Lithium Argentina AG Q1 FY2024 earnings call

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. ### Caucharí-Olaroz - Achieved 4,500 tons of lithium carbonate in Q1 2024, a 20% increase from Q4 2023. - Encountered increased variability during ramp-up, with April shutdown planned to address issues like piping leaks and motor seal replacements. - Aims to continue ramping up production consistently and sustainably towards 20,000-25,000 tons of lithium carbonate in 2024. ### Cost and Development - Initiated a corporate cost reduction program while remaining committed to neighboring communities. - Pastos Grandes transaction on track to finalize around end of Q2, providing $70M to support operations. - Regional development plan for Pastos Grandes Basin progressing, with a comprehensive plan expected by year-end.

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's financial performance is centered around the ramp-up of the Caucharí-Olaroz project with production volumes increasing as part of the ongoing ramp process.

Production - Primary objective is to continue ramping up production consistently and sustainably towards 20,000-25,000 tons of lithium carbonate in 2024. ### Disclosure - Will work with joint venture partner Ganfeng to enhance disclosure later in 2024 as operations near nameplate capacity and become more normalized. ### Debt - Working with Ganfeng to pursue additional long-term debt options to leverage improved lending conditions in Argentina and support future growth plans.

Ramp-up Variability - Caucharí-Olaroz encountered increased variability during ramp-up as typical of any startup project. ### Pastos Grandes Development - Potential challenges during the development of Pastos Grandes Basin. ### Power Outages - Seasonal electrical storms in February and March led to power disruptions at Caucharí-Olaroz, though mitigation plan is in place and out of the seasonal period now.

Q: Can you clarify exactly what testing a higher production level at Caucharí means?

A: Yeah. 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: What does plans maintenance look like at Caucharí?

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: Could you give an update on inventories at Caucharí-Olaroz and price-quality relationship?

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: What's the status of the development plan for Pastos Grandes and motivation for DLE?

A: I would say, I mean, Ganfeng spent a lot of time investigating different process technologies, and I think, since their involvement in Caucharí, there’s been a lot of advancement in DLE, just generally in the industry, but also specific to what Ganfeng’s been working on. And so I think when they look at Pastos Grandes, there is a slightly lower lithium concentration, which doesn’t obviously rule out conventional, but does make it appropriate to investigate new technologies. Ganfeng is a world-class company in terms of processing technologies and they’ve made great strides in terms of advancing their proprietary DLE technology.

Q: What about inventories and pond inventory at Caucharí?

A: No. No. Finished products. Our pond inventory is very healthy. It’s certainly, at this time, not the bottleneck to achieving your nameplate capacity.

Q: Are power outages still an issue and any plans to address them?

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.