Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Production volumes increased by 24% compared to the first quarter, reaching approximately 5,600 tonnes of Lithium carbonate.
- Monthly production records were achieved in each of the past three months, with production sustained at around 70% of design capacity.
- Lithium Americas (Argentina) Corp (LAAC, Financial) remains on track to achieve 2024 guidance and expects to reach commercial production later this year.
- The company has $96 million in cash and expects to strengthen its balance sheet further with the imminent closing of a $70 million transaction.
- LAAC successfully secured an $80 million bank credit facility to replace existing short-term debt with more flexible long-term plans.
Negative Points
- Current market conditions remain challenging, impacting pricing and operating cash flow.
- There is a high degree of fixed costs within the business, making cost optimization crucial as production volumes ramp up.
- The company faces variability in production and financial metrics during the ramp-up phase, which may not always provide an accurate picture.
- There is a need for ongoing optimization and potential minor shutdowns to address bottlenecks and sustain higher production levels.
- The company has significant debt due before June 30, 2025, requiring active refinancing efforts to manage repayment.
Q & A Highlights
Highlights from Lithium Americas (Argentina) Corp (LAAC) Q2 2024 Earnings Call
Q: Can you provide an update on your offtake agreements for the remaining 3,800 tons of Phase one production?
A: We plan to retain this uncommitted share of offtake, giving us flexibility longer term. During the ramp-up, we expect to sell that product through downtime. - Sam Pigott, President and CEO
Q: Can you elaborate on the refinancing plans and the scope of the $80 million bank credit facility secured in May?
A: We are open to all credit facilities and expect to use a portion of the proceeds from the PG co-transaction to significantly deleverage XR. We are also evaluating a local bond offering in Argentina to take advantage of improved lending conditions. - Sam Pigott, President and CEO
Q: What is the current operating environment for lithium pricing, and how does it affect your cash flow?
A: We look at the battery grade price in China, around $11,000 per ton. Despite lower spot prices, we remain operating cash flow positive, with costs expected to decline as production volumes ramp up. - Sam Pigott, President and CEO
Q: Are there any plans to change the design of the plant based on recent optimizations?
A: We are not looking to change the plant design but will continue with minor optimizations to sustain higher production levels. - Sam Pigott, President and CEO
Q: Can you quantify your operating cost target as you ramp towards battery-grade production?
A: We expect costs to be in line with low-cost producing peers in Argentina once we reach steady-state. Optimizations, particularly in reagent consumption, will help lower costs further. - Sam Pigott, President and CEO
Q: What are the current discussions around the expansion of the 20,000 tons at Cauchari?
A: Development work is ongoing, focusing on technical collaboration and reserve models. We aim to capitalize on growth opportunities at the right time, with more details expected by the end of the year. - Sam Pigott, President and CEO
Q: How will the incremental cost of producing battery-grade material compare to the current $2,000 discount?
A: The incremental cost will be immaterial compared to the discount, and we expect the processing fee to narrow as quality improves. - Sam Pigott, President and CEO
Q: Can you reconcile the production and sales numbers for the first half of 2024?
A: Ganfeng is taking the majority of the product. There is a lag between production and sales, which we expect to normalize as we approach steady-state production. - Sam Pigott, President and CEO
Q: What criteria will define commercial production by the end of the year?
A: Achieving higher production levels on a sustained basis over several months, meeting certain capacity and quality criteria. - Alex Shulga, Vice President of Finance
Q: Can you provide more context on the $113 million loss related to the fair value of derivatives?
A: This loss relates to inter-company funding and represents unrealized non-cash foreign exchange loss due to the devaluation of the Argentine Peso. - Alex Shulga, Vice President of Finance
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
