Q1 2025 Lithium Argentina AG Earnings Call
Thank you for standing by my name is Kate and I will be your conference operator today at this time I would like to welcome everyone to the lithium Argentina AG first quarter 'twenty 25 earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question Press Star one again. Thank you I would now like to turn the call over to Kelly or Green, Vice President Investor Relations and ESG. Please go ahead.
Kelly Green: Thank you for the introduction I want to welcome everyone to our earnings Conference call. This morning, joining me on the call today to discuss our first quarter results is Sam Pigott, President and CEO, Alex Sugar VP and CFO will also be available during the Q&A session before we begin I would like to cover a few.
Kelly Green: Items, our first quarter 2025 earnings press release was issued last evening 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's performance update on the regional development plan, the timing of our projects and.
Kelly Green: Market conditions may be considered forward looking statements. Please note the cautionary language about forward looking statements in our presentation and DNA and news release I will now turn the call over to Sam.
Sam Pigott: Good morning, everyone. Thank you for joining us.
Sam Pigott: We will start on slide three where we highlight several key achievements this quarter that reflect our strategy and our ongoing commitment to long term value creation.
Sam Pigott: Overall, the operation delivered production in line with expectations.
Sam Pigott: As previously noted planned maintenance and optimization efforts to improve reliability and drive lower unit costs resulted in a slight decline in production volumes.
Sam Pigott: This was reflected in our 2025 guidance.
Sam Pigott: We're already seeing the benefits from these changes with April production back over 85% capacity.
Sam Pigott: On the cost side, the operation maintained low production cost and an even more challenging pricing environment, our disciplined approach to cost management and process efficiency remains a cornerstone of our competitive advantage.
Sam Pigott: Strategically we've taken important steps to unlock value and define our growth plans.
<unk> had a letter of intent with our partner got in fact, the jointly developed new regional projects targeting a combined capacity of 150000 tonnes per annum of lithium carbonate equivalent this.
Sam Pigott: This represents a significant opportunity to advance our long term development plans, while increasing our strategic and financial flexibility in the near term.
Sam Pigott: Any substantial capital commitment.
Sam Pigott: Finally, we published our 2020 for sustainability report, which provides a transparent view of our current environmental and social performance and highlights the progress we're making in areas like water use environmental monitoring community engagement and governance practices. It's.
Sam Pigott: This report helps keep us accountable to both our operational goals.
Sam Pigott: Take hold their expectations.
Sam Pigott: We entered the year with clear operational targets and are delivering according to our plans.
Sam Pigott: As a result of the maintenance and optimization efforts mentioned lithium carbonate production was slightly lower in the first quarter.
Sam Pigott: These planned shutdowns focused on optimization and lowering costs and were largely completed in Q1.
Sam Pigott: April production returned to over 85% of nameplate capacity.
Sam Pigott: Cash operating cost remained low reflecting our focus on cost discipline.
Sam Pigott: Continued to advance targeted cost reduction initiatives that aim to lower operating costs by an additional 5% to 10% in 2025 without compromising performance or quality.
Sam Pigott: We continue to anticipate higher production volumes in the second half and reaffirm the operation remains on track to meet full year guidance of 30 to 35000 tons.
Speaker Change: This slide outlines the financial highlights the Qatari will rise.
Speaker Change: Cash operating costs remain competitive at $6600 per ton with costs slightly lower than expected.
Speaker Change: We note a portion of our maintenance related costs were deferred to the second quarter, we remain diligent on costs, especially in the current pricing environment.
Speaker Change: Taking continued efforts to reduce these costs further.
Speaker Change: On the balance sheet.
Speaker Change: We have made significant progress here in recent quarters at the project level, we continue to work with Gan Fang and expect to have over $200 million in additional liquidity from low cost unsecured debt facilities.
Speaker Change: This excess debt capacity should provide a buffer to support ongoing operations and refinance existing debt extending maturities into 2027, and 2028 enhancing our financial flexibility.
Speaker Change: We also continue to work closely with <unk> to advance and define our long term growth plans. This continues to be a priority even in this more challenging pricing environment, given the limited capital requirements and the strategic and financial opportunities, we see from advancing these efforts and.
Speaker Change: In April we executed an LOI to jointly develop and consolidate our regional growth and Puds whaler and pass those ground is based in Wisconsin.
Speaker Change: We are finalizing the development plan now that integrate scan think DLA processing technology with our conventional solar evaporation pond process and expect the results to support attractive large scale and low cost development.
Speaker Change: We are working with Dan thank to assess the best options to unlock value here, including collaborations with potential customers and strategic partners.
Speaker Change: You'll also notice we mentioned the plan is flexibility to produce lithium chloride or lithium carbonate.
Speaker Change: This is based on customer interest to support emerging cathode chemistries, but the lowest cost.
Speaker Change: As we look beyond the first quarter, our focus remains on further lowering cost to reinforce our position as a low cost producer.
Second with optimization activities now complete we are increasing production volumes into the second half of the year and remain on track with full year guidance third with the completion of the previously announced letter of intent with Genzyme, We plan to continue to prudently advance our growth plans and use these initiatives to increase our strategic and financial flexibility.
Speaker Change: <unk>.
Finally, we continue to strengthen the balance sheet, our qatari over raws, extending maturities and ensuring we remain well capitalized through the current price cycle.
Speaker Change: Across all fronts, we're proud of the progress, we're making in Argentina from scaling up the Qatari overall as to defining our growth pipeline. We are building a platform for long term growth.
Speaker Change: And now I will turn it over for questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
Speaker Change: We request that you limit yourself to one question and one follow up we will pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Ben Isaacson with Scotiabank. Your line is open.
Speaker Change: Thank you very much and good morning, everyone.
Sam Pigott: Sam just a question on the cash cost outlook.
Sam Pigott: Overtime. So you came in at around 6600, this quarter you've talked about.
Sam Pigott: Some deferral of the of the maintenance into Q2, so presumably things maybe bump up a little bit.
Sam Pigott: And then just looking out further ahead.
Sam Pigott: You've talked about how DLA will bring costs down eventually youre going to have stage two that'll bring costs down you're also doing a cost optimization efforts.
Sam Pigott: Percent to 10% can you just kind of walk us through the shape of how you see cash costs evolving over the next.
Sam Pigott: Four to six quarters.
Speaker Change: Sure. Thanks for the question, Ben I think coming into this and what we disclosed at the year end Q4 was that we expected operating costs to be in line with the average of last year I think what we've seen so far as these coffee cost optimization strategy is really paying off.
Sam Pigott: So if we disclose that.
Speaker Change: The decrease in operating cost between five and 10% and that was to be captured this year.
Speaker Change: I think youre correct $6600 reflected some deferral of costs into Q2, so there will be some variability quarter over quarter, but we expect again this year for this cost optimization program too.
Speaker Change: To deliver 5% to 10% improvement over what we guided to the.
Speaker Change: The end of last year.
Speaker Change: Longer term I mean the.
Speaker Change: Technical updates feasibility that we put out had long term costs of 6500, I mean that was based on what we're experienced in Q4 and basically extrapolating to 40000 tons.
Speaker Change: I think that is certainly achievable from what we're seeing and what.
Speaker Change: We think we will get to by the end of the year I'd say in addition to that I mean, I think we do see opportunities along with kind of trying to lower costs beyond that just on stage one conventional.
Speaker Change: The Delhi.
Speaker Change: We're going to be integrating into stage one the demonstration plant.
Speaker Change: It provides an opportunity to lower costs even further.
Speaker Change: Largely the cost savings will come from two places one improve recoveries.
Speaker Change: And the second one will be a reduction in the amount of reagents used.
Speaker Change: So long story short.
Speaker Change: We expect operating costs to be 5% to 10% below the average of last year. This year.
Speaker Change: Longer term 'twenty six 'twenty seven working with kind of thing to kind of achieve and hopefully surpass $6500 dollar target in our feasibility study and then longer term with the DLA plant, we expect cost to be even lower than that.
Speaker Change: That's a really really great color. Thank you for that Tim.
Speaker Change: Just two more very quick ones for me you mentioned a couple of times in the MD&A about easing FX restrictions in Argentina.
Speaker Change: How will that benefit lithium Argentina.
Speaker Change: And maybe just some context of timing or magnitude what should we be looking for why should we be excited about this.
Alex Sugar: Maybe for this I'll turn it over to Alex <unk> our CFO.
Alex Sugar: This is Alex.
Alex Sugar: Well, we do see that.
Alex Sugar: Really following on his promises to remove or reduce restrictions specifically around foreign exchange in April there was a first step mostly aimed at easing restrictions for individuals.
Alex Sugar: And the expectation is that this will follow toward the end of the year with reducing restrictions for corporate.
Alex Sugar: It generally will help overall.
Alex Sugar: Overall economic environment in Argentina in terms of us specifically.
Alex Sugar: Removing restrictions will allow for more free flow of.
Alex Sugar: Capital cash funds.
Alex Sugar: In and out of Argentina, which will be definitely helpful for us.
Alex Sugar: Great. Thank you and then just my very last question I don't usually nitpick, it accounting, but I did have one investor.
Alex Sugar: Flag, a $4 5 million compensation expense in the quarter can you just kind of break that down a little bit tenant that something we should expect to see going forward. Thank you.
Alex Sugar: So that is related to year end bonuses as well as some.
Alex Sugar: Related to the contract changes associated with the migration I would say that that was almost entirely stock based compensation.
Alex Sugar: And last.
Alex Sugar: Last year comparatively lower because.
Alex Sugar: We granted yearend bonuses later in the year, partially in Q2 and Q3, so it's unlikely to continue.
Speaker Change: That makes sense and then just wondering have you Sam you said, 85% operating rate in April where are you right now and what are like what's a normal operating rate that we're aiming for like 95 100.
Alex Sugar: What should we be thinking about.
Alex Sugar: Well I think I mean, the year the full year guidance, we provided was 30% to 35.
Alex Sugar: Obviously that provides kind of a range of what we expect for operating rates going forward.
Alex Sugar: On the <unk>.
Alex Sugar: Plant continues to deliver reflecting the improvements of optimization through sort of where we sit now in may.
Alex Sugar:
Alex Sugar: So bottom line is you are on track.
Alex Sugar: The keep we're very much we're very very much on track.
Speaker Change: Perfect. That's all for me thanks, so much.
Speaker Change: Thanks, Bob Your next your next question comes from the line of David <unk> with TD Cowen Your line is open.
Speaker Change: Hum.
Speaker Change: I'm, sorry, but I didn't want to just ask.
Speaker Change: If you can.
Speaker Change: A little bit more on <unk> installation plans.
Speaker Change: The construction you talked about the pilot facility is just going as expected.
Speaker Change: What should we expect on or how do you think about that installation.
Sam Pigott: And are you going to break it up a bit David.
Sam Pigott: Sorry, hopefully you can hear me, but.
Speaker Change: I'm just curious.
Sam Pigott: Yeah.
Sam Pigott: Okay.
Sam Pigott: Sorry I'm.
Sam Pigott: Im not sure if it's just on our side.
Speaker Change: Youre breaking up a bit.
Sam Pigott: Yeah, sorry can you guys hear me.
Speaker Change: Yes, yes.
Sam Pigott: Alright.
Sam Pigott: Sorry, I'll give us another shot.
Sam Pigott: Okay.
Sam Pigott: Can you talk about how the DLA circuit will impair.
Sam Pigott: Impact your production once installed and how you see the ramp of that pilot.
Sam Pigott: Yes.
Sam Pigott: So in terms of its overall impact to our total production.
Sam Pigott: It will be consuming.
Sam Pigott: Stock from the pre concentration ponds, it's going to be delivering.
Sam Pigott: We expect it to deliver a higher recovery.
Speaker Change: Don't model it adds an incremental 5000 tons on top of 40.
Speaker Change: Maybe able to deliver a small proportionate amount of additional production, but really to demonstrate the effectiveness.
In order to use in future growth plans, both the Qatari as well as in post whaler as Pat described it.
Speaker Change: Hmm.
Speaker Change: The second question.
Speaker Change: It was related to sorry, maybe you can remind me.
Speaker Change: Well, maybe just following up to that so then.
Speaker Change: If we're thinking about the 5000 tons of capacity do you expect that to be fully utilized.
Speaker Change: And then do you expect the offsetting impact on.
Speaker Change: Cost with that.
Speaker Change: Is being introduced into the flow sheet.
Speaker Change: Being offset with the benefit on price.
Speaker Change: I mean, we plan to commission it.
Speaker Change: Got it at full capacity.
Speaker Change: I think the intention is to do that in a fairly short period of time <unk> has a lot of experience operating a similar FX module in China.
Speaker Change: So the expectation is commissioning will not take very long a matter of a few months is what <unk> guided to.
Speaker Change: Cost savings will obviously be important to validate on the DLA demonstration plant it'll be five.
Speaker Change: Totals 40, or so total production so the the overall kind of cost improvements will be.
Speaker Change: Minor overall, but the real attaching it to demonstrate this technology.
Speaker Change: Uninstructed a cost advantage it in order to apply this new process and technology to our future growth plans in Argentina.
Speaker Change: I appreciate it sorry about the connection.
Speaker Change: Yeah, no worries thanks, Dave.
Speaker Change: Your next question comes from the line of Shannon Gill with <unk>. Your line is open.
Speaker Change: Thanks, very much Sam I, just wanted to know I would say this the plant shutdowns in Q1, why did sales volumes dropped 24% quarter over quarter was there a buildup in inventory over 224 that was sold out in Q4, I'm referencing that nine point floor.
Speaker Change: <unk> thousand tons sales.
Speaker Change: In Q4 versus the <unk>.
Speaker Change: Yes can you can you speak to that one.
Speaker Change: I think sales just followed production into into Q1, there was no buildup in finished product inventory, we have no issues selling the product.
Speaker Change: Mhm.
Speaker Change: Demand pull through has been very strong from from <unk>. So.
Speaker Change: I'm not sure what you are seeing Alex do you have anything to add there.
Alex Sugar: Yes, no I think our sales were approximately same as production 72000 in Q1.
Alex Sugar: I think you mentioned Q4, we had sales a little bit higher.
Alex Sugar: Yeah baked in southern 24 week.
Alex Sugar: We did have a little bit of buildup, which was sold in Q4.
Alex Sugar: If that was your question.
Speaker Change: Yes, yes, sorry about that it was nine.
Speaker Change: 20000 ton sales in Q4 versus the $8 5000 times and production.
The colored Alex right.
Speaker Change: Yep.
Speaker Change: Yeah.
Speaker Change: That's it.
Speaker Change: Thanks Shannon.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
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Speaker Change: [music].