Lithium Argentina AG

Hello everyone. Thank you for joining us and welcome to Lithium Argentina Q1 2026 earnings presentation. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Kelly O'Brien, VP, Investor Relations. Kelly, please go ahead.

Thank you for the introduction. I want to welcome everyone to our conference call this morning. Joining me on the call today to discuss the first quarter 2026 results is Sam Piggott, CEO of Lithium Argentina. Alex Shoba, our CFO, will also be available for Q&A. Before we begin, I would like to cover a few items. Our first quarter 2026 earning results were press released earlier this morning, and the corresponding documents are available on our website. I remind you that some of the statements made during this call, including any production guidance, expected company performance, update on development plans, the timing of our project, 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 releases. I will now turn the call over to Sam Pickett.

Good morning, everyone, and thank you for joining us. The first quarter of 2026 represented another very strong quarter as Kachari-Oloraz continued to operate at or near design capacity while beginning to generate meaningful cash flow. During the quarter, production totaled about 9,700 tons of lithium carbonate, with the operation average being approximately 97% of nameplate capacity, a level we've been able to consistently run for the past two quarters. This performance also highlights the progress we are making on costs. First quarter operating cash costs were down again to just under $5,400 per ton, making Kachari-Olaroz one of the lowest cost lithium operations globally. I also want to highlight that since the beginning of the year, we've been able to distribute around $100 million in cash from Kachari-Olaroz, $48 million for Lithium Argentina's share, strengthening our balance sheet and highlighting the cash-generating capability of the operation. This quarter reinforces the importance of Kachari-Olaroz, both in what we've achieved with Stage 1 and in the opportunity to grow from here. On the left side of the slide, we've summarized operational and financial metrics for the quarter at Kachari-Olaroz. which reflect both strong operations and an improving lithium pricing environment. As noted previously, realized prices increased to just under $17,000 per ton for the first three months of the year, compared to just over $9,000 per ton in the fourth quarter last year. Combined with stable production and continued cost discipline, we have produced an over three-fold increase in EBITDA quarter over quarter. Adjusted EBITDA, which removes primarily non-cash FX fluctuations, increased to $106 million for the quarter, up from $30 million in the fourth quarter. Turning to costs. Last quarter, we highlighted the progress of our cost reduction efforts at the operation, and I am pleased to say that we reduced them even further in the first quarter, bringing our cash operating costs down below $5,400 per ton. While these costs demonstrate what the operation is capable of, some quarter-to-quarter variability should be expected as we remain focused on driving costs lower over the long term. We are also watching the situation in the Middle East closely, and so far we are seeing a limited impact related to costs and availability of key supplies or reagents, such as soda ash. The operations at Kachari Olaraz do not require an energy-intensive process, have minimal diesel needs, and do not need sulfuric acid, relying principally on solar evaporation. As noted previously, direct diesel consumption makes up less than 3% of our direct operating costs. I think it's important to spend some time showing how the EBITDA generated at Kachari-Oloraz translates to cash flow. As mentioned, during Q1, the operation generated $106 million in adjusted EBITDA. There is roughly a two-month lag between when these sales are made and when the cash is received at the operation. As we have outlined, we are expecting over 90%, nearly all, of this EBITDA to convert to free cash flow this year and support our growth plans by providing capital to strengthen and de-risk our balance sheet. We expect this cash flow generation should become increasingly evident through the second and third quarters. In terms of adjustments, during the first quarter, sustaining CapEx was even lower than normalized levels estimated at around $4 to $5 million per quarter. On the interest side, we have a small amount of third-party project level debt, which is approximately the same as it was at the beginning of the year, even after making around $100 million in distributions and represents less than 0.5 times net debt to Q1 EBITDA on an annualized basis. Related to tax and other costs, we expect cash taxes to increase in the coming years, but we are realizing the benefits of accelerated depreciation and our intercompany loan structure, which is providing a much stronger cash flow generation during these early years of operations. The high level of cash flow generation from EBITDA during both high and low price scenarios is important to understand to see how we will leverage this cash flow to support our expansion plans and de-risk our balance sheet. Now, turning to our outlook for 2026, this year's production guidance of 35,000 to 40,000 tons remains unchanged. This estimate has some flexibility built in as we look to optimize this year's production and also consider efforts to support sustained higher production levels in the years to come. We have provided an EBITDA outlook across a range of prices and see substantial upside as market reference prices move closer to the futures pricing. Currently, our realized prices include an approximate 6 to 7 percent adjustment to market pricing. We expect this differential will decrease as consistency continues to improve and product quality evolves. Recent lithium prices range from roughly $20,000 to $30,000 per ton. At those levels, the operation is capable of generating approximately $460 million to $630 million of EBITDA in 2026 on a 100 percent basis. Moving to the market. we are seeing a much more constructive view on price and the sustainability of these higher prices based on accelerated energy storage demand. On the EV side, we are seeing a much stronger outlook today, including for commercial vehicles, than at the start of the year. This is supported by recent developments in the oil market, as well as the increasingly strong performance, low cost of batteries, which now offer longer ranges and faster charging capabilities. It will take time to bring on enough new lithium supply to meet that growing demand. Large-scale and high-quality projects with experienced teams and a successful track record are rare. Against that backdrop, we believe assets like Chari-Olraz Stage 2 and PPG are becoming increasingly strategic within the global lithium supply chain. During the first quarter, we made substantial progress advancing and de-risking our Stage 2 development plan. which is targeting to add an additional 45,000 tons per year of production capacity. One of the key upcoming milestones is the approval of the RIGI application, which was filed late last year. We understand this is progressing well and could be approved as early as this quarter. Another important catalyst is the advancement of the environmental permits. This is underpinned by a recently updated resource estimate and a basin-wide hydrogeological model supporting the project's ability to sustainably extract brine needed for these higher production levels. We are working closely with our partner to finalize the development plan mid-year. Building off the success of Stage 1, the plan is expected to incorporate new technologies while leveraging Ganfang's expertise in lithium chemical processing and modular construction capabilities in China to help optimize timelines and overall development costs. We believe future growth should be funded in a manner aligned with shareholder interests, prioritizing stage one cash flow generation and access to low cost project level debt where appropriate, while minimizing the need for equity issuance and limiting shareholder dilution. I want to spend a minute talking about the communities around Kachari-Olaroz because these relationships are an important part of the operation. We've been working in the region for many years now and have built long-term relationships with communities across the region through agreements, local hiring, procurement, and ongoing engagement as the operation has grown. And I think that's important context as we discuss stage two. We expect ongoing dialogue with the neighboring communities where important relationships have been built and expect this to be an important part of supporting the next phase of growth at Kishore-Olaroz. Moving to PPG. This is an equally important part of our longer-term growth platform in Argentina and represents a key source of value. As a reminder, the scoping study released late last year outlined a phase development plan for getting up to 150,000 tons of lithium carbonate production over time, beginning with an initial 50,000-ton phase. By confining three separate projects, we believe PPG will be one of Argentina's largest lithium operations. benefiting from scale and synergies related to being a single operator across one single massive lithium system. Our focus here is also to de-risk and provide a path to value creation for Lithium Argentina shareholders. Working with Ganfang, we were looking at the option to bring in a minority investor at the project level. So far, we have been very pleased with both the level and breadth of interest there is from global groups seeking exposure to large-scale, low-cost, and scalable lists and supply from brines. PPG is on a strong path to create value. The combined assets have a historic book value of $1.7 billion based on investments made, and the development plan has a range of NPV values from $6 billion to $8 billion. Overall, I believe funding a minority partner for PPG represents an opportunity to continue growing responsibly and unlocking significant value in a manner that does not require equity dilution or reliance on cash flow from Kachari Olaroz. As we look ahead, our focus remains on disciplined execution at Kachari Olaroz. The stronger financial position established over the past year supported by distributions from Kachari Olaroz and the recently completed debt facility alongside Ganfeng, provides additional financial flexibility. At the same time, we continue to advance and systematically de-risk our broader growth platform, which includes Stage 2 and PPG. These projects will benefit from the ongoing permitting progress, RIGI approvals, development planning, other key upcoming technical and financial milestones. As we look to broaden our investor base and improve market visibility globally, we are considering plans for a secondary listing on the ASX, which we believe could further strengthen our position with international investors and support long-term shareholder value. Our focus remains on disciplined execution and continuing to systematically de-risk the broader growth platform in Argentina.