Lithium Argentina (LAR) Q3 2026 Earnings Call Transcript

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DATE

Tuesday, Nov. 10, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations - Kelly O'Brien
• Chief Executive Officer - Sam Pigott
• Chief Financial Officer - Alex Shulga

TAKEAWAYS

• Lithium Carbonate Production -- 9,550 tonnes in the third quarter, representing a 3% increase over the second quarter of 2026 as operations reached 95% of design capacity.
• Cash Operating Costs -- $5,801 per tonne, driven by higher energy expenses and the strength of the Argentine peso.
• Revenue -- $184 million, reflecting an 18% sequential increase in sales volumes which offset a 10% decline in realized lithium prices.
• Adjusted EBITDA -- $113 million, compared to $110 million in the previous quarter, aided by higher sales volumes.
• Free Cash Flow from Operations -- $92 million, generated from the Cauchari-Olaroz Stage 1 asset.
• Cash and Cash Equivalents -- $312 million as of Sept. 30, 2026, including proceeds from a new strategic investment.
• Strategic Investment -- $180 million, issued to a subsidiary of Ganfeng as a six-year unsecured convertible debenture with a 4% coupon.
• Convertible Note Repurchase -- $200 million of January 2027 notes were repurchased in October 2026 at approximately $198 million in cash.
• Full Year Production Guidance -- 35,000 to 40,000 tonnes, with management reporting year-to-date production of 28,490 tonnes.
• Cash Operating Margin -- 67% during the quarter, demonstrating the resilience of the low-cost operating model in a softer pricing environment.
• Cash Distributions -- $100 million distributed to joint venture partners during the quarter, bringing the 2026 total to $230 million.
• Stage 2 Expansion NPV -- $3.1 billion after-tax valuation, based on a scoping study outlining a 45,000 tonne annual capacity increase.
• Stage 2 Capital Expenditure -- $1 billion estimated for the expansion, which targets a total site capacity of 85,000 tonnes per year.
• PPG Project NPV -- $8.1 billion on a 100% basis, assuming a lithium carbonate price of $18,000 per tonne and operating costs of $5,000 per tonne.
• Net Debt -- $171 million at the project level, reflecting a modest increase from $142 million in the prior quarter.
• Syndicated Debt Facility -- $170 million, secured in July as a three-year facility at SOFR plus 1.05% to manage the asset's maturity profile.
• Average Realized Price -- $17,580 per tonne for lithium carbonate, catchably following a mid-single-digit discount to the China battery-grade benchmark.
• ESS Growth -- Management noted significant growth in the energy storage system sector in China, which has contributed to strong demand for product offtake.

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RISKS

• Pigott stated, "Near-term market sentiment remains cautious and views on the timing of a recovery are divided," noting that buyers are hesitant to enter the market while prices are falling.
• Pigott indicated that "labor costs, for example, when translated in U.S. dollars, there's been inflation there as well" due to the Argentine peso strength running above devaluation.
• Pigott warned that policy changes in China, specifically regarding operating fees for connecting energy storage systems to the grid, could weigh on project IRRs.

SUMMARY

Lithium Argentina AG (NYSE:LAR) reported third quarter results that emphasized operational consistency at its Cauchari-Olaroz asset and proactive balance sheet management. Management reported that the Stage 1 operation maintained production at 95% of design capacity, yielding high cash operating margins despite sequential declines in market lithium prices. During the period, the company secured a strategic investment from Ganfeng through a convertible debenture and subsequently repurchased the majority of its notes due in January 2027. Strategic focus has transitioned toward a phased expansion of its Argentine assets, utilizing modular development to manage capital commitments in a volatile commodity environment.

• Management is accelerating a 10,000-tonne modular expansion at Stage 2, targeting production in 2028 using direct lithium extraction technology.
• The company is advancing a secondary listing on the Australian Securities Exchange to broaden its investor base in the Asia-Pacific region.
• CEO Pigott stated, "The strength of the operation and low operating costs give us a competitive position across the lithium price cycle."
• The PPG joint venture expects to receive approval under Argentina's RIGI framework by the end of 2026, providing long-term fiscal stability.
• Management indicated that future investment decisions for Stage 2 and PPG will be based on project economics rather than assuming a near-term price recovery.
• The remaining $59 million in 2027 convertible notes will be repaid at maturity from existing cash on hand.

INDUSTRY GLOSSARY

• DLE: Direct Lithium Extraction, a technology used to extract lithium from brine more efficiently than traditional evaporation ponds.
• ESS: Energy Storage Systems, large-scale battery installations used to store energy, primarily from renewable sources.
• IRR: Internal Rate of Return, a financial metric used to estimate the profitability of potential investments.
• LCE: Lithium Carbonate Equivalent, a standard unit for measuring lithium production and resources.
• NPV: Net Present Value, the current value of all future cash flows of a project discounted at a specific rate.
• RIGI: Regimen de Incentivo para Grandes Inversiones, an Argentine regulatory framework providing tax and fiscal incentives for major capital projects.
• SOFR: Secured Overnight Financing Rate, a benchmark interest rate for dollar-denominated loans and derivatives.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the Lithium Argentina Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Kelly O'Brien, Vice President of Investor Relations. Kelly, please go ahead.

Kelly O'Brien: Thank you for the introduction. I want to welcome everyone to our earnings call this morning. Joining me on the call today to discuss the third quarter 2026 results is Sam Pigott, CEO of Lithium Argentina. Alex Shulga, our CFO, will be available for Q&A. Before we begin, I would like to cover a few items. Our third 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 will now turn the call over to Sam Pigott.

Sam Pigott: Thank you, and good morning, everyone. Our third quarter results show Cauchari-Olaroz operating as a consistent cash-generating asset, which gives us the flexibility to make growth decisions on our own timetable. This is particularly important in a cyclical industry like lithium. We've always believed that the real test of an operation isn't how it performs when lithium prices are high. It's how it performs when market conditions are less favorable. The third quarter was another good demonstration of that resilience. Cauchari-Olaroz continues to operate at approximately 95% of design capacity with competitive operating costs under $6,000 per tonne and a cash operating margin of 67%.

Year-to-date production of 28,490 tonnes keeps us on track to reach midpoint of our full year guidance of 35,000 to 40,000 tons. During the quarter, the operation generated approximately $92 million in free cash flow from operations and distributed $100 million to the joint venture partners, bringing distributions to approximately $230 million year-to-date, which allowed us to take significant steps to strengthen our corporate balance sheet. These results reflect the operating platform we have established and the financial discipline that continues to guide our business. This quarter's financial results highlight the underlying strength of Cauchari-Olaroz. Realized lithium prices declined by approximately 10% quarter-over-quarter, but this did not translate into weaker financial performance.

Sales volumes increased by 18%, helping drive revenue to $184 million, up 6% from the previous quarter. At the same time, cash operating costs declined slightly to approximately $5,800 per tonne. As a result, adjusted EBITDA increased to $113 million compared with $110 million in the second quarter despite the softer pricing environment. That's important. We're operating in a business where consistent production, cost discipline and strong execution can help offset movements in lithium prices. And with 67% cash operating margin during the quarter, we continue to demonstrate the resilience of our operating model. We dig into that profitability a bit more on this slide.

While lithium prices are an important factor in the profitability of the business, operating cash costs are more within our control. We have maintained C1 operating costs below $6,000 per tonne in every quarter of 2026, averaging approximately $5,700 per tonne year-to-date. That's a significant achievement, particularly given the inflationary and currency pressures, including higher energy costs globally and stronger local currency in Argentina. Near-term market sentiment remains cautious and views on the timing of a recovery are divided, but we're maintaining financial flexibility and advancing our growth in phases with investment decisions based on project economics rather than assuming a near-term price recovery.

More importantly, the strength of the operation and low operating costs give us a competitive position across the lithium price cycle. Even at lithium prices of $10,000 a tonne, our operating model indicates EBITDA margins of around 30%, subject to underlying assumptions. This reinforces the point we've made consistently. We don't need to rely on higher lithium prices to have a viable cash-generating business. That combination of consistent production and low operating costs continues to translate into substantial cash generation. The operation generated $95 million in operating cash flow during the quarter with $92 million in free cash flow from operations.

As you can see in the waterfall, net debt increased only modestly from $142 million to $171 million, even as the operation distributed $100 million to its joint venture partners during the quarter. In July, the joint venture secured $170 million 3-year syndicated facility with another $50 million 2-year facility closed in June, primarily to replace existing debt and extend the maturity profile at a lower interest rate. This leaves a very manageable debt position at the asset level even in a lower pricing environment. At Lithium Argentina, we've been equally focused on strengthening our financial position. On the corporate balance sheet, we made significant progress recently.

In September, we closed $180 million strategic investment from Ganfeng through a 6-year unsecured convertible debenture, carrying a 4% coupon and a conversion price of $12.50 per share. Together with our existing cash, this investment enabled us to repurchase $200 million of our January 2027 convertible notes in October at an attractive price. That leaves approximately $59 million outstanding, which we intend to repay at maturity in January from over $100 million in cash on hand. These transactions reflect our continued focus on proactively managing risks and maintaining financial flexibility while avoiding unnecessary and expensive equity dilution for our shareholders. Turning to our growth pipeline.

During the quarter, we published a scoping study for Stage 2 outlining a 45,000 tonne expansion, which would more than double total production capacity to approximately 85,000 tonnes per year. What makes this opportunity particularly attractive is that we're expanding an established operation with existing infrastructure, operating experience and a substantial resource base. The scoping study highlights compelling economics with an after-tax NPV of $3.1 billion and an IRR of 28.5% on a 100% basis at a lithium carbonate price of $18,000 per tonne with estimated operating costs of approximately $5,000 per tonne and initial capital of about $1 billion.

The characteristics of the brine resource provide flexibility in the process and technology, allowing us to make decisions that will maximize shareholder value. We also outlined plans to accelerate an initial 10,000 tonne of the expansion through a modular DLE approach, targeting production in 2028, subject to permits and approvals. This modular approach allows us to add capacity incrementally, gain valuable operating experience with the technology and retain flexibility. We intend to leverage our current permit through amendments and additional approvals, which we believe can help expedite development of this initial phase. We believe Stage 2 represents a highly competitive, flexible expansion opportunity with a clear pathway to incremental production. Turning to PPG.

We closed the joint venture with Ganfeng, bringing together 3 adjacent projects under a single development platform with Ganfeng holding 67% and Lithium Argentina at 33%. PPG has planned production capacity of 150,000 tonnes per year, estimated operating costs of approximately $5,000 per tonne and an after-tax NPV of $8.1 billion on a 100% basis at $18,000 per tonne based on scoping study published last year. While we've highlighted these metrics before, they're worth reinforcing given our strategic interest in what is designed to be the largest lithium operation under development in Argentina. Between Lithium Argentina and Ganfeng, approximately $1.8 billion has already been invested across the 3 projects, which gives the joint venture a strong foundation.

With an operating asset and 2 leading development projects, there is significant underlying value in our portfolio. On an attributable basis, Stage 2 and PPG represent approximately $4.1 billion in combined project NPV for LAR's interest based on our latest scoping studies. This is in addition to the value of our interest in Stage 1 operation, which generated approximately $350 million in adjusted EBITDA over the last 12 months. Near-term market sentiment remains cautious. We're maintaining financial flexibility and advancing our growth in phases with investment decisions based on project economics rather than on timing and near-term price recovery.

As we look ahead, our focus is on converting this underlying asset value into shareholder value through continued execution and derisking efforts. At Cauchari-Olaroz, that means maintaining strong operating performance and cash generation while advancing Stage 2 through engineering, permitting and the accelerated initial 10,000-tonne module. At PPG, we expect to receive RIGI approval by year-end, an important milestone as we continue advancing engineering, permitting and financing discussions to position the project for development. Each of these milestones represents an opportunity to reduce risk and increase the value of our interest without necessarily committing significant capital upfront.

In fact, future investment decisions for both Stage 2 and PPG require Lithium Argentina's approval and will be done carefully based on the best interest of our shareholders. Ultimately, we are in a strong position with a profitable operating asset, growth options and the financial flexibility to advance them responsibly. Our priority remains creating shareholder value through responsible management of some of the best lithium assets globally. We will now open the call for questions.

Operator: Your first question comes from the line of Joel Jackson with BMO Capital Markets.

Joel Jackson: I'll ask a few questions one by one. Just short term, if I look at your Q4 or Q4 for Cauchari, should we expect sales volume lower, the same? It looks like you drew down a lot of inventory in Q3. And then if I take your exact verbatim guidance, reaching the midpoint of 35,000 to 40,000 tonnes, that would imply about 9,000 tonnes of production, the lowest of the year. So can you just sort of elaborate on some of that?

Sam Pigott: Sure. I'll start with the second question. I think we would be expecting to produce over 9,000 tonnes in Q4. I think we've consistently been at 95% operating capacity. So I think that likely continues through Q4. Given where we sit year-to-date, that seems very likely the case. So the midpoint was kind of a rough estimate, likely going to be higher than that. The second question about sales tracking similar to 10,500 tonnes. Yes, I mean, it largely depends on timing of shipments. Q3, the shipments are up just because we're trying to make up for some -- not delays, but some timing mismatch from Q2.

So we really, I think, did a good job in getting product through the port into the end market. So it really kind of depends on timing of shipments. I would expect it to be in and around the same levels as Q3.

Joel Jackson: Okay. And then a much different question. You started off this call, Sam, talking about you have the luxury and the flexibility to make growth decisions on your own timetable because of the consistency we're seeing out of Cauchari. Obviously, we've seen the lithium market fall off a lot in the last few months, everyone knows that. But as you think about some of the investments that you want to make and you've been talking about for the last several quarters, what is kind of the minimum spend you think you've got to do here with your partner at -- for Phase 2 for the DLE 10,000-tonne unit?

And if you and your partner disagree on the market here and what should be next from an investment perspective, what other options would you have in terms of asset sales, share buybacks? Yes.

Sam Pigott: Sure. Well, I think for the 10,000-tonne plan specifically, like it's something that we're still working through with Ganfeng. Our focus is on really kind of derisking that from a permitting approval perspective. We're continuing to finalize engineering. We're going to have more definition and details for you guys early next year on the 10,000-tonne modular plan. There's no kind of minimum commitment. Any material spend, any decision to move ahead on FID requires joint approval. I think there are a number of different scenarios. I mean, I can tell all of the audience on this call, like absolutely, we are never anywhere near this price thinking of diluting shareholders. That's totally off the table.

But I think when we come out with a 10,000 tonne detail, it will be pretty clear that at spot price or below spot price from the cash flow generated from Cauchari next year, along with the fact that the joint venture level has approximately 1x debt to EBITDA at current spot prices that this 10,000 tonne will easily be financed with project cash. But beyond that, I think have worked together closely for a long, long time. But even in the last short little while, being able to bring in additional debt at the project level at very attractive terms.

I think in the press release, we kind of reiterated that we had brought in $170 million 3-year facility at SOFR plus 1, an additional $50 million 2 years. So there's a lot of capital to support this. It's 10,000-tonne modular. I mean the reason why we're approaching it this way is we recognize that the market may not support a massive 45,000 tonne plant. So we want to be very cautious in how we approach this and do it in the best interest of shareholders.

Operator: Your next question comes from the line of Ben Isaacson with Scotiabank.

Ben Isaacson: Sam, just 2 questions from me. The first one is your cash cost. It improved to about $5,800 from $5,900. Your operating rate was where it should be. In Q1, you achieved $5,400. So my question is, the difference between what you were able to achieve in Q1, how much of that is temporary higher energy, higher logistics? And when those costs normalize, can you get back to $5,400? What's the target given inflationary events over the last several months?

Sam Pigott: Yes. I mean you're right to point out, and we alluded to this in our press release that energy costs, even though this is a relatively low energy-intensive project, given that we use conventional pond and evaporation systems, with direct energy costs well below 10%, there is an impact. There's also an impact from indirect costs, logistics, transport of reagents. And so that was felt throughout Q2, Q3. In addition to which there's been pressure in the Argentinian peso. So inflation has been running quite a bit above devaluation. So labor costs, for example, when translated in U.S. dollars, there's been inflation there as well.

I mean, certainly, if these things correct back to lower levels, we would expect that to translate through to lower costs. But yes, I mean, I think we feel very comfortable with where our costs are, what we've been able to achieve in a pretty unusual time in the energy complex globally.

Ben Isaacson: Great. And then my follow-up question is just would love to hear your thoughts on this debate about where demand growth goes next year, particularly related to energy storage. There's -- the bulls seem to think that a high production is just -- there's a natural time lag towards installations and the bears believe and you can see in pricing what they believe that there needs to be a big inventory drawdown. And so now the debate in the market is that incremental production will be greater than incremental demand next year. Where do you stand on that? And what are you looking at in terms of the key drivers?

Sam Pigott: I mean probably not fully in one camp or the other. I mean, I think we recognize that the ESS growth that has transpired in largely in China, but really a global phenomenon over the last -- really over the last 12 months, naturally leads to certain bottlenecks around installations. I mean China has a lot of experience producing cells for EVs and the translation of that into larger format packs for ESS is pretty well known. Further downstream integration, it's relatively new at this scale. So certainly, there are bottlenecks.

I think there have been some policy changes in China namely around operating fees being charged on ESS projects that want to connect to the grid weighing on IRRs of some of those projects. I have heard that a number of provinces in China have modified those in recognition that the intent of this policy change is not to strangle or necessarily slow down ESS installations, but rather to improve the financial conditions of the state grid. So I think there's a bit of wait and see, I would say, in terms of which side wins out. It's probably somewhere in the middle. But yes, I mean, what we're hearing from Ganfeng is that demand is still very strong.

So unfortunately, we are taking a bit of a wait-and-see approach here to see how demand materializes through 2027. And then just like on the physical market and some of our larger peers in the industry, I think commented last week, we're seeing the same thing. I think it's reported in most analysts and consultancy numbers, like the physical market seems to be fairly tight from an inventory perspective. But with seemingly down every day, I think buyers are hesitant to step into the market.

So it's one of these factors of being in the lithium trade where it's very volatile and buying patterns are largely concentrated in China when the price is falling it oftentimes overshoots similarly in the other direction. So maybe an unsatisfactory answer, Ben, but I think we're just taking a wait and see. And I think our view is kind of appreciate what the bears are saying, appreciate the bulls are saying, but we're going to wait for the data to actually guide us.

Operator: Your next question comes from the line of Craig Hutchison with TD Cowen.

Craig Hutchison: Great to see the free cash flow generation in the quarter. Just kind of a bit of a macro question follow-on for me as well. Just what are you guys seeing in terms of demand for your products specifically? Are you guys -- like what kind of discount rate are you guys starting to get versus the benchmark on your product?

Sam Pigott: So like similar as it's been all year, kind of a mid-single-digit discount to the lithium carbonate battery price China ex VAT. So kind of a blend of different price reporting agencies. And that -- I mean, that hasn't changed. So we -- yes, under our offtake agreements, we sell at market price. Of course, market price in the offtake refers to battery quality. We are producing the technical grade. And so we have this price adjustment, which is mid-single digits from the battery grade price in China.

Craig Hutchison: I guess I won't see that change, I guess?

Sam Pigott: No. no. I mean, we're not seeing any change. I mean is very eager to take all the product they can get.

Craig Hutchison: Okay. And I just want to ask a question on the Stage 2 expansion. The operating cost you guys have of $5,000 is obviously a bit below what you guys are operating at now. Just can you speak to why you think that cost will go down? Is it a function of just higher capacity and kind of spreading out a larger amount of production over the fixed costs and whether it's tied to the choice to go to DLE?

Sam Pigott: Most of the cost savings are associated with incorporating DLE technology into the Stage 2 expansion, which reduces our reagent consumption considerably. So liming is not a huge cost, but it all adds up. Liming will be removed from the process. And the DLE technology components, they produce a cleaner lithium chloride, which further downstream requires fewer purification steps and fewer reagents. So that's probably the big driver. The second one is the total recoveries improved quite a bit with the incorporation of this new DLE technology. So those are the 2 main drivers. It's less about lowering overall kind of fixed costs against the higher volume.

It's more about improving the variable cost of reagents and the higher recoveries to the plant.

Craig Hutchison: Okay. Maybe just one last quick one for me. Just in terms of the approval process from both Argentina and China, any kind of thoughts and timing around that?

Sam Pigott: Certainly, I think the view on Argentina is a bit clearer. We have a great relationship with the authorities. We've been approved for the RIGI they've been very supportive of this modular approach. They want to see investment flow in ASAP. So I would suspect that could take place before the end of the year. On the technology export permit in China, Ganfeng is obviously leading those conversations as it should be. And that's a bit less clear. I would have the sense that early next year is probably when we would expect to get approval if it's forthcoming.

Operator: Your next question comes from the line of Corinne Blanchard with Deutsche Bank.

Corinne Blanchard: Actually, I think most of them have already been answered. So maybe just high level, I know you already got a question on the lithium market view, but kind of wanted to go back on the lithium pricing. I think I was a little surprised to see the 3Q in the $17 a kilo. We were expecting probably to be more like around $19 a kilo. Can you just talk maybe about the key takes and puts there? And how should we -- or how should we think about pricing going into 4Q and into next year?

Sam Pigott: Sure. I mean pricing, again, we take market price. I think in a quarter where prices are so volatile. A lot of it depends on the cadence of shipments. So if we just happen to ship more in the back half and caught the downward slope of the price trend, that could be a factor. But we take the lithium battery grade price from a blend of different price reporting agencies and apply a mid-single-digit discount, and that's how we arrive at a realized price. So it may be -- if those numbers aren't exactly square, we can work with it offline and try and figure it out, it's probably around timing, the price has been.

And then for Q4, I mean, we do sell at spot kind of on a 20-day delay. So for Q4, we'll have caught a month of pricing from -- basically from September and the rest of it through the end of the year. So pricing is certainly coming down with the market.

Operator: Your final question comes from the line of Katie Lachapelle with Canaccord Genuity.

Katie Lachapelle: Most of my questions have already been asked. So just one follow-up question for me. In the prepared remarks, you guys noted that Argentina and Ganfeng continue to evaluate different project financing options for PPG. And you noted that, that could include a potential offtake or a sale of a minority stake in the project. Can you provide us with any more incremental detail there, like what percentage stake you usually to let go of, how those discussions are advancing and when we could maybe see more -- get more detail on PPG?

Sam Pigott: Yes. I mean I think for PPG, I mean, in October, we finalized the consolidation of that project, which is obviously a pretty important milestone in terms of advancing discussions with financing partners or potential strategic partners. And we're still pushing ahead with the RIGI, which we expect to be approved by the end of the year. So those are kind of key risks and catalysts. We're still working with Ganfeng. We're pretty advanced in certain discussions around potentially bringing in a minority or doing an offtake.

I would say, despite the market over the last 6 months deteriorating quite rapidly, I think the view is these projects still remain highly attractive to strategic investors that want to participate in kind of the first quartile of the cost curve. So we haven't seen -- the reaction in the private market versus the reaction in the public market is very different from what we're seeing going through. But I think for investors, I mean, I think the important kind of milestone to watch out for is the approval of the RIGI. And beyond that, I mean, the plan for PPG is, of course, to develop it when we can bring in external capital.

And the view is there's still a lot of interest globally in projects like these, but the RIGI is obviously a pretty important derisking milestone.

Operator: We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

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