Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lithium Argentina Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Kelly O'Brien, Vice President, Investor Relations. Please go ahead.

Thank you, Regina. I want to welcome everyone to our first earnings conference call. Joining me on the call today to discuss the fourth quarter and full year 2023 results is Sam Pigott, President and CEO of Lithium Argentina; Alex Shulga, VP and CFO; Alex Meikle, Business Development; Ignacio Celorrio, Executive Vice President, Legal, Government and External Affairs will also be available during the Q&A session. Our earnings were released after the market closed yesterday, and you'll find the press release, the MD&A and the financial statements posted on our website. We also filed our annual information form last night. I remind you that some of the statements made during this call, including any production guidance, expected company performance, Ganfeng's proposed investment in Pastos Grandes, 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 MD&A, annual information form and news release that was filed last night. Now I would like to introduce Sam Pigott, our President and CEO. He joined Lithium Argentina on Monday. However, he is not a stranger to the lithium industry or Lithium Argentina. He joins the company from Ganfeng Lithium, and we are happy to officially have him on the team. I now turn the call over to Sam.

Thank you, Kelly, for the introduction, and thank you, everyone, on the line for joining our first earnings conference call. It is great to be here this morning, having just published our 2023 results. This is our first earnings conference call, and we thought it would be well timed on the back of the first lithium sales and our transition from development to operations at Cauchari-Olaroz. As we mentioned yesterday in our earnings release, 2023 was a historic year for Lithium Argentina and everyone involved with the development construction and now operations of Cauchari-Olaroz. This $1 billion development is the result of the talented and dedicated team of professionals at both Lithium Argentina and Ganfeng. Since joining the company, I have had detailed meetings with the operators and various members of the team and feel very confident in the production guidance outlined in the earnings release. 2024 is expected to be another positive year as the project improves product quality and increases production volumes. Overall, the ramp-up is going well. It's been approximately nine months in first production and four months in operations with the first KCL train, and we are already operating at levels consistent with other projects in Argentina. The Cauchari-Olaroz is currently producing at approximately 50% of capacity, and in March, the plant has demonstrated it can operate at around 75% capacity over a limited period. It will take time to work through these typical ramp-up issues to sustain these higher levels of production, but we expect to be operating at close to design capacity by the end of 2024 on a steady-state basis. We recognize that the current lithium price environment raises concerns amongst investors about corporate strategies, especially around capital-intensive growth strategies. So Lithium Argentina is quite simple, by far our highest priority is to…

[Operator Instructions] Our first question will come from the line of Joel Jackson with BMO Capital Markets. Please go ahead.

Good morning, everyone. Sam, welcome to the job first week officially. Can we talk a little bit about -- so you're not disclosing what sales volumes were out of XR or lack for the fourth quarter. But it looks like you talking about $20 million, $21 million gain from the JV from XR in the fourth quarter. Can you talk about -- are you able to give a little color about what kind of sales run rates are? And when you give a production guide? And if it's $20 million, that wouldn't seem to imply that you had some healthy profits on these times even if the quality wasn't quite what you want yet? And then you're giving a 20,000, 25,000 tonne production guidance out of Cauchari-Olaroz this year, would we assume that's what the sales would be volumes also out of Cauchari?

Maybe I'll take your -- the second part of that question first. So yes, the guidance is 20,000, 25,000 metric tonnes of production this year. That guidance obviously reflects the variability in a typical ramp-up. I think things are going very well, and there's room to improve there. But obviously, that guidance is a reflection of what we believe is achievable today and incorporate some of the expected ramp-up issues that are typical in a project like this. I think for the first part of your question, I'd turn it over to Alex Shulga to answer around the $20 million. Alex?

Thanks, Sam. This is Alex, CFO. The $16 million for the full year is not only a large share of the joint venture operating profit. It does include LAC share of the JV results of operations. But in addition to that, it includes other elements, including a significant non-cash foreign exchange gain on some of the local [indiscernible] denominated dollar-linking company loans because of the significant devaluation in the end of 2023, the JV recognized the non-cash unrealized foreign exchange gain on such loans in accounting. And the $16 million reflects LAC share of this game. For more details on this, we resort disclosure on updates on Page 24 and 25 of the company's financial statements. And I'm happy to follow-up or if you have any more detailed questions.

Okay. I'll ask one more question. Sam and team, can you talk about the trade-off that you're looking at for product quality. So you got to look at what kind of quality can you get battery grade, if there's different floating definition of battery grade versus technical grade and you got to look at how much volume you can get out. We know Olaroz Phase 2 across the road there is just focusing on technical grade. How about the trade-off in trying to push so much volume as possible, but maybe deciding maybe more technical grade might be the optimal path and upgrading it to battery grade later, sorry, elsewhere, maybe by Ganfeng. Just talk about the trade-off that you're sort of looking out -- as you start to ramp the operation, try to maximize profit.

Sure. Well, I think I'll start by just saying that the plant is designed to produce battery grade. And our focus today is on ramping up volumes. As a function of increasing volumes, we also expect quality to improve as we reach higher and higher rates at steady state. There will be less variability flowing into the product. So the intention right now is to move to battery grade. Obviously, we will do whatever is in the best interest of shareholders and maximizing value, and we consistently kind of review that with our joint venture partner, but the plan is to ramp production volumes, the increased improvement in product quality and move towards battery grade.

Our next question will come from the line of Ben Isaacson with Scotiabank. Please go ahead.

Thank you very much and good morning, everyone. Congrats on the first call, and Sam, congrats as well. First question is, can you talk about the weather-related power disruptions? And what is -- what exactly happened? And how long has it been going on for? And what is the mitigant going forward?

Sure. I'd say, in the first couple of months of this year, really February and March, the Puna area in Argentina experienced a really unusual number of electrical storms, which impacted some of the reliability of our power to site. So this is something that we're working on to mitigate going forward, just increasing the support systems there, improving redundancies. It's something that we're well advanced and taken care of. So it was just unusual weather.

So how should we -- so is there still risk? And will that risk be eliminated entirely when you're done like in a quarter or whenever?

I mean the plan is, yes, to mitigate these power-related issues. I would say that as we push throughput through the plant, it obviously puts more strain on the power system, but we've identified what needs to be fixed, and we're pursuing a solution.

Perfect. And then my follow-up question is you talked in the press release about expectations for positive cash flow from operations this year. Can you give us just some color on your assumptions in terms of the economics to achieve positive CFO? What kind of pricing are you thinking about, et cetera?

We were thinking about recent pricing, so maybe just take an average of year-to-date.

Our next question will come from the line of David Deckelbaum with TD Cowen. Please go ahead.

Good morning, everyone, and congrats again, Sam and team on the first inaugural call here. Perhaps just to dig into the weeds a little bit more. I was hoping just on the guidance side, if you might opine on what your expected operating cost now is on a per ton basis, sort of ex-DD&A in this first year and then what you're thinking now as you get to capacity relative to your original expectations?

So I mean, I think as most people appreciate, we're in the middle of a ramp-up at Cauchari-Olaroz. Costs are largely tied to volumes. And as we reach steady state, we'll provide more details. I would say on the cost side of things, we're also going through a transition from construction to development. And so the cost will change -- the cost structure will change. So I think it's too early to provide you with any of that guidance. But when we have a cleaner sense, once we reach more steady-state production, we'll obviously be providing that information along with our partner, Ganfeng. But in terms of operating costs, I mean, what we have said is that we expect to be operating cash flow positive in 2024 based on recent pricing, which the Ben's question is kind of an average of battery quality in China year-to-date.

Yes. I appreciate that. Maybe just further into some of the guidance details, I'm trying to get a sense of -- I think you all announced that in light of the current environment you're reducing corporate overhead and spend by 25%. Obviously, as we think about the Cauchari expansion, it seems like that's a wait and see. How do we think about the capital that you're looking to spend this year? I know that you know that you're going to do away with sort of excessive exploration work at Pastos Grandes. But how do you see this base CapEx evolving this year? Or is it kind of iterative right now as you're considering multiple different opportunities that are out there?

Yes. I mean I'd say that we're in a very fortunate position to not have material capital commitments going through this year. As disclosed in our documents, we have $13 million of CapEx remaining to be spent. The priority for us is to get to ramp up at a steady-state production. Stage 2 will follow that. It will follow the successful completion once we get up to your name capacity by the end of this year. In terms of our decision to cut back on our other corporate expenses, it's in part related to this transaction with Ganfeng and the development plan that they will be leading for the Pastos Grandes region. So we didn't anticipate -- we don't anticipate spending material capital on that plan given that we already have a wealth of information from the work that's already been done by us and our predecessors on the Pastos Grandes basin.

Your next question will come from the line of Santhosh Seshadri with HSBC. Please go ahead.

Yes, hi, good morning, everyone. And congratulations, Sam, for your new role. So I have a couple of questions here. Firstly, can you provide some time line on the ramp-up to battery grade specifications? Because I was under the impression that debottlenecking your KCL plant will help you achieve higher production rate as well as battery grade product. I can see your production rates are increasing, but you're still producing technical-grade product. So if you can provide some color on that, that will be helpful.

Yes. I mean I think the -- sorry, there was a second question.

Yes, go ahead. I'll wait for the second part of the question.

Okay. Yes, the priority for us is ramping up volumes and getting to this steady in your nameplate capacity by the end of the year. Volume -- quality will improve as we push through production. The -- as we increase throughput and achieve steady-state production at ever greater throughput, it's going to help with the variability of our product and the product quality will improve. The battery plant is designed to do battery equality specifications.

Great. And how to think about the pricing discount to your JV partner, Ganfeng, given the product quality differences?

Yes. The pricing today that we received is tied to battery quality prices, which are then adjusted based on product quality and the cost to further process this product by Ganfeng in China. So as the product improves, which we've already seen, the discount to battery quality that we received is expected to narrow. And yes, so it's tied to battery grade less an adjustment for product quality, which is improving.

Our next question will come from the line of Noel Parks with Tuohy Brothers. Please go ahead.

Good morning. Sorry if you've already addressed this. But I was just wondering, looking at the stage of production and operations at the Stage 1. Just wondering, do you have any rough sense of sort of the delta in terms of cost inflation, now live in production versus what sort of the original planned levels were? Just kind of a sense of where -- kind of where we've come versus the original studies?

I mean I'd say that the largest cost on an operating basis for any brine project, are the reagents and reagent prices have been very volatile. There has been quite a bit of inflation since the technical report was announced. But we expect that our costs will be on a steady-state basis, reflective of other operations in the vicinity.

Great. And just looking ahead, I guess, just to the expense of resources including personnel and so forth. As the region continues to build out among other different areas with new -- with not just getting off the ground. Do you have any sense on any particular constraints, resource constraints just looking out over the next few phrases the next few years?

I mean human capital is hugely important, I think as we all know, Argentina is very active in terms of lithium projects. So we're very happy that we've built the team along with Ganfeng within the joint venture project. But that's certainly an area that I think the country will face challenges in attracting appropriate talent. I think in our case, we're very fortunate to have a joint venture partner in Ganfeng and access to their world-class expertise in commissioning and operating these very large lithium chemical plants. I mean, the other area is kind of logistics. There's a lot of reagents that move through the Northwest part of Argentina, and that will just increase as more projects come online, and this is part of the thinking around our -- the investments that Ganfeng made into the Pastos Grandes and kind of assessing a regional development plan for Pastos Grandes, where we can be better coordinated with our existing joint venture partner, Cauchari, which is Ganfeng.

Our final question is a follow-up from the line of David Deckelbaum with TD Cowen. Please go ahead.

Sorry to come back for a second here, but I was hoping to ask just sort of what information we might expect to receive with this regional development plan, what's going to be included in that around planning and disclosures? And should we think about this as a fulsome development plan for Cauchari, Pastos Grandes and beyond over sort of like the next several years? And will there be additional feasibility studies that go into that?

The plan right now is for Ganfeng to lead this regional development plans focused on the assets in Sal de so that would include as well as Pastos Grandes -- Pastos Grandes and Sal de la Puna. We expect to have more information towards the end of the year.

Fair enough. Thank you, guys.

And with that, I'll hand the call back over to Kelly for any closing remarks.

Thank you. I want to thank everyone for joining the call today, and we look forward to your participation next quarter. Have a great day.

Thank you all for joining. This will conclude today's meeting. You may now disconnect.