Lithium Argentina AG Q3 FY2024 earnings call

• Cauchari-Olaroz produced 6,800 tons of lithium carbonate in Q3, a 21% increase from Q2, operating at 75%-80% nameplate capacity with plans to reach 40,000 tons in the future.
• The additional processing cost for battery quality lithium carbonate reduced to $1,500 per ton from $2,000, positively impacting margins despite downward pressure on lithium prices.
• Working closely with Ganfeng to determine optimal product mix and quality to maximize operating margin, with clarity on 2025 production plans and product quality targets expected early in 2025.
• Progress on Stage 2 at Cauchari-Olaroz and regional development plan around Pastos Grandes in Salta Province, with the RIGI regime providing fiscal incentives for large-scale investments.
• Optimism about strategic positioning in the lithium market driven by long-term energy transition demand, and commitment to enhancing efficiency and sustainability practices.

During the third quarter, Cauchari-Olaroz produced approximately 6,800 tons of lithium carbonate, a 21% increase from the second quarter. The plant is operating at 75% to 80% of nameplate capacity, with plans to reach 40,000 tons in the future. Year-to-date production positions the company to meet the 20,000 to 25,000 tons of lithium carbonate production guidance for the year. The additional processing cost-to-achieve battery quality lithium carbonate has been reduced from $2,000 to $1,500 per ton.

• Expect to provide clarity on 2025 production plans and product quality targets early in 2025.
• For the fourth quarter, expect to be around breakeven at close to current prices.
• Working with Ganfeng on the production plan for 2025, with guidance on product mix to be provided early in 2025.

• Market price volatility of lithium, which impacted realized prices during Q3.
• Need to refinance convertible debt due in January 2027, though confident in refinancing closer to maturity.
• Dependence on market conditions and ability to sustain production levels and quality at higher volumes.

Q: In prior quarters, you disclosed Cauchari would be cash flow positive even at current spot levels. With spot prices down and processing costs reduced, is Cauchari still cash flow positive ex working capital at spot?

A: During Q3, operating cash flow adjusted for working capital. Prices declined by 18% from Q2 averaged carbonate price to Q3, with most recent realized sales price at ~$7,000. Expect to be around breakeven in Q4 at close to current prices, working with Ganfeng on 2025 production plant and cost disclosures early in 2025.

Q: At what point in 2025 are you expecting production levels to increase meaningfully? Any challenges in sustaining quality at higher levels?

A: Currently at 75%-80% nameplate capacity, expect to exit 2024 around those run rates into early 2025. Working with Ganfeng on 2025 production plan, with details available early in 2025.

Q: On pricing, how to think about China price reference minus VAT and $1,500 processing fee? And on convert, plans for it?

A: China price includes VAT, need to strip out plus additional processing fee. Convert due in Jan 2027 with 1.75% interest rate, in contact with convert holders and confident in refinancing closer to maturity. Focus on Cauchari Stage 1 and refinancing Exar's short-term debt.

Q: On quarter-over-quarter production increase, what drove it? And cost breakdown by labor and reagents?

A: Increase due to team improving plant operation, uptime, reliability. Reagents are a substantial part of costs, with more clarity on percentages expected early in 2025 with full guidance.

Q: On the regional development plan update in 2025, what should investors expect? And on next year's capital needs and cost optimization?

A: The regional development plan will show new ways to incorporate technologies for enhanced recoveries and environmental impact. Focus on Cauchari Stage 1 and refinancing, with no immediate need for buffer as the business is positioned well under lower-for-longer pricing scenarios.

Q: On Cauchari Phase 2, what price makes sense to move forward? And on reducing additional processing fee to near zero, need for material CapEx?

A: Focus on Cauchari Stage 1 first, with Phase 2 planning ongoing, evaluating processing technology advances. No material incremental CapEx identified yet, as focus is on steady-state production to manage impurities and variability, with clarity expected early in 2025 with guidance.

Q: On Q3 production increase color (brine well availability, grade, recovery), and cost percentage breakdown by labor and reagents?

A: Production increase due to team improving plant operation, uptime, reliability. Reagents are a significant cost component, with more detailed percentages to be provided early in 2025 with full guidance.

Q: On GM lock-up expiring in October, any color on GM's ownership?

A: Maintained dialog with GM since separation, lock-up expired, GM focused on Lithium Americas' Thacker Pass, but ongoing open dialog with GM.