Q2 2025 Lithium Argentina AG Earnings Call
Argentina second quarter 2025 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 you would like to ask a question during that time simply press Star then the number one on your telephone keypad.
I'd now like to turn the call over to Kelly O'brien, Vice President of Investor Relations Kelly. Please go ahead.
Thank you Stephanie I wanted to welcome everyone to our earnings Conference call. This morning, joining me on the call today to discuss our second quarter results as 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 items, our second quarter 2002.
25 earnings press release was issued earlier this morning, and the corresponding documents are available on our company website.
Remind you that some of the statements made during this call, including any production guidance guidance expected company performance.
On the regional development plan, the timing of our projects 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 release I will now turn the call over to Sam.
Good morning, everyone. Thank you for joining us we.
We will begin on slide three with a review of key highlights and milestones from the second quarter.
<unk> delivered strong operational results with higher production volumes and lower costs quarter over quarter with.
The completion of the first half we feel confident in reaching our full year production guidance of 30% to 35000 tons.
We also strengthened our financial position, securing a $120 million and new bank facilities. The Qatari overall to support working capital and his operations events.
The other with our partner <unk> Bank, we made meaningful progress towards consolidated in the boiler as Pat described as basins, we expect to give the market an update shortly.
Worked diligently to position these assets for long term growth and to develop a platform for what is expected to be one of the largest lithium operations globally.
On slide four we delivered solid performance in the second quarter, you can see a summary of the key operating and financial metrics.
Revenue increased despite softer market prices, reflecting the benefit of higher output.
Team has done an excellent job executing safely and efficiently during the second quarter. The operations consistently produced 85% of nameplate capacity delivering 8500 tons of lithium carbonate for the second quarter and 15700 tons in the first half.
While market prices have been quite volatile in recent weeks, we realized an average price of $7400 for the second quarter and 8% decrease compared to the first.
Emphasize the reduction of costs quarter on quarter and turning to the next slide we will discuss this in more detail.
In the second quarter.
We brought operating costs down approximately 8% compared to the first quarter, reaching $6100 per ton.
This decrease is a function of many different cost reduction efforts across the operation there are structural long term changes.
Part of our transition to a steady state operator.
We are quite proud of these optimization efforts, which bring our current costs below latest feasibility study estimates.
The scale and quality of the triangle, the raws, coupled with efficient operations and low production costs reinforces our position as a resilient producer that is able to sustained profitability across market cycles.
Moving to slide six in recent months, we have seen increased volatility in lithium prices.
Today prices are just over $10000 per ton.
We do not believe that these lower prices are sustainable given strong global growth and the need for new supply, which is often significantly higher costs. We are positioning the business to withstand a lower for longer price environment and remain focused on what we can control, namely safe low cost and reliable operations.
We believe this environment favors low cost, Brian operations, which are well positioned on the cost curve and able to execute and grow through the cycles.
On slide slide seven we have outlined our platform for growth.
As we look ahead, we're excited by the scale of opportunity emerging across our platform in Argentina.
Our growth strategy targets over 200000 tons per year of lithium carbonate equivalent capacity leveraging both expansion that are producing operation and at a regional growth projects with Gan thing.
Through consolidating our projects as well as in past those ground as basins, we are targeting approximately 150000 tons of capacity.
We've made significant progress in advancing the regional development plan in Solta very soon we expect to combine these three high quality assets that together cover two entire solarz something unique in our industry.
This positions us to participate in what is expected to be one of the largest lithium projects in the world with the benefits of scale and advanced technology.
This partnership will allow lithium Argentina again trying to bring together their respective strengths and large scale, Brian development building on the capabilities and collaboration already proven at controllable raws.
We would expect to have an update shortly on the consolidation and a feasibility study completed by the end of the year.
Lithium Argentina again think of working together to advance financing plans, including project debt and potential minority equity investments from customers.
In addition to our regional growth plans stage two of Detroit and remains a key component of the pipeline.
<unk> contribute an additional 40000 tons.
Our approach, it's create a more efficient operating structure that harnesses, new technologies economies of scale and builds off of our track record of <unk> as we advanced these longer term growth initiatives. We are focused on strengthening the balance sheet, while preserving and maximizing shareholder value.
In closing on slide eight we remain focused on executing our core priorities unlocking value.
Operational efficiency.
Flexibility.
Looking ahead to the second half of the year, our priorities are clear and Qatari older odds are focuses on continuing our efficient operations and maintaining our position as one of the lowest cost producers in the industry.
We plan to advance the unified development plans, which as well as Pat described as basins positioning this world class asset for long term scalable growth.
What level, we continue to strengthen our balance sheet and preserve financial flexibility without diluting shareholders.
Above all we will execute with discipline focus on delivering against our targets and ensure we closed out 2025, and a position of even greater strength and opportunity.
Thank you for your continued support.
With that I think we'll open up to questions.
At this time, if you would like to ask a question Press Star then the number one on your telephone keypad to withdraw your question simply press Star one again.
Currently ask that you limit your questions to one and one follow up for today's call.
We will pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Katy, Let's Chapell with Canaccord Genuity. Please go ahead.
Hi, Sam and team congrats on a good quarter.
I just want to talk about the surgeon looking future resolve or night on reports of shutting down one of their major mines in China we.
We've seen a number of news outlet suggests that this is not only won't necessarily a permit related auction, but can be part of a broader push by the government to address overcapacity and domestic competition.
He has been leading to some price destruction. So I'd just be curious.
Whats your view on China's anti involution policies, specifically and how do you see these measures impacting the lithium market is the potential longevity of the recent price moves.
Thanks, Katy I mean, we've been following these developments which are fairly recent.
Very closely.
Yeah, I think this anti involution policy is.
Not not just specific obviously to lithium but looking across industries and trying to.
Reduced the amount of.
Rapid rapid competition, that's that's ongoing so.
We're monitoring I don't think we have anything.
Kind of novel to contribute to the discussion around that I think from our position in this strategy with the businesses that we've set this business up to manage.
This volatility.
I think in Q2.
This was evidenced in where our costs came in really focused on ensuring that we can get through any price environment. So.
Yes, I mean, we're very pleased with where our costs are obviously, if we got some support from pricing that's great, but again, we've kind of set this business up to withstand this volatility.
There's like a more general comment and that's something that I think the industry has been talking a lot about over the past 12 months is just the view that pricing that we've experienced so far this year, it's really unsustainable in the long term looking at kind of demand expectations.
The need for new supply.
Where pricing is right now we just think pricing is.
Long term unsustainable as to the short term nature I think it's it's not for us to comment.
Great and then maybe a follow up on the regional growth strategy, both Qatari as well as its Alta.
Are there specific project milestones that need to be achieved to make a formal investment decision on either of those projects or what market signals are you guys waiting on to it to make a go ahead decision there.
So I mean first and foremost we're still kind of pushing ahead with the feasibility study, which is expected to be complete this year I think prior to that we plan to in the very near term too.
Disclose a plan for how we're going to consolidate all of these assets.
With a view to participating.
And one of the largest lithium projects globally. So it's extraordinarily exciting.
In terms of a formal investment decision I mean, the feasibility study needs to be complete.
Beyond that we've had preliminary discussions with certain customers and there is a lot of interest.
To participate in very large high quality.
Brian projects.
Particularly based on the track record that we've been able to demonstrate a qatari.
So I think a formal decision on going ahead will we'll have to wait for certainly the feasibility study but for us it's.
Important to grow but important to also.
Manage our balance sheet.
Look at non dilutive measures in order to finance our growth projects.
Got it thanks, again, guys and congrats on a good quarter.
Okay.
Your next question comes from the line of Corrine Blanchard with Deutsche Bank. Please go ahead.
Hey, good morning, and thank you for taking my question.
Two question can you talk about the pricing discounts that you receive this quarter and how that compare for Q1, and maybe what you're thinking you could be gating for the rest of the year and then the other question is on the cost I mean, you obviously.
Did a great job here.
E mail quite significant decrease quarter over quarter, how much long can we expect going into.
So I joined <unk> in 2020 say so.
Thank you have reached kind of a run rate of 6000 is spent on thank you.
Sure.
So addressing your first question the discount to the reference prices approximately $2000. So very similar to what was.
Achieved in Q1.
That reflects.
Next obviously taxes as well as a reprocessing costs for the material in China.
I think this this year last year was all about ramping up this year is about operational stability.
At much higher production volumes and so we are seeing product stability improve and we expect that to continue through Q3 and Q4.
So there may be maybe room too.
Reduce that that reprocessing fee, but I think from our perspective.
<unk> really is on volumes and cost and if we can if we can deliver on those and I think the product quality will will also improve throughout the end of the year.
I think it's important to note like we're very much aligned with <unk> in terms of being able to supply customers with our product.
Global customers. So these are customers outside of China.
Going into 'twenty, six and certainly going into 2007. So it is it is a high priority.
And we will have more to disclose on that certainly into next year.
On the cost side, yes, I mean, we've been very focused on costs.
I think every company in the lithium industry has been for very good reason that we continue to be some a lot of these cost reduction efforts are a function of entering into steady state operations last year during a ramp up it's really hard to kind of.
In essence freeze things and really.
Take serious efforts to optimize wallet, while youre ramping up this year, that's exactly what we're doing and the.
The cost the cost savings, we've achieved or they're not there's not one single bucket that kind of represents.
A significant portion it's kind of spread over a number of different initiatives and these are structural so they are long term I think going forward there will be probably some volatility through this year.
In terms of where.
Costs are just as a function of these optimization efforts, but the trend is certainly.
One that we expect to continue.
Through 2026.
Your next question comes from the line of Joel Jackson with BMO capital markets. Please go ahead.
Hi, <unk>.
Sorry.
Actually you answered the last question so.
Cash costs were down $600, a ton and like you said.
A report of Cogs or about flat is that because of reprocessing costs and then to the $600 a ton cash.
Cash cost savings not flow through the and I'm sort of confused if I missed that sorry.
Alex do you want to take that one.
Sorry.
Sorry, Joe your question with respect to so.
Well your Cogs, yes, yes, your Cogs, the JV Cogs divided by the ton was flat quarter over quarter, but your cash Cogs per ton as you disclosed that are down $200 a ton. So I was trying understand the difference between the two why was the Cogs about it by 10 flat quarter to quarter cash Cogs.
Down thanks.
Yes, I need to remember that across the sales of <unk> depreciation.
We started depreciation in Q4 of last year when we.
Rich.
Commercial production so thats.
Yes.
That's one item.
And.
And then in addition, we have some some logistics costs through some some other costs that are included in cost of sales, but mostly depreciation impacted the cost was a bit higher in Q2, which resulted in a bit higher cost of sales and then I guess cash costs.
Okay, and then I.
I guess I'm going to sneak in two part question to my second question. So the first part of <unk>, what kind of visibility.
Ability do you have into Q3 and Q4 in terms of your order book, Obviously, a Sam said try to whip sign all over in China now for last month, and a half including today so kind of.
I know you have some reprocessing and again I don't know.
The linked to your order book look when so what kind of returns on that and on cost should we expect kind of Cogs would be similar in Q3.
Cash and normal and then.
The second part of the question would be.
Sam what are your thoughts here.
Q2 was the bottom of the market.
You came in probably the JV came in maybe a negative free cash flow, maybe you can comment on that.
Does that think about your business here across the cycle. Thanks.
Yeah, I mean costs.
I think expecting costs with some minor variability in.
In Q3, Q4, and what we experienced.
In Q2 is probably a fair way to.
To assess it.
Cost of goods sold I mean, Alex its really a function of depreciation the delta between that and our operating costs.
Cost of sales per ton will generally follow cash cost per ton in next quarters.
And then in terms of in terms of the order book I mean, the vast majority of our product is under offtake and the vast majority of that goes again thing and.
So it's you know, it's all well spoken for them I think there is very strong obviously very strong demand from gas ankle and that material through.
So it sounds like.
Is that like a one month lag Sam a two month lag of three months, how should we think about it.
Just in terms of the pricing flow through like kind of a benchmark price and you can see in the indices. It seems feature since I don't know Alex why don't you disclosed on that.
I think.
Do have some lag I would say several weeks.
Off lagged.
On average.
Yes.
And how the business did in Q2 at the bottom.
Yeah, I mean, we're obviously very.
Very happy with where the business is today and where we expect it to be over the next.
Six months 12 months 18 months like this is a world class operation that has some of the lowest costs in the industry.
And we obviously this even with realized pricing being at $7400 on an operating basis. We were you know very marginally.
Operating.
I had a marginal operating profit I think beyond that the the free cash flow that you referred to is largely tied into working capital which.
Necessarily higher than Q1, and Q2, given the increase in volume production and I think as we spoke to on the last call in terms of the cadence of production first half versus second half, we still expect the second half too.
To be the larger volume half of the year.
Your next question comes from the line of Muhammad Citibank with National Bank Financial. Please go ahead.
Good morning, everyone.
Good morning.
Question on the pricing discount that you've seen in the past you've guided to the $22000 worth of 'twenty $100 per ton.
Is that something that we should still expect for 2025, and then just if you could help us reconcile.
The price realized to call into lithium carbonate at average prices of $9000 per ton I think maybe it gets to do renewals question around or lag on.
The sales price received thank you.
Yeah. The the discount was approximately $2000 I mean, that's comprised of.
Go to 50% fixed 50% variable.
Associated with taxes.
I think Gan thing in L. A are very aligned in terms of what we want to accomplish this year, which was really getting volume production up.
Ensuring the operations stabilized at these higher levels, and then driving costs down so that's been the priority this year.
I think this.
I think thats going into 2026 and 2027 given that we're both aligned.
The ability to supply global customers outside of China with our product.
The focus will shift so for the remainder of the year I think the the pricing discount that we're receiving today.
Likely to continue going into 2026, I think the priorities and the focus of both.
Thing in L, a or will shift to to be able to provide those customers ex China with product.
It sounds good and then just I guess, maybe a reconciliation between the realized pricing in the average price.
For lithium carbonate during the quarter any color on that would be helpful and I'm happy to take it offline. If that's more of a question of propylene.
I don't know Alex do you want to handle that or you want to handle that.
Hofmann.
So I'll just make a comment as I mentioned that.
There is a lag of several weeks.
I mean.
Production pricing and shipments.
That's why change in spot price isn't reflected immediately.
In our results.
Several weeks.
Hey.
But yeah, we're happy to provide some more details maybe offline.
Great. Thank you and just a final question on the third party debt.
Sorry.
Just the $108 million to you within the next 12 months what are your expectations around that should we expect some potential refinancing of that or do you expect to pay that down and using some of the with the level of credits.
Now you have thank you.
Alex feel free to answer that.
Yes sure Sam.
Mentioned, we managed to secure a 120 million loan facility is in Q2.
So are we.
We expect to use those.
Two it is to refinance that short term debt that is coming to you.
Thanks Scott.
Your next question comes from the line of Ben Isaacson with Scotiabank. Please go ahead.
Yeah.
Thank you very much and good morning, everyone.
So a question on your partner King phone.
Just looking at the slide it looks like gain fund is going to be involved in.
Not only the pipeline, but in the regional development plan as well can.
Can you talk about their financial health.
Your partner if prices were not to change from where they've been the last kind of six months and not a mid 8000 dollar area.
What Dennis Fung be able to continue funding and developing its proportionate share of these projects.
Would it does it rank other projects higher.
The ones with <unk> can you just talk about what the thought process is with respect to get on with the partner in a period of sustained.
Sustained pressure on pricing and profitability for them. Thank you.
Yes.
I'll be careful not to put words in <unk> mouth, but.
I think.
Addressing some of these questions out of order one.
Argentina is probably the most.
Extraordinarily high in terms of Ken Thanks focus outside of China.
And I think what we've been able to deliver.
I could try all raws are only kind of supports and emboldens that strategy.
Obviously, we're very pleased with where costs are coming in.
In Q1 and Q2.
One thing is relentless in terms of driving down costs and they see.
Certainly.
Considerably more to do on that front.
And then in terms of the I mean in terms of their financial health.
<unk> does have access to a lot of capital in China.
They also have <unk>.
Tremendous relationships with their downstream customers.
Who I think are are interested in being able to.
Minimized the risks that I think a lot of people see two to three years certainly if prices remain where they are now I think there is.
There is a high probability that there could be.
Certainly market balance potentially market shortage and so some of their customers are very supportive of <unk>.
Efforts to kind of Derisk the supply chain bring on low cost projects like <unk> that can kind of be resilient through the bottom of a cycle. So I would say they they do prioritize Argentina is one of the kind of top jurisdictions for investment.
I think they do have access to quite a bit of capital in China.
And so their appetite is there obviously.
If prices were to.
Fall dramatically I think it would give everybody continued pause in terms of investment.
But again thing is certainly a tremendous partner to have they have great related global customers.
They have a keen understanding of cost curves and where they wanted to invest in so I think we're very well positioned with them.
With our platform in Argentina that has.
Kind of a pipeline that can get us to over 200000 tons of production of low cost lithium units.
Great. Thank you.
Thanks Ben.
That concludes our question and answer session, ladies and gentlemen, this will conclude today's call. Thank you all for joining you may now disconnect.