Lithium Americas' (LHMAF) CEO Tom Hodgson Reports on Results of Annual General Meeting (Transcript)

| About: Lithium Americas (LACDF)

Lithium Americas Corp. (LHMAF) Results of Annual General Meeting Call April 1, 2016 10:00 PM ET

Executives

Tom Hodgson - CEO

John Kanellitsas - President

Analysts

David Talbot - Dundee Capital Markets

Javier Martínez - Morgan Stanley

Alec Meikle - Cormark Securities

Cesar Perez-Novoa - BTG Pactual

John Hill - Cambrian Capital

Operator

Good morning. My name is Lindsey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lithium Americas Conference Call hosted by Tom Hodgson, Chief Executive Officer and John Kanellitsas, President. All lines have been placed on mute to prevent any background noise. There will be a question-and-answer session after the update.

Thank you. Mr. Hodgson and Mr. Kanellitsas, you may begin your conference call.

Tom Hodgson

Thank you, Lindsey, and welcome everyone. We appreciate you taking the time this morning to dial into our call for a brief update. I have to begin the call with one formal matter and that is to remind you that we will be making forward-looking statements on the call. I won’t read to you our cautionary note, I'll just ask you to refer to what’s on our website in that regard.

We did a call a few months ago and it did not included a question-and-answer session because we knew that there would be a whole bunch of questions that we weren’t in a position to answer at that time. This is a different situation today. Obviously we have made a fairly major announcement earlier this week by the joint venture with SQM. We've had very, very positive feedback on that from some major players in the industry and major institutional investors and we wanted to take this opportunity to talk to you about it and to try to answer any questions that you have. I'm sure there will be some questions that we’ll have to take the same position and it's too early for us to answer, but we’ll do our best.

What's this deal about? The deal is about a path to production and a path to cash flow and critically an important minimizing execution risk. Building a Lithium mine is not a trivial undertaking and there are quite a number of examples over the last five years of parties that have tried and who either failed or have experienced significant delays and startup problems. We in our discussions with various parties, we’re really focused on trying to minimize that execution risk. And I don’t believe we could have found a better partner anywhere in the world in that respect than SQM. They are the largest producer of lithium from brine in the world. Their project in Atacama is a couple of 100 miles away from ours, it's very physically approximate and they've got 20-some years of experience on the ground producing lithium carbonate from a resource that is somewhat similar to ours, certainly we use similar processes, and we think that they are truly an exceptional partner and we’re very, very pleased to consider them a joint venture partner.

I think it's fair to say that they are familiar with most of the lithium brine salars in the world and did intensive due diligence on ours before we entered into the documentation stage of our deal and came to the conclusion that this was a project that could support production of 40,000 tonnes a year. That makes it a very major project and obviously it will take some time to get to that level of production but it will be a big project and our 50% continuing ownership stake in it would be a very, very valuable asset for our shareholders.

A couple of questions we've had, one is how could you guys be so stupid to sell a 50% stake in this wonderful asset for $25 million. Well, the answer is that we believe the effect that this transaction has on the value of our remaining 50% is enormous. It gets us on to that path to production, and it gets us on to that path to cash flow in a very, very low risk way.

We published -- as you may well know we published a definitive feasibility study in 2012. And that focused on a production level of 20,000 tonnes per year. I would note that in putting that feasibility study together we referred to the maximum extent possible to the approach taken by SQM in Chile because they really are the undisputed world leader in production of lithium carbonate from brine. And the economics of that definitive feasibility study were very, very positive.

So our 50% share of the new Joint Venture equates actually pretty closely to the feasibility study numbers that we published in 2012, 50% of 40,000 equates to the 20,000 tonnes that were reflected in that feasibility study. Have things changed since then? Yes of course. The cost of some of the inputs has gone up, but the price of lithium carbonate has also risen significantly from what was reflected in that definitive feasibility study. So this transaction is not about $25 million, this transaction is about getting the project into production on a timely basis, on a large scale with absolutely a world class partner who is the leading producer in the world right now of the product that we are talking about.

The other question has been raised to me by some of our investors is, well how do you know that SQM didn’t do this deal just so that they can the project on ice? In fact, they have no intention of developing it and they just want to keep competition out of the market.

Well, we are absolutely, 100% certain that that’s not the case. This represents a very major growth opportunity for SQM as it does for us. And some of the research that’s been published this week about SQM really drives attention to the incremental benefit that will come to their shareholders as well from exploiting this asset and doing it on a timely basis. Having said that, our fiduciary duty is to our shareholders and in the detailed minutia of the documentation are protection mechanisms, if for any reason SQM decides in the future that they don’t want to move forward with the project. If we thought that was a risk of any significance we wouldn’t have done the deal. We have spent a great deal of time with SQM management, they have spent a great deal of time at our salar in Argentina and we are absolutely certain that this project is going to move forward on a timely basis to our mutual benefit very soon.

This is all in the background, the other big macro event that’s going on right now, maybe I should say Macri instead of macro, is the changes that are being experienced in Argentina as a result of the change of government late last year with the election of President Macri, as President of Argentina. It's been a remarkable and incredibly positive evolution in a very short period of time. The first week that President Macri was in office, the government abolished most export duties on agricultural commodities and others, and notably that included Lithium. So that was very positive.

Two or three weeks into the new administration, they abolished the foreign exchange controls that have been in place for a number of years in Argentina and really made it very obvious that they are focused on increasing capital inflows into Argentina, in order to do that, you have to be able to have capital outflows take places well. And most recently, the renegotiation or I should say the negotiation with holder to bond holders from 2003 default that Argentina was engaged in and the new administration has negotiated a settlement on those funds and I know that yesterday that that settlement was approved by the center in Argentina. So I think all the road blocks are now out of the way and we will start to see major capital inflows into Argentina. Argentina back in the world of commerce in a major way and we're very, very encouraged by the changes both at the federal level and prevention level focused on the new development.

So this is major double whammy for us in terms of having an exceptional partner come to the table and in terms of dramatic improvement in the local economic environment that we're dealing in. We're incredibly excited and this is going to be very, very positive for Lithium Americas and we believe our shareholders. And that might conclude my introductory comments.

John, do you want to add anything before we open the floor to questions?

John Kanellitsas

No, Tom, I don't think you are stupid. I think that the -- just to reaffirm, the notion and that’s really what was driving, there are lots of criteria that go into selecting a strategic partner, and we've been very -- I think we've communicated very clearly that we were examining a number of different options to advance Cauchari and at the end of the day, the highest criteria was this notion of de-risking and technically, commercially and then as with the changes in Argentina, we think we're very fortunate with that, we've de-risked dramatically any types of financing risk. Tom, maybe one thing you could comment on though would be the -- perhaps the immediate next steps with respect to the work plan and the timeline, then I think maybe we can turn it over then to questions.

Tom Hodgson

Sure, so what will happen, we have created a new board for our Argentinean subsidiary Minera Exar and two members from SQM, two members from Lithium Americas, we will be working on very high and together over the next few months to update our 2012 feasibility study, as I mentioned earlier we had done that feasibility study trying to basically copy the SQM approach to producing lithium carbonate, so I don't see dramatic changes other than as we referred to you before, the increase in capacity from 20,000 tons to 40,000 tons. We may indeed decide to stage that capacity, it might be that together we and SQM decide that we're going to start with 20,000 tons and then add another 20,000 tons two or three years later, that will be driven by market demand among other things.

So over the course of the rest of this calendar year, we would expect to update that definitive feasibility study and to agree a detailed business plan with SQM that would be the basis for it's to agree a detail business plan with SQM. They would be at the basis for our project moving forward in the foreseeable future and it would be the basis for arranging financing. This financing on the project is by no means finalized, it will include a significant portion of project debt and then each of SQM and Lithium Americas would be responsible for raising their share of the equity, but if I anticipate a question and it may well be coming in the next 20 minutes or 30 minutes, we don’t know what it's going to look like in detail.

We've run internally various scenarios to make sure that they were all things what we were comfortable with, but were not in a position at this stage to put at any numbers or really speculate on what it might look like in detail.

John Kanellitsas

We can take questions now.

Tom Hodgson

Yes. Lindsey maybe we can open it up to questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of David Talbot with Dundee Capital Markets. Your line is now open.

David Talbot

Just a couple of questions here. Who controls the marketing of the lithium carbonate production? As this is something you guys will be able to sell your share of. Is there any desire to go to lithium hydroxide at this stage?

Tom Hodgson

Okay, well those are both great questions and to be honest and Dave I actually meant to address the marketing aspect so I’m glad you raised it. Clearly that's another major benefit of the SQM relationship. SQM has a worldwide network of sales force and relationships with most if not all of the major consumers of lithium carbonate around the underworld. And we will have -- absolutely have the ability to piggy back on that network and to have the product distributed through that channel.

We also retain the ability to take our share of the output in kind, if we have a particular use or a particular application or a particular group of clients that we want to deal with directly that's written into the deal. So in my mind it's kind of the best of both worlds. I’m expecting that we will absolutely take advantage of the existing sales network that SQM has, but having the ability to take the product is an important asset of the relationship as well.

David Talbot

Okay. Would there would be a price raise on product that's delivered to SQM clients?

Tom Hodgson

I don’t believe so, and again the details of some of these arrangements haven’t been fleshed out and that hasn’t been the basis of our discussion to date.

David Talbot

Okay. And then --.

John Kanellitsas

And same with hydroxide versus carbonate as well. We will determine that, that's part of the business plan or the work plan that we - that Tom described over the next number of months as the feasibility study has been updated that's the exact types of questions we’ll be determining, the market is obviously -- in the lithium space, is so dynamic right now, it is moving so quickly, there could be no better counterparty with insights into exactly what's happening there than SQM with again as Tom said they have boots on the ground globally with every lithium user. So we will make a market call collectively and make some of those decisions in the next few months. It’s becoming very important obviously.

David Talbot

Okay. Thanks for that. Just sort of piggy backing on that notion. In the call you mentioned that SQM uses similar processes to what you've planned at Cauchari, will this upcoming DFS flow sheet sort of mimic those old plans or is there something new that SQM can bring forth as far as technology goes, something that might speed up path to production here or lower cost further?

Tom Hodgson

Look, SQM is sort of in a continues improvement mode and of course when we did the 2012 feasibility study we didn’t have direct current access to SQM's production methodology or technology. They have made significant enhancements, they have focused on being the low cost producer. We think it's really important in pretty much any business to try to be the low cost producer, and so there will undoubtedly be changes from the old DFS that reflect technological improvements that SQM has either made in the last few years, or that we weren’t even aware of in 2012 when that original report was done.

David Talbot

Okay, been nothing earth shattering, it’s still [indiscernible].

Tom Hodgson

No, you can assume evaporation ponds and what we would refer to industry [approach] [ph] is the traditional process. State of the art of course, but it would -- versus an alternative process as you know we’ve explored as well.

David Talbot

Okay, thank you, guys.

Operator

Your next question comes from the line of Javier Martínez with Morgan Stanley. Your line is now open.

Javier Martínez

So, I like to ask you three questions if you don’t mind. The first one is on to the second point you mentioned, did you already have any kind of broad agreement on CapEx and the amount of money that is going to be invested and the timing? Given the Board composition that you mentioned what happens if there is a disagreement on those on the amount of money or timing of that and money to be deployed, do you have any breakup clause if you don’t get an agreement? That will be my first question.

Tom Hodgson

There is a dispute resolution mechanism built into the agreement. The detailed agreements will all be filed on SEDAR in fairly short order. And they have been drafted very carefully to - as all of these contracts should be, to contemplate worst case scenarios and make sure that it's still okay for Lithium Americas and our shareholders.

Do we expect that? We don’t expect that based on the working relationship, the time we have spent with SQM management, understanding their philosophy, working together with them to working through the negotiations, it’s been a very constructive, positive experience for us and that gives us great confidence that their objectives and perspective are very, very similar to ours. Well we have disagreement? Undoubtedly. Will they be in any respect fatal or seriously problematic? I’d be very, very surprised if that’s the case.

We have had privately with them discussions about anticipated CapEx and OpEx, can't comment on them at this stage, they will be of course reflected in the updated DFS that we produce later this year. I think the only thing I can say is that we are comfortable and that the focus on capital efficiency and attempting to be a low cost producer is absolutely critical to SQM’s approach and it's critical to our approach and we think that it will, when the numbers are released that they are likely to be ones that don’t represent huge funding risk.

John Kanellitsas

You had a couple of other questions Javier?

Javier Martínez

Yes, sure and then I would like to also understand better the industrial part of the agreement. So the lithium salt is going to be processed into whatever lithium carbonate or whatever, but this going to be done in Argentina or in Chile or you don’t know?

Tom Hodgson

No, it's going to be done in Argentina. It’s going to be done on site.

Javier Martínez

So part of the project is to build an industrial facility?

Tom Hodgson

Correct.

Javier Martínez

Yes, okay. And then finally, I would like to understand or maybe you can do some comments on what is the situation in terms of the communities who are part of the project, is there any issue which we should be aware of?

Tom Hodgson

No, I have to tell you that one of the things that I'm most proud about of our history, in our current situation in Argentina is the incredible relationship that we have with the local communities. We've entered into a few years ago contractual arrangements with them, but the relationship that exists with the project, it couldn't be more positive and of course it represents a major employment opportunity and we're very strongly committed to the local communities as well as to the people of Jujuy generally, but no, no issues with the local communities.

John Kanellitsas

I think Tom, we should maybe further to that, because one question has come up, which is why doesn't SQM just buy the entire company. And the answer of course is that the entire company wasn't for sale, but SQM does joint ventures all over the world and they have a certain model or template they follow, and as much as the technical due diligence is important, also the social due diligence, they absolutely require a strong local partner which again as Tom said we're very proud of our team there at Minera Exar and the relationships they have and the reputation, but that is absolutely critical to the success in any of these projects, SQM recognizes that and again it was fundamental to the entire discussion.

Tom Hodgson

That's a very important point.

Javier Martínez

If I may ask something that's not on the line, so do you plan to produce potash as well or any other by-product?

Tom Hodgson

Absolutely, yes. There is about 2:1 potash ratio and so at full production we would be producing around 80,000 tons of potash per year.

Javier Martínez

Fantastic. Thank you.

Operator

Your next question comes from the line of Alec Meikle with Cormark. Your line is now open.

Alec Meikle

I was just hoping you could maybe clarify more of this joint venture agreement and explain to me, is there any change of control restrictions or is there any restrictions on selling your 50% stake in this JV or is that open for some follow on transaction at a later date?

Tom Hodgson

There is no change of control restrictions as it relates to Lithium Americas, the parent company and there are certainly -- there are provisions that apply on nature of the first right of refusal. If we wanted to sell our 50% remaining stake in Minera Exar, we have no intention of selling our 50% stake in Minera Exar, but certainly if that ever happened in the future, SQM would have an important right to pick it up.

John Kanellitsas

But this is at the Minera Exar, Alex, this is all done at Minera Exar level not at the Lithium Americas corporate level.

Alec Meikle

Okay.

John Kanellitsas

That's a different -- there are no restrictions covenants at all with LAC.

Alec Meikle

And is there anything in that joint venture agreement that prohibits at more M&A in Argentina or anything that we should be aware of just in terms of how that general agreement is restructured?

Tom Hodgson

No, I'm not certain if I understand your question totally, but we're certainly free and for the Minera, SQM is free to be involved with another project in Argentina.

Alec Meikle

Okay, that's helpful.

Operator

Our next question comes from the line of Cesar Perez-Novoa with BTG Pactual. Your line is now open.

Cesar Perez-Novoa

Thank you. Good morning, gentlemen and congratulations for the partnership with SQM. For those acquainted with the Lithium Americas story. Could you quickly review project economics for coming out from the 2012 feasibility of study, and I also have a second question let's assumed that your updated feasibility is concluded by yearend 2016. What timeframe do you envision on construction ramp up and product delivery to the market? Thank you.

Tom Hodgson

John do you want to address that one.

John Kanellitsas

We could spend a lot of time on that, it's Page 11 of our corporate presentation, which is on our website. The Cauchari is widely considered the third largest brine resource in the world, we’re fully permitted and we like to say shovel already. So as soon as the feasibility study and the work plan is complete, we have our business plan settled and let's assume the end of 2016, we could update permits and begin construction immediately, and we are both parties are on an aggressive timeline, so you could expect and it would then follow a traditional timeline that these projects have which again we would expect much less execution risk, much quicker commissioning et cetera, as the technical side would be led by our partners at SQM.

But the original feasibility study from 2012, which used $5,900 as a price of LCE for the first 10 years. Give you an idea of how far things have come since then. It was for a LCE lithium carbonate production of 20,000 tonnes and that potash production as Tom said about 2:1 or 40,000 tonnes, a mine life of 40 years. Capital cost are just under -- over $300 million and that would equate back then to annual revenues of $175 million or 20% IRR NPV after tax using a 8% discount rate of just under $500 million.

So obviously since then the price of LCE has gone up these are fantastic margins and a very impressive cash flow model using just very simple arm waving assumptions. Is long as you are producing right, I mean these are all the great models all of these feasibility studies looks fantastic. The margins are there in the industry, but you need to be producing and that again back to reaffirming that's the entire objective of our board. We want it to be in the Lithium business in the production side generating cash flow to be a factor in this market and quite frankly to play a role in this fantastic energy revolution which is occurring.

Cesar Perez-Novoa

Great, okay fair enough. Thank you.

Operator

Your next question comes from the line of Rob Kelly [ph], a shareholder. Your line is now open.

Unidentified Analyst

Good morning gentlemen from California, a couple of questions. You kind of addressed, but who actually controls this board? You've kind of talked about the makeup of the board, but when push comes to shove is it still controlled by a subsidiary of Lithium America or is it now totally 50-50?

John Kanellitsas

Nobody controls Board.

Tom Hodgson

Yes, go ahead John.

John Kanellitsas

It's a 50-50 forward composition. Two Directors from each side, which represents the economic interest the Chair of the Board, President our current of President of Minera Exar, Franco Mignacco will continue in that role for two years. The Board will elect a Chair after that first two year term. As Tom said, there is a prenuptial agreement in our marriage, that’s all in place, you will see it in a shareholder agreement, when it's files. Certain decisions would be unanimous, certain decision simple majority and ties there is a dispute resolution.

Tom Hodgson

It really -- I mean it's -- I think it's critical to say that the approach that we are both taking is absolutely in the nature of the 50-50 partnership. It's not either side being in control, it's absolutely a partnership where we will bring the best assets of both sides to the table. And in SQM's case that includes knowing in detail how to lay out the project on a very cost effective basis and producing the product out of the gate.

On our side it relates to maintaining those critical local relationships both amongst the communities and with the government. And we will both be taking advantage of the expertise and the relationship that the other party brings to the table.

Unidentified Analyst

And then regarding looking -- being forward thinking let's imagine ourselves being at the end of that 2018, are we in production and selling Lithium and if so, at what point does -- how you discussed at what point will be Board be offering dividends, something for example similar to SQM's 50% dividend that they offer to their shareholder, just so I know where to invest next?

Tom Hodgson

I think, again the details of the timeline will be reflected in the updated DFS. I think if you are focusing on late 2018, early 2019 that’s probably a sensible focus for getting into production. In terms of exactly when that is going to translate into dividends been paid by Lithium Americas Corp to its shareholders. I think you’re going to need to be a little bit more patient with this Ralph [ph] I don’t want to go out on a limb and have you start banking those dividends just yet. Certainly as we have said repeatedly our focus is on creating shareholder value and we also -- we believe that there is an enormous amount of cash flow that can come from this project. It will be to the benefit of the shareholders and it will include a dividend policy, but that’s something that our Board hasn’t yet turned its attention to. And there is certainly a few years down the road.

Unidentified Analyst

Well, thank you gentlemen appreciated.

Operator

Our next question comes from the line of Nigel [indiscernible], a Private Investor. Your line is now open.

Unidentified Analyst

I have got three questions, in the press announcement following the AGM, Mr. Ireland is quoted to saying and lastly we have a restructured Board of Directors with a very strong expertise in corporate governance. To judge from the Company's documentation filed with SEDAR, I noticed that four independent Directors apparently decided as a group and without giving much notice to the Company that they would not stand for reelection.

In fact the decision was apparently made so late in the day that there was no time to let shareholders know, but all forth the non-executive, independent Directors who were also Chairs of the three permanent Board committees would not be standing be reelections. Instead the company decided to proceed with just five board members and four vacancies, that's of course completely annulling the responses in the corporate governance sections and the management information circular.

After the meeting had terminated, I noticed the three new comers to the company, or apparent new comers to the company were co-opted to the Board. I can't believe that the company had so little notice of these events that it could not notify shareholders or that it’s still to submit the new appointees to a vote of the AGM. One item I noticed was that all four nonexecutive independent directors and no others were granted stock options, supposedly immediately in October.

So, it looks like this was planned, to the untrained observer, and I'm not sure that these actions actually coming to Mr. Ireland’s boast of having a very strong expertise in corporate governance, that's a first one, do you want to go with that, or do you want the other two?

Tom Hodgson

I'm curious, give us the other two.

Unidentified Analyst

Well, the other two are much less involved, second question is, have the changes in the ownership of the company that occurred over the last year triggered the change of control clauses in the contract or agreement of the five gentlemen, the first one of which I can't pronounce his name, the other four are Epistine, Batoly, Brian and Wright [ph] that are referred to on Page 24 and 25 of the managed information circular. And if so, how will the company be funding the £1.5 million to these gentlemen?

And third one, finally, why in the current interest rate environment has the company take on a line of credit, there is an interest rate of 15% per annum and also other cost. I'm sure you could have found other banker willing to lend money at much more favorable rates and again looks -- again to the untrained observer, the regular shareholder, just like inappropriate stewardship of our resources. Thank you.

Tom Hodgson

Okay, thank you, Nigel. You are obviously very diligent shareholder and that's what we should have, those are all good questions and let's deal with them in a slightly different order then you put them forward. Change of control provisions were not triggered by the change in the shareholder base and so --.

John Kanellitsas

Nigel, may be go on mute, put your phone on mute. It's your background noise. Thank you.

Tom Hodgson

So, there is no liability of £1.5 million or anything like that as a result of these changes. The third question on the line of credit, well I would say two things about that Nigel sadly there aren't banks prepared to -- certainly that we know of, that are prepared to provide funding to what I would modestly described as a junior mining company, not yet in production, not yet generating cash flow and before the Board approved that line of credit, it looked very carefully at other precedence and other recent comparable transactions and I can assure that we didn't turned down cheaper money from anybody, we don't believe that it was available and in fact, I think that the terms of that line of credit compare favorably to most financing -- debt financing that have been done by companies in comparable position, in the recent past, we looked at several precedence in negotiating the terms of that line of credit.

John Kanellitsas

Tom, just that line of credit was fantastic terms, let’s be really clear, that was unsecured, that just doesn't exist. We in fact owe a huge amount of gratitude to [indiscernible] research partners for supporting the Company. It absolutely is critical, especially going into the negotiations that we're involved in where counter parties are global, blue chip, multinationals very large companies. They absolutely require a balance sheet strength and George stepped up in a very big way and that is a pattern that is done with Lithium Americas, Western Lithium for a number of years, so that absolutely needs to be stated.

Unidentified Analyst

Okay as I've said really it’s just in the point of view of the untrained eye.

John Kanellitsas

No it’s a very good question and a very fair question and one that the board took very seriously expecting the question would be raised and wanted to make sure they’re in a position where they could defend it categorically and I think that's the case. That line of credit was an important, a very important insurance policy for us, that's how I described it on the last investor call that we had a few months ago. When you get into negotiations like we have just been through with SQM, you don’t know how long they are going to take and to be honest in the early stages you have really no idea whether they’re going to work out or not.

And not to have had that liquidity position available to the company would have put us in a position of great negotiating weakness and so of having it was very much to the benefit of the company, it allowed us to negotiate on an arm swing basis from a position of strength, it wasn’t the case that if we didn’t get this SQM deal done or were going to have to close our doors and everybody knew that and has a the big impact on the way you can approach the negotiation like this, so

Tom Hodgson

And by the way we didn’t draw it down. It's not been draw down and it now is eliminated as well.

Unidentified Analyst

That's good the non-draw, it's still accumulating interest of course isn’t it?

John Kanellitsas

The long draw down is what?

Unidentified Analyst

Even though it hasn’t been drawn down, it's still accumulating interest?

Tom Hodgson

The interest that accumulates only on amounts that are drawn down, there was a small arrangement fee which was paid to secure the facility, but there is no our interest payments due or a prepayment penalties or anything like that.

Unidentified Analyst

And also how I read the MIC, but okay go ahead.

Tom Hodgson

And maybe that language was confusing I'm not sure, but I'm telling you is accurate, I can assure you that.

Unidentified Analyst

Okay, that's good to know.

Tom Hodgson

And your question one, was this all pre-arranged and the options granted and all of that sort of stuff part of some grand plan, categorically not. Options were granted last fall to officers, employees and directors of Western Lithium after the closing of the merger with Lithium Americas. It's not an accurate statement to say that all of the independent directors are no longer with the Company. John Macken --.

Unidentified Analyst

No I did not just say that, but well okay go ahead. John Macken is still with the company?

Tom Hodgson

John Macken is very much inactive continuing member of the Board of Lithium Americas Corp.

Unidentified Analyst

It's not with the support of the holding company or I'm sorry the largest shareholder. Because the number of votes with-held from him as a reappointed Director seems -- but it's the only one that’s that big.

Tom Hodgson

I don’t think to that information as we necessarily have or if we did that we could share. We've certainly unseen the overall results.

John Kanellitsas

I think you can conclude that.

Unidentified Analyst

I'm sorry say it again.

John Kanellitsas

I'm not sure that mathematically can be concluded. But we won't know, there are the fact. It’s a vote.

Tom Hodgson

It's shareholder, democracy and yes that’s what happened. Look with what happened with the other Directors, we did consider the possibility of delaying the meeting. We would have no problems putting forward the new nominees for shareholder approval. We really think they are an exceptional group. There is a six month dead line for a shareholders meeting post fiscal year end, fiscal year end was September 30th, so six months was March 30th, this year.

And we talked to legal counsel and we considered what alternatives existed and whether we want to get regulatory approval to delay the meeting and put out in new circular and incur all of the cost to that. And that wasn’t the conclusion of the best way to handle the situation.

And so the end result, I think is that we have a very good Board in place with a range of expertise that will be very helpful to the company moving forward. The addition of one additional Director from Argentina, very, very well placed and a couple of Canadian appointees both have superb background for helping the Company and overseeing management as we move forward.

Unidentified Analyst

That’s great, they look like very competent Directors, it wasn’t an individual complaint about them? Mostly just the way it was said that -- anyway, I look forward seeing all that good news reflected in the share price.

Operator

Our next question.

Tom Hodgson

Perhaps, we have time for one or two more questions. Operator?

Operator

Our next question comes from the line of [indiscernible] Ray, Private Investor. Your line is now open.

Unidentified Analyst

I was wondering, if you could address whatever happen to the POSCO Lithium Technology and I haven't seen any announcement, are they out of the picture or what's happening?

Tom Hodgson

Well, that’s also a very good question and probably one we should have addressed earlier. We have had a relationship with POSCO now for a couple of years, which included them delivering a pilot plant to [indiscernible] in Argentina. We maintain a very cordial, I think constructive business relationship with POSCO, POSCO is an exceptional high caliber company. It did develop this technology for processing Lithium brine into carbonate and hydroxide, which is very impressive in many respects.

We’re certainly not in a position where we can share with you the different discussions that went on with POSCO versus the discussions that went on with SQM. Obviously, with the conclusion of our management and our Board that SQM arrangement was more likely to be in the long term best interest of the company shareholders.

But we have the greatest respect for POSCO. We will continue to corporate with them, we will continue to explore whether there are aspects of their technology that makes sense to us. SQM has always taken the position that if there is a better way to -- a better technology out there that’s going to reduce cost or increase production, they want to know about it. And so I dare say we will have conversations together and we will maintain a relationship with POSCO.

How exactly that will play in remains to be same, but it's absolutely first rate organization and we have great respect for them. We have enjoyed the relationship that we've had with them over the last couple of years and we went through a lengthy process considering whether, we are to be moving forward with them as our principal partner or with SQM or for that matter in different party as our principal partner in this undertaken.

Unidentified Analyst

Okay. Thank you.

Operator

And our next question comes from the line of John Hill with Cambrian Capital. Your line is now open.

John Hill

Look, there is clearly a lot of alternatives, a lot yet to be learned about the project, but my question is, now we're thinking about 40,000 tonnes for 40 years versus previously 20,000 for 40, how confident are you in the basin, how confident is SQM in the basin and it's facility to support that in terms of flow rates and recharges and changes to chemistry and such?

Presumably, they are fairly confident because they've involved and it's nice saturated basin and so I was just curious in the confidence in the basin to support these higher production rates and also anything you might have learned just from SQM with their set of eyes looking at the property package, have they brought up anything in that regard that is new and different in your opinion?

Tom Hodgson

Great question and let's start with the 2012 DFS. It was prepared on the basis on 20,000 tons of production, that's absolutely accurate, but if you read the resource and critically the reserves sections of that report, it's very clear that the conclusion of the DFS was that this was a project that was capable of producing 40,000 tons for 40 years.

We intended -- when we published the report, we intended to produce 20,000 tons and then a number of years later to expand the 40,000. At that time the lithium markets were strong, but certainly not nearly as strong as they are today. I think it's fair to say and I don't want to put words in SQM’s mouth, but obviously it's reflected in their press release as well as ours, the reference to 40,000 tonnes annual production. I think it's fair to say that an important part of their due diligence was to trying to confirm to the best of their ability that in fact 40,000 tonnes was a sustainable rate of production.

The other comments that would I make are really two, one is that for our 2012 DFS to be 43-101 complaint which it is and it might be the only 43-101 complaint DFS for lithium brand project, the requirements in terms of the precise drilling grid and things like that are prescribed. Our reserve comes from the central one-third of our [indiscernible] and we have drilled at wells in the rest, but not sufficiently close together that they are 43-101 complaint.

There is certainly more lithium out there, it’s not worth spending our money right now to increase the reserve to a longer timeframe than 40 years, but as we're in production of course we’ll be continuing to drill new areas and looking to maintain, a longer term reserves then what we can identify right now [multiple speakers].

The last comment that I’d make is, that SQM’s been production at Atacama for 20 some years and I think it’s a true statement that their reserve is bigger today than it was then by orders of magnitude and obviously that reflects continuous drilling. So we have a high confidence level, but those reserved numbers are reliable.

John Hill

Thank you. Just as a quick follow up as part of putting together business plan with SQM. Do they -- are they going to go conduct some drilling of their own or are they satisfied on the resource in the basin and are they devoting all their efforts to more like the operations, the metallurgical, the plant design, et cetera?

Tom Hodgson

I expect there will be some additional drilling, that doesn’t mean they aren’t satisfied, I don’t believe they would have done this deal if they weren’t satisfied, I'm quite sure of that. But there may well be a few more wells drilled over the course of this year, that's not going to get in the way or slowdown of the process of the completion of the business plan and from the DFS.

John Hill

That's great.

John Kanellitsas

But actually that's the core that's the essence of the update on that, that feasibility so you just can't take it and multiply it by two. There is -- they have taken a complete fresh look at this with the idea of 40, not 20 and their hydrologist -- that was the entire focus of that portion of the due diligence, John.

John Hill

Great, thanks for the color.

Tom Hodgson

Okay well listen thank you we've gone little bit more than a hour now. Thank you very much ladies and gentlemen for taking the time and obviously were incredibly excited about this development and you should look forward to updates as we move forward. So until the next time. Thank you.

Operator

This concludes today's conference call. You may now disconnect.

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