Lithium Americas Corp. Q1 FY2024 earnings call

Key Priorities

• Supporting the successful ramp-up of Caucharí-Olaroz.
• Ensuring the company remains sufficiently capitalized through the ramp-up and for future growth plans.
• Advancing the regional development plan for Pastos Grandes Basins with Ganfeng.

Q1 Achievements

• Caucharí project produced 4,500 tons of lithium carbonate in Q1, a 20% increase from Q4 2023.
• Initiated a corporate cost reduction program while remaining committed to neighboring communities.
• Working with Ganfeng to pursue additional long-term debt options and Pastos Grandes transaction on track to finalize around end of Q2, providing $70 million to support operations.
• Regional development plan for Pastos Grandes Basin progressing with comprehensive plan to be completed by end of year.

In the first quarter of 2024, the Caucharí project achieved a production milestone of 4,500 tons of lithium carbonate, a 20% increase compared to the fourth quarter of 2023. This segment is the primary focus with production ramping up despite variability typical of a ramp-up process.

Production Target

• Primary objective is to continue ramping up production consistently and sustainably towards the 2024 production target of 20,000 to 25,000 tons of lithium carbonate.
• Expect increased disclosure later in the year as operations near nameplate capacity and become more normalized.

• Variability in production volumes typical of a ramp-up process.
• Potential issues with piping and reliability identified during ramp-up at Caucharí requiring planned downtime.
• Seasonal power outages in the Puna region, though mitigation plan is being implemented.

Q: Good morning, everyone. This is Apurva on for Ben. I’ve got a couple of questions. My first is that, obviously, Caucharí continues to advance through the ramp-up and you noted that you’re testing a higher production level. Can you clarify exactly what this means, please?

A: Yeah. Thanks for the question. So, just under a year since production began the project, we’re very happy with how the project is going. It’s moving in the right direction both in terms of increased production volumes and consistency. As part of the ramp-up, it’s not a straight line. So, as we test different parts of the plant at higher and higher levels, we will identify issues and address them in order for us to be able to sustainably achieve those higher run rates. And so when we talk about testing capacity, that’s exactly what we did, for instance, at the end of March prior to the April shutdown. So we test the higher capacity, we identify issues, we affect and implement solutions, and we continue going on. It’s just kind of a typical ramp-up.

Q: Good morning, guys. Good morning, Sam. Thanks for taking my questions today. I just wanted to understand, and maybe this is overly logistical in nature, but just what does plans maintenance look like at Caucharí? I know that you all remarked that you took some downtime in April. Can you elaborate a little bit more on those planned improvements and this is something that we should kind of expect every six months or so, or how we should think about that as you all kind of ramp towards capacity, especially once you achieve that run rate?

A: Sure. So, through Q1, volumes continued to ramp up. We started testing the plants at higher and higher throughputs. As part of that, we identified issues that needed to be addressed in order to sustain those higher and higher throughputs. So, the April shutdown was planned to go in and address particularly around reliability issues. And so specifics would be we replaced piping in certain areas where we had identified leaks and cracks. We had identified certain motors where seals needed to be replaced. So, typical stuff. This often arises during ramp-ups as you push higher and higher throughput capacity towards nameplate design. So, it’s downtime to enable us to achieve on a sustainable basis these higher production rates. So, when I mentioned in the previous answer to the question that ramp-ups aren’t a straight line, there are periods of time where there will be downtime to address issues and they unlock our ability to operate at higher sustaining rates.

Q: Hi. Good morning, Sam and team. Could you give us an update at Caucharí-Olaroz what the inventories were like at the end of the quarter or now of carbonate? And then, could you tell me what is the kind of price-quality relationship? What kind of price discounts is the product getting versus different grades, please? Thanks.

A: Sure. We did have some meaningful inventory build, particularly at the end of Q1. I’m not going to disclose exactly where it is, but it’s substantial. And that’s just a function of improving our regular shipment plans and it’s all kind of part and parcel with the ramp-up. In terms of the second question -- so in terms of -- and quality and price are obviously very linked. The pricing we received starts with a reference price of battery-quality product for carbonate and then makes adjustments for quality and processing costs in order to get it to battery quality. And I can say there was a meaningful improvement in quality between Q4 of 2023 and Q1 of 2024. Right now, we are meeting most technical and battery specifications. Let’s say the outlier, in large part, is potassium. So, this is a function of getting the KCL train up and running on a consistent, reliable basis. So, as product improves, the price that we receive improves and there’s been a dramatic change over the last few months in terms of product quality and the reflected pricing. And given this time and this improved pricing will be reflected in Q2.

Q: Hey, guys. Thanks for taking my question. I do want to focus more again on the ramp-up. Sam, as you mentioned, the potassium chloride circuit that’s being integrated right now, is that, I would say, one of the largest components of what’s limiting you in terms of volumes getting up or where specifically in the plant are you seeing that issue?

A: KCL is the focus and it has been the focus. So we went in during April and we stabilized one of the plants. We replaced a lot of the piping that was creating some leakages. So, yeah, KCL is definitely the focus of Ganfeng’s team. They’re largely responsible for overseeing that operation. We’re very thankful that we have such an experienced team looking at this. So, KCL was the last of the subsystems to commission. It’s currently in commissioning. We ran both trains independently and tested them to pretty high throughput. So it’s progressing very well, and yeah, there’ll be more on the second quarter conference call to describe, but KCL is certainly the focus.

Q: Hi. Good morning. Just had a couple. I wonder if you could just maybe talk about the remaining stages ahead on the road to completing the comprehensive development plan. Just sort of what’s still outstanding needs to be done, needs further analysis, et cetera?

A: Sure. I mean, we’re starting from a position of having a rich database of information on both Pesuelos, as well as Pastos Grandes. So, a lot of work has gone into both of those. So, obviously, we’re merging and consolidating these resource bases. We’re sharing information on hydrogeological models. We’re conducting kind of infrastructure trade-off studies. All of that information is readily available. So, it’s just about compiling it and getting the teams aligned and focused. So, there’ll be more, obviously, there’ll be a much bigger update towards the end of the year. But that kind of gives you a flavor of what we’re doing.

Q: Hi. Good morning. Sam, you noted that as you ramp, the volumes of quality is improving. When it comes to the major operating cost items, such as, say, reagent use intensity per ton output, is that also improving as you ramp?

A: Yeah. I mean, it’s -- yeah, as we ramp and get to more normalized, more sustainable, higher levels, it allows us to kind of focus in on things like specific consumption. And so, like everything during a ramp, it’s testing out and optimizing and so there certainly will be opportunities to hone in on those things, like, soda ash-specific consumption, lime-specific consumption. These are material cost drivers. I’d say costs so far during the ramp are tracking to our plan. Once we get into higher sustained levels, we’ll really be able to kind of narrow down our focus onto those specific -- kind of specific consumption target rates.

Q: And then just to follow up on the inventory buildup question your answer, was that in terms of finished product buildup or is that units of lithium in your pond inventory?

A: No. No. Finished products.

Q: And how is the pond inventory now when we were there in April? It sounded like everything was well on track through your 2025 production. Is that correct?

A: Yeah. Our pond inventory is very healthy. It’s certainly, at this time, not the bottleneck to achieving your nameplate capacity.

Q: And then, lastly, on the power outages, are those problems behind you essentially now, like, has the weather gotten back to where you sort of expect it to be and then can you speak to perhaps power conditioning or any changes to the power connection that you’re contemplating to eliminate that issue?

A: Yeah. I mean, It’s really a seasonal thing. In February, March in the Puna, we saw an unusual number of electrical storms. I mean, typical season, you’re going to see a lot of it and that led to power disruptions. So we are out of that season now and the mitigation plan that’s been developed is being implemented. So we expect to address these issues.