Lithium Mining in Argentina: A Prime Investment Opportunity

Is Argentina a feasible lithium investment target?

In the Fraser Institute's 2021 Annual Survey of Mining Companies, Argentina ranked in the bottom ten for both investment attractiveness and policy perception. However, one should not judge an investment opportunity on a single set of metrics without context.

For one, Argentina is home to the Salar del Hombre Muerto salt flat, one of the world's largest and richest lithium deposits. Salar del Hombre Muerto also has the benefit of an extremely favorable climate; the region is hot and dry year-round, which lends itself incredibly well to lithium brine extraction.

Argentina is also considerably more attractive for Australian investors compared to investors from other regions.

The country has a long history of collaboration with Australia across multiple sectors. Several bilateral and free trade agreements exist to encourage mutual investment, and Australian citizens entering Argentina for business or tourist activities do not require a visa. Additionally, there are agreements in place to avoid double taxation and promote technological and scientific collaboration between the countries.

It's also noteworthy that Argentina maintains no special restrictions on foreign investment, nor are there taxes on exports or currency controls on the dollar. Another benefit is that Australia and Argentina are members of multiple trade organizations together, including the Cairns Group, Forum of East Asia-Latin America Cooperation, G20 and the World Trade Organization. From 2016 to 2021, approximately AU$1 billion was invested in Argentina by Australian companies.

Last but certainly not least, Argentina has not identified lithium as a strategic resource, a designation that would mean the government would look to control it. This represents a considerable advantage from a development perspective. Do note, however, that there is a chance this may change as Argentina's lithium market continues to develop. Later investors and mining companies may not be able to take advantage of current regulations.

Current lithium projects in Argentina

As established earlier, there are currently two producing lithium mines in Argentina, and it is anticipated that roughly US$4.2 billion in combined investment will come into its lithium market over the next five years, which would allow the country to roughly double its production by 2025. This means that Argentina will have an important role to play in meeting the growing demand for the battery metal.

Located in Argentina's northern Jujuy province, the Olaroz lithium facility is roughly 230 kilometres northwest of the capital of Jujuy. Owned and operated by Allkem (ASX:AKE) — formerly known as Orocobre — it began as a joint venture with Toyota Tsusho (TSE:8015). The site enjoys favourable environmental conditions and direct access to gas pipelines, highways, electrical infrastructure and three major seaports.

Argentina's other producing mine, Fenix, is situated in Argentina's Catamarca province. The project is operated by Minera del Altiplano, an Argentine subsidiary of US-based Livent (NYSE:LTHM). In 2019, it produced roughly 17,000 tonnes of lithium carbonate and 4,000 tonnes of lithium chloride.

Argentina has also attracted interest from major players, including Rio Tinto (ASX:RIO) and Posco (NYSE:PKX,KRX:005490). Most investments are focused on the country's northern provinces, which have in recent years emerged as a hub for greenfield lithium projects.

Unsurprisingly, Rio Tinto is one of the largest players, having put forth more than $800 million of investment capital to acquire the undeveloped Rincon lithium brine projects in Salta province. Posco, meanwhile, committed nearly as much to the construction of a lithium hydroxide plant at Salar de Hombre Muerto.

Galan Lithium (ASX:GLN) is another company operating in the region, and it could be a good path for investing in Argentine lithium production. The development and exploration company currently has two promising projects situated on the Hombre Muerto salt flat.

The first project — the Hombre Muerto West (HMW) — consists of licences along the western margin of Hombre Muerto, including Rana de Sal and Pata Pila, both of which cover large alluvial fans adjacent to Livent's holdings. The latest mineral resource estimate (October 2022) indicates 5.8 million tonnes contained lithium carbonate equivalent (LCE) at 866 milligrams per litre (mg/L) lithium, a more than 150 percent increase from its 2020 mineral resource estimate. The project continues to retain its high-grade, low-impurity profile.

Galan's Candelas project comprises a 15 kilometre by 3 kilometre valley-filled channel that has been predicted to host a substantial volume of lithium brine. Preliminary tests indicate that it has the potential to become a world-class soluble lithium deposit. Candelas contains an estimated 685,000 tonnes of contained LCE at 672 mg/L lithium, which in combination with HMW, brings Galan’s total resource to 6.5 million tonnes at 839 mg/L lithium.

“Lithium is an important commodity for Argentina’s economy, we feel that Galan is part of the solution towards a prosperous future for Argentina,” said Juan Pablo Vargas de la Vega, managing director of Galan Lithium. “Therefore, we expect the industry to enjoy continuing support from both federal and provincial governments as we progress our projects into production.”

As of this writing, the company has submitted an application to significantly increase the scope of the HMW pilot plant to 4,000 tonnes per year LCE. If the application is successful, the construction of a 120 hectare evaporation pond system could begin by mid-2023, which would allow Galan to accelerate the ramp-up of brine evaporation at the HMW project. The scaled-up piloting is expected to deliver targeted first-phase, high-quality 6 percent lithium concentrate on a semi-commercial scale. It is also designed to de-risk the targeted, full-scale pond construction methodology and evaporation path, as well as provide better defined cost information for the final HMW project capital and operating estimates, according to a company press release.

Takeaway

For Australian investors, Argentina represents an incredibly compelling target for lithium investment. The country is currently in the midst of its own lithium gold rush, with countless Australian mining and exploration companies staking their claim in its northern regions. Moreover, as the market continues to grow, so too will its potential.