Lithium Argentina 2026 Q2 Earnings Call - Cash Flow Machine with $141M FCF and Aggressive De-leveraging

Kendra, Conference Call Operator, Lithium Argentina: Hello, everyone. Thank you for joining us and welcome to the Lithium Argentina second quarter 2026 earnings conference call. After today’s prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Kelly O’Brien, Vice President of Investor Relations. Kelly, please go ahead.

Kelly O’Brien, Vice President of Investor Relations, Lithium Argentina: Thank you, Kendra. I want to welcome everyone to our conference call this morning. Joining me on the call today to discuss the second quarter 2026 results is Sam Pigott, CEO of Lithium Argentina. Alex Shulga, our CFO, will also be available for Q&A. Before we begin, I would like to cover a few items. Our second quarter 2026 earnings results were released earlier this morning, and the corresponding documents are available on our website. I remind you that some of the statements made during this call, including any production guidance, expected company performance, update on development plans, 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 releases. I now turn the call over to Sam Pigott.

Sam Pigott, Chief Executive Officer, Lithium Argentina: Thanks, Kelly, and thanks everyone. Good morning. The second quarter was another period of strong execution at Caucharí-Olaroz, and the results reflect what the operation was designed to deliver: reliability, low-cost production, and strong cash generation. For 2026, the operation has averaged 95% design capacity and remains firmly on track to achieve production guidance. From a cost perspective, costs remain under $6,000 per ton, supporting robust operating margins and driving significant cash flow. Reflecting the significant improvement in Argentina and substantial cash generation, the operation has now distributed $160 million year to date, of which $75 million was Lithium Argentina’s share. Finally, we completed two new unsecured debt facilities totaling $220 million at the JV level. This further strengthens the financial position of the operation, supporting our growth plans and providing flexibility to continue to make distributions to de-risk our balance sheet.

Turning to the financial performance at Caucharí-Olaroz. The operation delivered adjusted EBITDA of approximately $110 million in the second quarter, up 4% from the first quarter. Stronger realized prices, with prices averaging around $19,500 per ton in the second quarter, and continued cost discipline supported these results with total adjusted EBITDA now over $200 million for the first half of the year. These financial results are now translating directly into strong cash generation, supporting distributions to the JV partners, debt reductions, and providing flexibility for our next phase of growth. Looking more closely at operations. For 2026, we’ve averaged 95% of design capacity, demonstrating consistent and stable operations. We were pleased with the results, which included a planned shutdown during the second quarter that allowed us to focus on optimization and debottlenecking efforts.

For 2026, we are well positioned to deliver on the full-year production guidance of 35,000 to 40,000 tons. Going forward, our objective is to build on this consistency we are seeing today and support sustained production at rates even above the current 40,000 ton capacity. Moving to costs. Year to date, cash operating costs have averaged around $5,600 per ton. Second quarter costs came in modestly higher due to planned shutdown, higher energy costs, and the impact of a stronger peso. Since startup, we have brought costs down from roughly $8,000 per ton to a consistent sub-$6,000 level, driven by ongoing process improvements, cost reduction efforts, and the inherent advantages in the design of our brine-based operation. This low-cost position, coupled with higher average prices during the second quarter, has translated into a meaningful expansion in margins.

During the second quarter, the cash operating margin reached 70%, driving strong cash generation from Caucharí Olaroz. This slide shows exactly how EBITDA is driving free cash flow at the operational level. Starting on the left, the $110 million of adjusted EBITDA generated in the second quarter translated into $141 million of free cash flow from operations. Part of this reflected a drawdown of working capital, given the timing of sales made in the first quarter that were collected in the second quarter. Moving to the right, you can see where this cash went. Net debt at the joint venture level declined from $256 million to $142 million, a reduction of $114 million in a single quarter. Importantly, that de-leveraging was achieved while continuing to make distributions to the JV partners.

Turning to the balance sheet, we continue to strengthen our financial position with improved liquidity at both Caucharí Olaroz operation and the Lithium Argentina corporate level. At Caucharí Olaroz, we closed $220 million of new unsecured debt facilities, including $170 million three-year facility closed in early August with a variable interest rate currently under 5%. Combined with strong cash generation, this provides additional balance sheet strength and financial flexibility to support further JV distributions and growth. At the corporate level, we ended the quarter with $100 million of cash and total liquidity of $230 million. This includes $130 million in an undrawn six-year debt facility provided by Ganfeng at SOFR plus 2.5%, or around 6% today.

We also received an additional $27 million in distributions from Caucharí Olaroz subsequent to the quarter end. We expect to receive additional distributions in the second half given significant cash flow and liquidity at the operation. Looking ahead, the chart on the right illustrates the significant earnings capacity of Caucharí-Olaroz across a range of lithium price scenarios. At current lithium prices of $20,000 per tonne, we estimate 2026 adjusted EBITDA of approximately $460 million on 100% basis. The combination of strong operating cash flow, access to attractively priced debt, and liquidity at both the joint venture and corporate level provides us with significant financial flexibility as we advance our growth plans and de-risk our balance sheet. Another milestone I would like to highlight is the recent independent verification of the carbon footprint at Caucharí-Olaroz.

The product carbon footprint for 2025 was only 1.4 tonnes of CO2 equivalent per tonne of LCE on a Scope 1 and Scope 2 basis under the internationally recognized ISO and GHG protocol standards. This result is supported by the fact that approximately 97% of the energy used at the production process comes from solar power. It also highlights one of the key advantages of a brine-based operation, which has a significantly lower carbon footprint than many other, more energy-intensive lithium operations. Turning to our growth pipeline, we remain disciplined and are taking a phased approach, building on the strength we’ve demonstrated at stage 1. At Caucharí-Olaroz, our immediate priority is finalizing the stage 2 development plan, with the scoping study results expected around the end of the third quarter.

Following RIGI approval in the second quarter, we’re advancing an early works program, including drilling additional wells, engineering, and de-bottlenecking the existing plant. Much of this work directly benefits the existing operation, helping push production above design capacity while also meeting the needs of the stage 2 expansion. For stage 2, we are working with our partner on a modular approach, a DLE facility targeting an initial capacity of 10,000 tonnes per annum as the first phase of the broader 45,000 tonne per annum expansion. Turning to PPG, we continue to wait for the approval of RIGI, which was submitted in Q1 2026 and is expected later this year. In parallel, we’ve made significant progress with our partner Ganfeng on the financing plan for PPG, including discussions with potential minority strategic partners.

Across both stage 2 and PPG, we’re advancing a phased and disciplined approach to growth that leverages our experience with stage 1, our existing cash flow, and access to low-cost capital at the project level. In closing, the first half of the year reflects strong execution across the business and the priorities ahead build directly on that foundation: operating safely and cost competitively, strengthening our balance sheet, advancing our growth pipeline, and allocating capital with discipline. Finally, as we continue to broaden our investor base and improve global market visibility, we’re evaluating a secondary listing on the ASX, which we believe would complement our NYSE listing and further support long-term shareholder value. Lithium Argentina is well-positioned. High-quality operations, a strengthened balance sheet, and a disciplined approach to growth. We look forward to sharing further updates on our progress in the quarters ahead. Now we’ll open the call for questions.

Thanks.

Kendra, Conference Call Operator, Lithium Argentina: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question from the line of Mohamed Sidibé from National Bank. Mohamed, your line is open. Please go ahead.

Mohamed Sidibé, Analyst, National Bank: Good morning, Tom and Tim, and thanks for taking my question. Good to see the good progress on the operating production front. Just maybe from a modeling standpoint, can you help us understand how we should think about the cadence of production into Q3 and Q4? Any maintenance or shutdown expected, and as well as any catch-up in sales, given their lower sales versus production in Q2? Thank you.

Sam Pigott, Chief Executive Officer, Lithium Argentina: Yeah, on the production question, we don’t have any planned maintenance shutdowns. We expect production to be very strong throughout the back half of the year. On the sales, it’s really a timing issue between production when those get translated into sales and depending on when the quarter ends, kind of cuts it off. So I think you’ll see stronger sales through the back end of the year as well.

Kendra, Conference Call Operator, Lithium Argentina: Your next question from the line of Joel Jackson with BMO Capital Markets. Joel, your line is open. Please go ahead.

Joel Jackson, Analyst, BMO Capital Markets: Hi. Good morning, everyone. Sam, obviously lithium market’s volatile at the best of times. We’ve seen a quite strong rebound in lithium prices. Now things have come down. We have seen some restarts from companies. We’ve seen companies like yourself and Ganfeng talking about advancing projects. Can you speak to your conviction and your partner’s conviction in your different projects here at different lithium price levels, how the market’s faring, how assumptions have changed versus six months ago? Thanks.

Sam Pigott, Chief Executive Officer, Lithium Argentina: I mean, we have a huge amount of conviction in our projects. I think Ganfeng and LAR view the expansion at Cauchari and PPG as two of the most attractive growth projects in the market today. That view is largely founded on the success we’ve had at stage 1. It’s the project that we brought online for under $1 billion. Today, it’s generating on a 100% basis, like $460 million of EBITDA. It’s one of the lowest cost producing assets in the world. So there couldn’t be more conviction in our suite of assets. And I think that the way we’re approaching both is in a disciplined manner. We talked a lot about PPG. Obviously, we have a development plan out on that that shows the economics, really very robust project.

But we also talked about working with Ganfeng on our appropriate financing plan, including a potential minority partner to provide the equity capital. So, our job here at LAR is really to ensure that our shareholders benefit from what we have, which is joint control over two of the largest, highest quality lithium assets in the world. Our view is the market is growing in a fairly healthy way. And these projects are definitely at the top of the list in terms of projects that should be brought online and will be brought online. And I think stage 1 is just evidence of our ability to execute and lends to the conviction in continuing to grow in Argentina with Ganfeng.

Kendra, Conference Call Operator, Lithium Argentina: Your next question from the line of Anthony Taglieri with Canaccord. Anthony, your line is open. Please go ahead.

Anthony Taglieri, Analyst, Canaccord: Hey, guys. Good morning. Thanks for taking my questions. Maybe just on operating costs. So last quarter, we would’ve talked about full year operating costs in that mid-$5,000 per ton range. Obviously, there was some cost pressures this quarter, energy costs, that sort of thing. Is this going to be recurring for the rest of the year, or is it more one time for this quarter? How should we think about operating costs for the rest of the year?

Sam Pigott, Chief Executive Officer, Lithium Argentina: Yeah. Q2, obviously, we had a planned shutdown, which resulted in, I guess, a few hundred tons less production. So operating at 93% operating capacity. That does have an impact on our costs. In terms of structural changes to our cost profile, we don’t see anything. There was a small impact kind of shared equally between just energy costs globally, as well as a stronger peso. But I think that mid-$5,000 per ton is still how we’re tracking through the rest of the year. I think into next year and the years after, the view is as we continue to debottleneck, push the plant to 40 or above, there’s room for those costs to come down even further. We couldn’t be happier with how the operation’s running.

It is pretty remarkable, and I think the noise quarter-over-quarter in terms of an 8% increase in costs in a quarter we have planned maintenance shut down, I think is overshadowing the fact that this is a business with 70% operating margins that generated $141 million of free cash flow from operations. We couldn’t be more pleased with how the operation’s going and how our teams at Exar are performing. Just really world-class.

Kendra, Conference Call Operator, Lithium Argentina: Your next question from the line of Corinne Blanchard with Deutsche Bank. Corinne, your line is open. Please go ahead.

Corinne Blanchard, Analyst, Deutsche Bank: Hi. Good morning, Sam. Good morning, everyone. Maybe can you talk about the timing for stage 2? So I think one of the study scope on a pre-feasibility study also is now expected end of 3Q. I think you already expected for mid-year. So just maybe wondering if there’s a slight delay and if that’s the case, what caused it? And just in general, what can we expect over the next six to 12 months for stage 2? Thank you.

Sam Pigott, Chief Executive Officer, Lithium Argentina: Yeah. I don’t know if it’s really slipped. I think we got it to mid-year. Now we got into before the end of Q3. I think we’re just aligning with Ganfeng to make sure what we present here is going to be something that we can execute on immediately. A part of it, you’ll see in the plan when we put it out, but it’ll contain a lot more details in terms of these early works that we’re engaging in now to be able to accelerate the expansion in a phased approach, starting with 10,000 tons. Yeah, I wouldn’t flag it as a delay in any sense. Us and Ganfeng are very keen to get moving now with the Régimen de Incentivo a las Grandes Inversiones approval. A lot of these early works, the spending can apply to that first $80 million of required spend in the first two years.

I think you’ll be very pleased to see the report. I think the entire market and the industry will be impressed.

Kendra, Conference Call Operator, Lithium Argentina: Your next question from the line of Ben Isaacson with Scotiabank. Ben, your line is open. You may now go ahead.

Ben Isaacson, Analyst, Scotiabank: Thank you very much, and good morning. Sam, can you talk about the debottlenecking opportunity at stage 1? What exactly is being debottlenecked? How much does it cost? How long will this take? What are the next bottlenecks, if any, that can keep stage 1 surpassing original nameplate capacity? Thank you.

Sam Pigott, Chief Executive Officer, Lithium Argentina: Thanks, Ben. The debottlenecking effort is a function of us, through experience, being able to push major parts of the plant beyond 40,000 tons. For instance, the carbonation plant can do a lot more than that. We have to go further, I guess, upstream in terms of debottlenecking. One example would be putting in a few additional wells to get more brine to push through the plant. It is not overly expensive. A typical well runs somewhere less than $3 million, about 2.5. We are talking about maybe the need for two or three of those over the course of the next six to eight months. It is pretty low-hanging fruit, and it does not carry a significant investment. Obviously, if we can make investments that can push production up 2,000 to 3,000 tons, well worth doing. I hope that answered your question.

From a timing perspective, we are engaging in these early works now. You will see very modest CapEx spend over the next six to 10 months. The results should flow through into 2027, 2028.

Kendra, Conference Call Operator, Lithium Argentina: Your final question from the line of Ishan Jain with HSBC. Ishan, your line is open. Please go ahead.

Ishan Jain, Analyst, HSBC: Good morning, everyone. I just have a question around the PPG. You have been looking for a partner or offtake agreement, anything for the financing of the project. Is there any progress on that front, or are you looking to secure permits before you get into any kind of partnership? Thank you.

Sam Pigott, Chief Executive Officer, Lithium Argentina: Yeah. We’ve had a lot of progress on that front. I think the major milestone will be the RIGI approval for PPG. It’s kind of a fundamental piece that de-risks this investment for a third party, and we expect to have that by the end of the year. It’s something that we submitted in Q1 2026. The expectation and the dialogue with the authorities is very positive, and we expect to have it by the end of the year, and that will be a key milestone for the process.

Kendra, Conference Call Operator, Lithium Argentina: Another question from the line of Mac Whale with ATB Cormark. Mac, your line is open. Please go ahead.

Mac Whale, Analyst, ATB Cormark: Hi, good morning. I’m wondering, Sam, when you look at the DLE for the stage 2, does that require anything in terms of CapEx into the pond structure? Or are you able just to bring 10,000 tons per year online and not really have to invest at all in the ponds?

Sam Pigott, Chief Executive Officer, Lithium Argentina: Some of the infrastructure will borrow from what we’ve already built with stage 1.

Mac Whale, Analyst, ATB Cormark: Okay. I guess we’ll get more of this when you come out with the actual plan, but I was just curious as that seems a relatively modest CapEx to begin with on stage 2, relative-

Sam Pigott, Chief Executive Officer, Lithium Argentina: Yeah

Mac Whale, Analyst, ATB Cormark: and timing to get that up and running, right?

Sam Pigott, Chief Executive Officer, Lithium Argentina: Yeah.

Mac Whale, Analyst, ATB Cormark: Yeah.

Sam Pigott, Chief Executive Officer, Lithium Argentina: Yeah.

Mac Whale, Analyst, ATB Cormark: Okay.

Sam Pigott, Chief Executive Officer, Lithium Argentina: Well, we’ll have a lot more, obviously, information with the development plan, but it is, yeah, it is very attractive in terms of CapEx intensity to get additional tons.

Mac Whale, Analyst, ATB Cormark: Right. It really allows you to lever all that CapEx spend on the pond structure, right?

Sam Pigott, Chief Executive Officer, Lithium Argentina: Exactly

Mac Whale, Analyst, ATB Cormark: Yeah. In terms of when you look at distribution, let’s assume pricing stays roughly where it is now. Do you expect this level of distributions from Minera Exar back to you? Or how does that play out over the course of the year? Are there other big debt down payments that have to come at the Minera Exar level?

Sam Pigott, Chief Executive Officer, Lithium Argentina: No.

Mac Whale, Analyst, ATB Cormark: Okay.

Sam Pigott, Chief Executive Officer, Lithium Argentina: Minera Exar has $300 million of liquidity. We expect distributions, if prices remain where they are, distributions to be similar to the first half, potentially higher.

Mac Whale, Analyst, ATB Cormark: Right. Okay. That’s all my questions. Thanks.

Sam Pigott, Chief Executive Officer, Lithium Argentina: Okay. Thanks, Mac Whale.

Kendra, Conference Call Operator, Lithium Argentina: This concludes our Q&A. There are no further questions at this time. This concludes today’s call. Thank you for attending. You may now disconnect.