New Mining Deal to Boost Lithium Production in Argentina

Argentina might be one step closer to becoming a leading exporter of lithium. Last week, the country’s federal government signed a new mining act aimed at attracting foreign investment, and it is expected to boost lithium production over the next five years.
Introduced by President Mauricio Macri, the deal is expected to increase foreign investment in Argentina’s entire mining sector to $25 billion by 2025; that’s on top of the $3 billion already confirmed for 2017 to 2018. Last year, the country received $1.5 billion for lithium projects alone, and was able to increase its total lithium production by nearly 60 percent.
“[Mining] is an activity that could be one of the pillars of job creation,” Macri said at a signing ceremony. “We can develop it with perfect care of the environment.” Currently Argentina is the world’s third-largest lithium-producing country, accounting for 16 percent of production at 29,000 tonnes.

The agreement will set a 3-percent cap on the royalties that mining companies pay to Argentina’s provinces. Provinces will be able to tax miners an additional 1.5 percent on their sales for local infrastructure funds. The new mining act has yet to receive approval from Congress, but was signed by most Argentinian provinces except Chubut, La Pampa and La Rioja.
Since becoming president in 2015, Macri has removed the currency and capital controls and taxes introduced by his predecessors; those actions have largely been seen as wins for the mining industry. In fact, about 40 foreign companies began to consider opportunities in Argentina’s mining industry after the changes, more than half of those in lithium, according to Mining Secretary Daniel Meilan.

What’s ahead for lithium production in Argentina?

As the boom for electric cars continues, global lithium output is expected to reach 400,000 to 500,000 tonnes by 2025. As mentioned, Argentina currently produces 16 percent of the world’s lithium at 29,000 tonnes; however, the country has said it sees its output reaching 145,000 tonnes in 2022.
The new mining act will be important in making that increase a reality, but many market participants believe it is a possibility. John Kanellistas, president of Lithium Americas (TSX:LAC), recently said that “the world is focusing on Argentina,” while Alex Losada-Calderon, CEO of Sales de Jujuy, told The Economist that his company is “in expansion mode” in the country.
According to Meilan, there are 35 companies exploring and developing lithium projects in Argentina. The four projects he sees coming online the soonest are:

• Orocobre’s (TSX:ORL) Salar de Olaroz expansion, which is expected to increase output from 17,500 tonnes to at least 35,000 tonnes.

• Lithium Americas’ Salar de Cauchari, which is estimated to reach 25,000 tonnes by 2019.

• Galaxy Resources’ (ASX:GXY) Salar del Hombre Muerto, which could produce 25,000 tonnes by 2020.

• Eramet’s (EPA:ERA) Centenario and Ratones, which could add another 20,000 tonnes.

Other major lithium companies currently operating in the country include SQM (NYSE:SQM), Albemarle (NYSE:ALB) and FMC (NYSE:FMC).
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.