Lithium Argentina AG

6. INVESTMENT IN CAUCHARI-OLAROZ PROJECT

As at June 30, 2025, the Company, Ganfeng, and JEMSE hold 44.8%, 46.7%, and 8.5% equity interests, respectively, in Minera Exar, the company that holds all rights, title, and interest in the Cauchari-Olaroz project, located in the Jujuy province of Argentina.

JEMSE acquired its 8.5% equity interest in Minera Exar in April 2021, which was divided as 4.2% from the Company and 4.3% from Ganfeng. The right to acquire this 8.5% interest was initially granted under a letter of intent signed in 2012, in compliance with the Province of Jujuy's regulations concerning government participation in mineral projects. As part of the closing of the JEMSE transaction, JEMSE has agreed to reimburse the Company and Ganfeng their pro-rata share of $23,496 (8.5%) for the equity financing provided for the construction of the Cauchari-Olaroz project in prior years. This reimbursement will be made through the assignment of one-third of the dividends otherwise payable to JEMSE in future periods. Annual dividend distributions by Minera Exar to all shareholders, including JEMSE, will only be considered once Minera Exar has met all project debt commitments for the Cauchari-Olaroz project. As of June 30, 2025, the carrying value of the long-term receivable from JEMSE was $8,291 (2024 – $7,935).

The Company’s operations related to Cauchari-Olaroz are conducted through its equity investees, Minera Exar and Exar Capital, which are governed by a shareholders’ agreement between the Company and Ganfeng. The shareholders’ agreement regulates key aspects of the governance of the project and provides the Company with significant influence over Minera Exar. Under this agreement, the Company and Ganfeng are entitled to the project’s production offtake on a 49%/51% basis. Construction costs were also shared on the same 49%/51% pro rata basis between the Company and Ganfeng.

The Company and Ganfeng are 49% and 51% shareholders, respectively, in Exar Capital, a company that provides shareholder financing to Minera Exar. Minera Exar and Exar Capital are accounted for using the equity method of accounting (the investment in Minera Exar and investment in Exar Capital together, the “Investment in Cauchari-Olaroz project”).

In Q2 2024, Lithium Argentina and Ganfeng, as the shareholders and lender of Exar Capital, provided an irrevocable commitment to Minera Exar that they would not seek repayment of the amounts advanced or loaned to the Company for a period of twelve months from July 1, 2025.

Investment in Cauchari-Olaroz Project

Changes in the Investment in Cauchari-Olaroz Project are summarized below:

As of October 1, 2024, Minera Exar determined that commercial production had been achieved for the Cauchari-Olaroz project after reaching elevated production levels for a sustained period. As a result, the Cauchari-Olaroz project’s assets were considered ready for their intended use, and depreciation of these assets commenced on October 1, 2024.

The following is the condensed financial information of Minera Exar on a 100% basis, as amended to reflect the Company’s accounting policies.

As of June 30, 2025, Minera Exar’s outstanding third-party debt amounted to $257,537 (2024 – $210,400), while its cash balance was $24,995 (2024 – $11,190). The total debt includes the following:

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Approximately $135,000 from major international banks, secured by guarantees and standby letters arranged by Ganfeng. The Company has also provided a guarantee to Ganfeng for its 49% share, amounting to $66,150, for these loans. The Company and Ganfeng have negotiated a three-year extension of the maturity of $100,000 of these loans, which is subject to regulatory approvals.

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$18,000 in loans secured by local bank guarantees arranged by Minera Exar, due in 2025.

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$54,537 in third-party unsecured loans, due in 2025.

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Approximately $50,000 in unsecured bonds issued by Minera Exar in November 2024, carrying a contractual interest rate of 8% with semi-annual interest payments. The bonds’ principal will mature in two tranches: the first tranche of $25,000 on May 11, 2027, while the second tranche of $25,000 on November 11, 2027.

As of June 30, 2025, Minera Exar also had an undrawn balance of $85,000 available under one of its bank debt facilities, of which $23,000 was drawn subsequent to period end. This facility is secured by guarantees and standby letters of credit arranged by Ganfeng. The Company has also provided a guarantee to Ganfeng for its 49% share of the facility, amounting to $11,270.

Minera Exar has to settle the loans provided by Exar Capital and PGCo in US$ with sufficient Argentine Pesos (“ARS$”) at the implied market exchange rate. This settlement mechanism requires Minera Exar to repay the loans with more US$ at the official exchange rate. Since the repayment mechanism for the USD loans provided by Exar Capital and PGCo to Minera Exar is linked to the implied market foreign exchange rate in Argentina rather than the official foreign exchange rate, it results in an embedded derivative in the loans payable by Minera Exar. The fair value of this embedded derivative fluctuates with changes in the spread between the implied market exchange rate and the official exchange rate. During the second quarter of 2025, changes in Argentine foreign exchange regulations caused the implied exchange rate to converge with the official rate, resulting in a gain of $96,512, which was recognized in the other income line item in Minera Exar’s condensed statement of comprehensive income/(loss). This gain partially offset derivative losses recognized in the first quarter of 2025. Other income for the second quarter of 2025 also includes a deferred tax expense of $35,448.

As of January 1, 2025, the Company’s investment in Minera Exar was $Nil, and its investment in Exar Capital was $32,919. For the six months ended June 30, 2025, the Company’s share of the losses of Minera Exar and Exar Capital were $1,036 and $923, respectively. Since the Company’s investment in Minera Exar was $Nil as of January 1, 2025, it did not recognize its share of Minera Exar’s losses for the period. The accumulated unrecognized share of Minera Exar’s losses as of June 30, 2025, was $27,079 (2024 – $26,043).

As of June 30, 2025, the carrying value of the Company’s investment in Minera Exar remained $Nil, and its investment in Exar Capital was $31,996.