Cauchari-Olaroz is nearing full utilization, making LAR's Argentine lithium cash flow and expansion pipeline the key focus

Overview

This report summarizes the key points from Goldman Sachs' call with Lithium Argentina management after visiting Cauchari-Olaroz, focusing on LAR's 1Q CY26 performance, Cauchari-Olaroz Stage 1 ramp-up, Stage 2 expansion, the PPG project, and the potential policy benefits from Argentina's RiGl framework. The core message is that Cauchari-Olaroz has moved from construction and ramp-up into a stable high-output and cash-generating phase, while Stage 2 and PPG provide LAR with a sizable medium- to long-term path for lithium capacity growth.

Core views

First, Cauchari-Olaroz is performing strongly, operating at about 97% of nameplate capacity over the past two quarters, with CY26 production guidance of 35-45kt and a low-cost position that gives it strong resilience through lithium price volatility. Second, cash flow quality is high: under a US$20k-30k/t lithium price assumption, CY26 EBITDA potential is about US$460-630mn and roughly 90% can be converted into free cash flow, supporting dividends and early-stage expansion spending. Third, if Stage 2 proceeds as planned, it could lift Cauchari-Olaroz capacity to about 80-85ktpa, and project-level debt plus Stage 1 cash flow may reduce financing pressure at the parent-company level. Fourth, the PPG project uses a hybrid DLE process and is planned in three phases; if achieved, it could lift PPG to about 150ktpa LCE and become LAR's main source of long-term scale expansion. Fifth, management believes the lithium market will remain tight over the next 3-4 years, with storage demand, EV demand, and Ganfeng order visibility supporting the demand-side view.

Analysis framework

The report combines management call feedback, project operating data, cost and cash flow breakdowns, expansion plans, and policy framework analysis, focusing on capacity, costs, cash flow conversion, capex, financing paths, permitting progress, technology routes, and potential partners to assess LAR's asset quality and growth pipeline.

Methodology notes

• Project operating analysisCapacity ramp-up and nameplate utilization

  Use monthly output, nameplate utilization, and annual production guidance to judge whether a project has entered a stable operating phase.

  Cauchari-Olaroz has operated at about 97% of design capacity over the past two quarters, and the chart shows monthly output ramping from late 2023 to roughly 2,500-3,400 tonnes per month in 2025-2026, supporting management's guidance of 35-45kt CY26 production.

• Cost curve analysisC1 cash cost

  Measure a project's competitiveness on the global lithium cost curve using unit cash operating cost.

  1Q26 C1 cost was US$5,391/t, down 19% YoY and 4% QoQ, with management's long-term target at about US$5,400/t; the report believes this cost sits in the lower end of the global lithium cost curve.

• Project valuationNPV8% and IRR

  Assess the economics of phased development using discounted net present value and internal rate of return.

  The PPG Nov-25 scoping study showed that at a US$18k/t lithium carbonate price, after-tax NPV8% was US$8.1bn and IRR was 33%; at US$20k/t, NPV8% was US$9.6bn and IRR was 36%.

• Policy and tax analysisArgentina RiGl framework

  Assess project returns and financing feasibility through policy benefits such as tax rates, export taxes, and FX retention.

  RiGl may bring a lower tax rate, eliminate the 4.5% lithium carbonate export tax, and, four years after approval, allow 100% of export revenue to be retained offshore, helping improve project cash flow and financing appeal.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• LITHIUM ARGENTINA AG (LAR.US)

  The report's subject company, holding about 45% of Cauchari-Olaroz and about 33% of PPG.

  Strengths

  Cauchari-Olaroz is close to nameplate capacity, costs are low, and cash flow conversion is high; Stage 2 and PPG provide a large-scale expansion path; RiGl policy could improve tax, export tax, and FX retention conditions.

  Weaknesses

  LAR is not formally covered by Goldman Sachs and therefore lacks a formal rating and target price; future expansion still depends on permitting, financing, capex control, and partner execution.

  Comparison

  Compared with projects still in early construction or higher-cost lithium projects, Cauchari-Olaroz is already in a stable output and cash-generating stage; PPG is more of a medium- to long-term development option.

  Risks

  Downside in lithium prices, changes in Argentine policy, delays in Stage 2 environmental approval, scale-up risk in the PPG DLE process, weaker-than-expected project financing, and changes in Ganfeng cooperation and offtake arrangements.

• Cauchari-Olaroz

  LAR's core cash-generating asset, currently about 40ktpa, with a Stage 2 target of about 80-85ktpa.

  Strengths

  It has run at about 97% of design capacity over the past two quarters, 1Q26 C1 cost was US$5,391/t, and CY26 EBITDA potential is strong.

  Weaknesses

  The product price still trades at a discount of about 6-7% to the Asia reference price, and there is about a two-month lag from sales to cash collection.

  Comparison

  Management believes the cost sits in the lower end of the global lithium cost curve, making it more cycle-resilient than higher-cost supply.

  Risks

  Production stability, product consistency, reagent and labor costs, Stage 2 construction execution, and capex control.

• Pozuelos Pastos Grandes (PPG)

  A medium- to long-term expansion project between LAR and Ganfeng, with LAR holding 33% and Ganfeng 67%.

  Strengths

  The three phases imply about 150ktpa LCE of potential, the scoping study shows high NPV and IRR, and it has already attracted interest from battery makers, cathode producers, OEMs, sovereign wealth funds, and strategic investors.

  Weaknesses

  It is still at an early development stage, Stage 1 capex is about US$1.1bn, total capex across the three phases is about US$3.3bn, and the technical and financing complexity is high.

  Comparison

  Compared with Cauchari-Olaroz, PPG offers greater long-term scale optionality, but the project is less mature and carries higher execution risk.

  Risks

  Commercial scale-up risk for the hybrid DLE technology, permitting timing, modular construction cost control, minority equity partner negotiations, offtake agreements, and project financing execution.

• Ganfeng Lithium

  An important JV partner for Cauchari-Olaroz and PPG; Goldman Sachs discloses Ganfeng Lithium (A)/(H) as Sell-rated.

  Strengths

  It brings Chinese modular construction, equipment procurement, financing support, and order-book resources; the report says its order book extends into 1H CY27.

  Weaknesses

  As a partner, it influences project financing, offtake, construction pace, and strategic partner selection.

  Comparison

  Ganfeng can support LAR's project execution through China's modular construction capabilities, equipment supply, and value-chain resources.

  Risks

  Changes in partner strategy, changes in funding arrangements, Chinese demand or price volatility, cross-border policy issues, and supply-chain execution risk.

Key data

• Current Cauchari-Olaroz capacityAbout 40ktpa LCELAR owns about 45%, Ganfeng about 47%, and JEMSE about 8%.
• Recent Cauchari-Olaroz utilizationAbout 97% of nameplate capacity over the past two quartersSupports the CY26 production guidance.
• CY26 production guidance35-45kt of lithium carbonateSome sections also mention 35-40kt, but the overall disclosure uses 35-45kt as the fuller range.
• 1Q26 C1 cash costUS$5,391/tDown 19% YoY and 4% QoQ, with a long-term target of about US$5,400/t.
• 1Q26 realized priceAbout US$16,818/tThe discount to the Asia ex-VAT reference price was about 6-7%; management believes the discount could narrow as product consistency improves.
• CY26 EBITDA potentialAbout US$460-630mn, on a 100% basisBased on a US$20k-30k/t spot price assumption.
• Free cash flow conversionAbout 90%After deducting US$15-20mn of normalized sustaining capex, modest project debt interest, and lower near-term cash taxes.
• Stage 2 expansion sizeAn additional 40-45ktpa LCEWould lift total Cauchari-Olaroz capacity to about 80-85ktpa.
• Stage 2 capexAbout US$1bnThe financing plan is expected to rely on Stage 1 cash flow and project-level debt; banks have initially indicated they could underwrite roughly a 60% debt / 40% equity structure.
• Cauchari-Olaroz resource28Mt LCE, 562 mg/L LiThe updated measured and indicated resource increased by 42% versus prior figures.
• PPG Stage 1 planAbout 50ktpa LCEUses a hybrid DLE process, has received Stage 1 environmental approval, and has already submitted the RiGl application.
• PPG three-phase target capacityAbout 150ktpa LCEEach phase is about 50ktpa; LAR holds 33% and Ganfeng holds 67%.
• PPG Stage 1 capexAbout US$1.1bnTotal capex for the three phases is about US$3.3bn.
• PPG project economicsUS$8.1bn NPV8% and 33% IRRBased on a US$18k/t lithium carbonate price; at US$20k/t, NPV8% is US$9.6bn and IRR is 36%.
• Long-term total target capacityAbout 235ktpa LCEThe chart shows the step-up from the current 40ktpa to Cauchari-Olaroz 85ktpa and then to roughly 235ktpa after the three PPG phases.

Impact & implications

For LAR, stable production at Cauchari-Olaroz and low-cost cash generation reduce the company's reliance on external equity financing and provide an internal funding source for early-stage Stage 2 work and future expansion. For the lithium industry, the report reinforces the competitiveness of Argentine salar assets in terms of cost, scale, and policy support, while also showing that new supply realization still depends on permitting, capex, financing partners, and technical execution. If lithium prices remain within the range management discussed, LAR's project cash flow, JV distributions, and expansion optionality could meaningfully improve asset value; if lithium prices fall or expansion is delayed, the value of the growth pipeline will take longer to be realized.

Risks

• A decline in lithium prices would compress Cauchari-Olaroz EBITDA, free cash flow, and JV distribution capacity.
• Stage 2 environmental approval is expected around early 2027; if delayed, it will affect FID timing and capex progress.
• PPG uses a hybrid DLE technology route, and commercial scale-up plus cost delivery still carry execution risk.
• Stage 2 and PPG require sizable capex, and if project-level debt or strategic partner financing falls short, parent-company funding pressure could increase.
• Changes in Argentine policy, tax rules, FX rules, or export rules could affect realization of RiGl benefits.
• Product consistency, sales discounts, and the cash collection cycle could affect near-term cash flow quality.
• LAR, the report's subject company, is not covered and therefore lacks a formal rating, target price, or full financial forecast framework.

What to watch

• Whether Cauchari-Olaroz monthly production can continue to stay near 97% of nameplate capacity.
• Whether actual CY26 production lands within the 35-45kt lithium carbonate guidance range.
• Whether C1 cash cost can stay near US$5,400/t.
• Whether the 6-7% discount of Cauchari-Olaroz realized price versus the Asia reference price narrows.
• The size of JV distributions in 2Q-4Q CY26 and the cash flow received by LAR.
• The detailed Stage 2 development plan and the release of the scoping study in mid-CY26.
• Stage 2 environmental approval, FID, and the capex pace after 2027.
• PPG RiGl application progress, minority equity partner selection, offtake agreements, and project financing arrangements.
• Ganfeng's order book, construction support, and China's modular equipment delivery capability.
• Validation of a tight lithium market from energy storage, commercial vehicle, and EV demand.