South American Real Estate News

Argentina is on track to becoming the region’s leading producer and exporter of lithium

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Argentina is competing with Chile, which is South America’s top producer of the mineral lithium, a key ingredient for the production of electric cars. Its rechargeable batteries allow them to retain energy far longer. Consequently, its price has soared more than 30% to a record US$ 12.000 a ton this year.

Since Argentina’s business-friendly president Mauricio Macri took office in December 2015 and opened the country to foreign capital, Argentina has received more investment than any other country in the ‘lithium triangle’ – the border region including parts of Chile and Bolivia that contains over half the world’s known reserves of so-called “white petroleum.”

Australia’s Orocobre, which produces some 14,500 tons of lithium carbonate per year at a mine on the Olaroz salt flat, has announced plans to more than double its total production to 35,000 tons by 2019 in conjunction with its partner Toyota Tsusho Corp.

“There is a real potential that Argentina will leapfrog over Chile in terms of production in five years,” Richard Seville, chief executive of Brisbane-based Orocobre, said during a visit to the mine. “It is going to be a very important player.”

The arid conditions of the lithium triangle high in the Andes, some 4,000 meters above sea level, are ideal for evaporating the brine to leave lithium residue. Argentina holds vast reserves of white dust. Still, for years, its production trailed its western neighbour as investors remained wary of the successive populist governments of Nestor Kirchner and his wife, Cristina Fernandez, from 2003 to 2015.

Argentina is the world’s third-largest producer, with some 30,000 tons per year, but that is less than half of Chile’s annual output of 70,000 tons. Australia, the world’s largest lithium miner, produces 76,000 tons, data from the government show.

Earlier, Argentina’s progressive president, Macri’s government, made lithium a priority, Orocobre and other miners are bypassing Chile and heading for Argentina. “We’re looking to becoming the world’s leading exporter of lithium shortly, ” President Macri said during a recent business forum.

Executives at Canadian miner Lithium Americas Corp, whose US$ 425 million Cauchari-Olaroz development is close to Orocobre’s mine, said Argentina’s lithium output could triple in the next five years.

“The shift in mindset around looking at Argentina more favourably has happened very quickly over the last couple of years, and obviously, that has a lot to do with politics,” said Chris Berry, a spokesman for Lithium America.

Macri’s market-friendly government has eliminated an export tax on mineral products to attract investment to the sector and ended a ban on companies sending profits earned in Argentina back to their overseas headquarters.

According to Benchmark Mineral Intelligence, a consultancy, as sales of electric vehicles grow, demand for ICE is set to increase to 2.4m tonnes in 2030, compared with around 600,000 tonnes this year.

Catamarca provincial Mining Minister Fernanda Ávila shows data up to July of 2022, proving that last month mining exports amounted to US$ 291 million, 15% more than in July 2021, accumulating US$ 2.209 billion in the first seven months of the year, a 31% growth year on year.

The two central mining provinces remain Santa Cruz and San Juan. Santa Cruz showed foreign sales of US$ 1 billion million (45.2% of total exports), and San Juan’s US$ 524 million (23.7%). But in the northwest provinces, the business is picking up pace due to lithium.

While mining exports from Santa Cruz and San Juan increased by 14.9% and 23.3%, those from Catamarca, Salta, and Jujuy, Argentina’s “lithium triangle”, increased by 65% in the same period.

In July, Santa Cruz’s mining exports fell 33.3% year-on-year and were, for that month, the lowest in the last four years. However, those of Catamarca, Salta, and Jujuy combined increased by 131.8%.

These three provinces of northwest Argentina already account for almost 29% of the country’s mining exports, surpassing those of San Juan, and their weight in the last months is even greater. In July, they exported US$ 128 million, almost 35% more than the US$ 95 million of Santa Cruz. In July, lithium sales exceeded silver sales and alone represented 15% of the country’s mining exports.

Although the country’s leading mining businesses are still in San Juan (Veladero) and Santa Cruz (Cerro Vanguardia, Cerro Negro, Cerro Moro), focused on gold and silver, lithium deposits such as Salar de Olaroz and Pirquitas in Jujuy and Lindero in Salta are already on the map, and the multi-million dollar project of the Chinese company Ganfeng Lithium, which at the beginning of July bought for US$ 962 million the rights of Lithea Inc. over two lithium salt ponds in Salta, which, unlike Catamarca and Jujuy, still does not export the “white gold”. Ganfeng is one of the battery suppliers of Tesla, the world’s leading electric vehicle manufacturer. And China accounts for 80% of the world’s battery production: 558 GWh in 2021, compared to 44 GWh for the USA and 28 GWh for second-placed Hungary.

The United States is also very interested in Argentine lithium. A year ago, a study by the Center for Strategic and International Studies (CSIS) pointed out that Argentina “is the most promising case for the expansion of the lithium industry”. The country, the study emphasized, has the second largest reserves in the world, behind Bolivia, and the third largest “commercially viable” reserves, behind Chile and Australia, and highlighted two operations in progress, in Jujuy and Catamarca: the Olaroz and Hombre Muerto salt flats. The study, signed by Ryan Berg, Senior Researcher at CSIS, underlined that the country is the main supplier of lithium to the USA, and based on official data, it specified that between 2016 and 2019, 55% of the lithium imported by the USA came from Argentina, followed by Chile (36%) and China (5%).

Behind this dynamism of lithium is the so-called “energy transition”, concepts such as “electromobility”, phenomena such as Tesla, with an impact on the global automotive industry, and the increase in the prices of minerals needed to manufacture batteries, such as nickel, graphite, and lithium. According to Trading Economics, in the last twelve months, the price of lithium carbonate increased 335% while the price of gold and silver fell 5% and 21%, respectively.

Mining exports still do not have a great weight in Argentina’s exports: in the first seven months, they accounted for little more than 4% of the total. But it is one of the sectors (the others are Energy, Agroindustry, and Knowledge Economy) to which the economic team headed by Sergio Massa is betting to attract international investments with export projection. The main limitation is the exchange rate regime and how unattractive it is for foreign investors to bury capital in a country that does not provide secure access to foreign currency.

Gold (61.5%) and silver (38.3%) account for more than 99% of Santa Cruz’s mining exports, while gold alone accounts for 96.5% of San Juan’s exports. In the northwestern provinces, the basket is more balanced and is shifting towards lithium, which in the first seven months of the year accounted for 52.7% of mining exports, compared to 24.3% for gold and 15.7% for silver.

As for the destination of exports, Switzerland (35.2%), the USA (33.1%), and Canada (21.9%) absorbed more than 90% of gold and silver exports from Santa Cruz and Switzerland (51.4%) and India (45.1%) more than 95% of those from San Juan. The “lithium triangle” provinces have a more diversified clientele: they sell 25.7% of their minerals to the USA, 24.8% to China, 17.2% to Japan, 10.3% to South Korea, and 22% to the “rest of the world”.
(Source: Infobae)

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