will shift to be able to provide those customers ex-China with product.

Sounds good. And then just, I guess, maybe a reconciliation between the realized pricing and the average price for lithium carbonate during the quarter. Any call around that would be helpful, and I'm happy to take it offline if that's more of a question for offline. I don't know.

Alex, do you want to handle that or do you want to handle it offline? I'll just make a comment, as I mentioned, that there is a lag of several weeks between production, pricing, and shipment. That's why a change in spot price isn't reflected immediately in our results. There's several weeks of delay. But yeah, we're happy to provide some more details maybe offline.

Great. Thank you. And just a final question on the third party debt at XR. Just $108 million due within the next 12 months. What are your expectations around that? Should we expect some potential refinancing of that or do you expect to pay that down using some of the level of credit that you have? Thank you. Alex, feel free to answer that.

Yeah, sure. As Sam mentioned, we managed to secure 120 million loan facilities in Q2. So we expect to use those facilities to refinance that short-term debt that is coming to you.

Thanks, Guy.

Your next question comes from the line of Ben Isaacson with Scotiabank. Please go ahead.

Thank you very much, and good morning, everyone. So a question on your partner, Gangfeng. You know, just looking at the slide, it looks like Gangfeng is going to be involved in not only the pipeline, but in the regional development plan as well. Can you talk about their financial health as your partner if prices were not to change from where they've been the last kind of six months in that, you know, mid $8,000 area? Would Gangfeng be able to continue funding and developing its proportionate share of these projects? Does it rank other projects higher than the ones with LAR? Can you talk about what the thought process is with respect to Gangfeng as a partner in a period of sustained pressure on pricing and profitability for them? Thank you.

Yeah, I'll be careful not to put words into Ganfang's mouth, but I think addressing some of these questions out of order. One, Argentina ranks extraordinarily high in terms of Ganfang's focus outside of China. And I think what we've been able to deliver at Qatari-Olaroz only kind of supports and emboldens that strategy. Obviously, we're very pleased with where costs are coming in in Q1 and Q2. GenFang is relentless in terms of driving down costs, and they see considerably more to do on that front. In terms of their financial health, GenFang does have access to a lot of capital in China. They also have tremendous relationships with their downstream customers who I think are interested in being able to minimize the risks that I think a lot of people see in two, three years. Certainly, if prices remain where they are now, I think there is a high probability that there could be you know, certainly market balance, potentially market shortage. And so some of their customers are very supportive of Genseng's efforts to kind of de-risk the supply chain, bring on low cost projects like Kachari Olaroz that can kind of be resilient through the bottom of a cycle. So I'd say they do prioritize Argentina as one of their kind of top jurisdictions for investment. I think they do have access to quite a bit of capital in China. And so their appetite is there. Obviously, if prices were to fall dramatically, I think it would give everybody continued pause in terms of investment. But Genfeg is certainly a tremendous partner to have. They have great relationships with global customers. They have a keen understanding of cost curves and where they want to invest. And so I think we're very well positioned with them with our platform in Argentina that has kind of a pipeline that can get us to over 200,000 tons of production of low-cost lithium units. Great. Thank you.

That concludes our question and answer session. Ladies and gentlemen, this will conclude today's call. Thank you all for joining. You may now disconnect.