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Argentina’s Lithium Resource Holds Potential to Power the Global Energy Transition
The significance of Argentina's lithium resources is underscored by recent industry movements. For instance, Rio Tinto's (ASX:RIO,NYSE:RIO,LSE:RIO) $6.7 billion planned acquisition of Arcadium Lithium (NYSE:ALTM,ASX:LTM) highlights the growing interest in brine projects and the strategic value of their location within the Lithium Triangle.
This move signals a broader trend of major players recognising the potential of Argentina's lithium deposits.
The Lithium Triangle: A geological profile
The Lithium Triangle, aptly named for its abundance of the lightweight metal, is the world's largest source of lithium. This region holds the key to meeting the surging demand for lithium-ion batteries that power EVs and store renewable energy. Argentina, with its vast salt flats, is particularly well-positioned to capitalise on this demand.
This region’s extensive salt flats are the result of ancient lakes that have evaporated over millions of years. These salars are underlain by vast aquifers containing lithium-rich brines, formed through the weathering of lithium-bearing rocks. The concentration of lithium in these brines is exceptionally high, with some areas reporting concentrations up to 1,500 milligrams per litre (mg/L), significantly higher than deposits found elsewhere. This unique geological formation, coupled with the arid climate that promotes natural evaporation, creates ideal conditions for lithium extraction.
The geological stability of the region, marked by minimal tectonic activity, further enhances its attractiveness for long-term mining operations. These factors combine to make Argentina's lithium resources not only abundant but also economically viable and strategically accessible for extraction.
Argentina's lithium production primarily relies on brine extraction, a method that offers several advantages over traditional hard rock mining. This process involves pumping lithium-rich brine from underground reservoirs and allowing it to evaporate in large ponds, leaving behind concentrated lithium compounds.
The benefits of brine extraction include:
- Lower production costs compared to hard rock mining
- Reduced environmental impact due to less intensive mining operations
- Higher-grade lithium with fewer impurities, ideal for battery production
These factors contribute to Argentina's competitive edge in the global lithium market, making its projects particularly attractive to investors and battery manufacturers alike.
Spotlight on excellence: Hombre Muerto West project
A prime example of Argentina's lithium potential is Galan Lithium's (ASX:GLN) Hombre Muerto West (HMW) project. Located in the heart of Argentina's lithium-rich Salar del Hombre Muerto, this project exemplifies the high-grade, low-impurity brine that makes Argentine lithium so valuable.
Key features of the HMW project include:
- High-grade lithium brine with concentrations of 859 mg/L
- Low levels of impurities, reducing processing costs
- Strategic location near established operations like Livent Corporation's El Fenix site
- A substantial resource of approximately 8.6 million tonnes of lithium carbonate equivalent
The project's proximity to existing operations enhances its value proposition, potentially allowing for shared infrastructure and knowledge transfer. This strategic positioning within the Lithium Triangle underscores the importance of location in the lithium industry.
Wood Mackenzie’s emissions benchmarking service has also placed HMW within the first quartile of the industry greenhouse gas emissions curve, making the project a globally significant, long-term source of lithium.
Argentina's commitment to lithium production
Recognising the immense potential of its lithium resources, Argentina has taken significant steps to foster growth in its lithium industry. The government has implemented a supportive regulatory framework aimed at attracting investment and accelerating project development.
Key initiatives include:
- A $7 billion investment plan to boost lithium production
- Projected export growth from $1.7 billion in 2022 to $5 billion by 2025
- Streamlined permitting processes for lithium projects
- Incentives for companies investing in lithium extraction and processing
These efforts are expected to significantly increase Argentina's lithium output, solidifying its position as a major player in the global supply chain.
Investment potential
The combination of high-grade resources, favorable extraction methods and supportive government policies makes Argentina's lithium projects highly attractive to investors. Companies like Galan Lithium, with their focus on high-grade brine assets, are well-positioned to capitalise on the growing demand for lithium in the clean energy sector.
Key factors driving investment interest in Argentina’s lithium sector include:
- Lower production costs compared to hard rock lithium mining
- High-quality lithium suitable for high-performance batteries
- Increasing global demand for lithium, driven by EV adoption and renewable energy storage
- Argentina's commitment to expanding its lithium industry
As the world transitions towards cleaner energy sources, the importance of securing a stable lithium supply becomes paramount. Argentina's lithium projects offer a compelling opportunity for investors looking to participate in this global shift.
Investor takeaway
Argentina's strategic position in the Lithium Triangle makes it a crucial player in the global lithium supply chain.
With its high-grade brine resources, favorable extraction methods and supportive government policies, the country is poised to significantly impact the future of clean energy technologies.
As projects like Galan Lithium's HMW continue to develop, and as global demand for lithium surges, Argentina's strategic importance in the lithium market is set to grow. For investors, policymakers and industry stakeholders, keeping a close eye on developments in Argentina's lithium sector will be crucial in navigating the evolving landscape of the global energy transition.
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Full HMW Phase 2 (21Ktpa LCE) Mining Permit Granted
Highlights
- Phase 2 Hombre Muerto West (HMW) mining permit has been granted, securing the pathway for Galan’s continued development at HMW at an efficient commercial scale up to 21,000 tpa LCE
- The granted permit includes all construction activities including ponds, plant, onsite laboratory, power and other required infrastructure
- HMW Phase 2 production would be cash flow positive at today’s lithium carbonate prices. Independent benchmarking highlights HMW as being within the first quartile of the lithium industry AISC cost curve
- The granting of Phase 2 permits supports Galan’s application for the RIGI, Argentina’s new incentive regime for large scale investments
Galan’s Managing Director, Juan Pablo (JP) Vargas de la Vega, commented:
“We are delighted with the grant of the Phase 2 mining permit which continues to solidify our strong relationship with the local Catamarcan authorities. It will allow Galan to increase production over threefold from Phase 1 and produce a premium quality lithium chloride product, which is in high demand.
Importantly, HMW is positioned in the first quartile of the cost curve and Phase 2 production would be cash flow positive even at today’s prevailing lithium carbonate prices. HMW is now poised to be a long term and resilient globally significant source of lithium supply.”
Figure 1. Wood Mackenzie 2028 Lithium Cost Curve: AISC (US$/t LCE)Wood Mackenzie Disclaimer “The foregoing information was obtained from the Lithium Cost Service™ a product of Wood Mackenzie.” "The data and information provided by Wood Mackenzie should not be interpreted as advice and you should not rely on it for any purpose. You may not copy or use this data and information except as expressly permitted by Wood Mackenzie in writing. To the fullest extent permitted by law, Wood Mackenzie accepts no responsibility for your use of this data and information except as specified in a written agreement you have entered into with Wood Mackenzie for the provision of such of such data and information." Information sourced in December 2024.
Wood Mackenzie’s emissions benchmarking service has also placed HMW within the first quartile of the industry greenhouse gas emissions curve. Strong environmental, social and governance principles have been a governing tenet of the development strategy for HMW, which focuses on the production of a lithium chloride concentrate from conventional evaporation allowing for significantly reduced energy and water consumption. In line with Galan’s commitment to social principles, at least 70% local content in employment and contracting opportunities has been targeted at HMW and remains a keen focus for the Government of Catamarca and Galan. Skills and training opportunities have been provided to increase local participation, with a view to creating a skilled local workforce and supply chain for sustainable long-term operations.
Galan has demonstrated considerable progress on the HMW project, including:
- 2019: Discovery well drilled, marking the inception of the HMW project.
- 2020-2024: Mineral Resource established and expanded, now ranked as a global Top 20 lithium resource.
- 2023: Completion of Phase 1 and Phase 2 Definitive Feasibility Studies (DFS), validating the project's technical and economic viability (https://wcsecure.weblink.com.au/pdf/GLN/02720109.pdf).
- 2023: Secured all required approvals for Phase 1 construction and commenced construction.
- 2024: Continued construction and built a lithium inventory in the ponds of over 6,000 tonnes LCE.
- 2025: Full mining permit for Phase 2 granted, securing the pathway for continued development.
Chairman of Galan, Richard Homsany, commented:
“The grant of the Phase 2 mining permit is testament to the hard work and commitment of our dedicated team, and also highlights the strong long-term relationships we have fostered with the Government of Catamarca and local communities, who we sincerely thank for their continued ongoing support. Through action we have demonstrated the benefits of our HMW operations: economically though the generation of employment, procurement and trade opportunities and socially through education, community programs and training opportunities. We look forward to continuing to work in co-operation with the Government of Catamarca and all stakeholders to maximise the benefits of Galan’s operations in the community, and ensure they are sustainable.”
The HMW project is separated into four production phases. The Phase 1 DFS is based on the production of 5.4ktpa LCE of lithium chloride concentrate, with production anticipated in the second half of 2025.
The Phase 2 DFS, announced on 3 October 2023, targets medium-term production of 21ktpa LCE of lithium chloride concentrate. Arcadium Lithium Plc, which is subject to a change of control transaction from Rio Tinto Limited, produced around 20ktpa LCE from the adjacent mining permit at Salar de Hombre Muerto in 2023.
Phase 3 at HMW aims to achieve 40ktpa LCE within a 2-5 year horizon whilst Phase 4 represents a longer-term target of 60ktpa LCE, leveraging lithium brine sourced from both HMW and Galan’s other 100%-owned project in Argentina, Candelas.
The phased development of the HMW and Candelas Mineral Resources mitigates funding and execution risk and allows for continuous process improvement. The production of lithium chloride as a product is in demand from lithium converters as battery chemistry is trending towards lithium iron phosphate technology. Galan received permission to sell lithium chloride from the Catamarca Government earlier in 2024.
The Phase 2 mining permit also supports Galan’s application for the Argentinian Régimen de Incentivo para Grandes Inversiones (RIGI). Subject to meeting the eligibility criteria for RIGI, the RIGI can provide the following key incentives:
- The corporate income tax rate is set at 25% (ordinarily 35%)
- Accelerated depreciation
- Absence of time limits in the computation of tax loss carry forwards
- Concessions on import duty, VAT and withholding tax
- Greater flexibility on foreign exchange movements
- Fiscal stability for a period of 30 years
Galan’s JP Vargas de la Vega further stated:
“Our plan for HMW is unchanged, beginning with Phase 1. Our immediate focus is finalising the financing and offtake arrangements for Phase 1. Once secured, our operations team will complete construction and commence first production of lithium chloride concentrate. While the operations team advances Phase 1 construction our corporate team, supported by advisors, will commence a project financing process for Phase 2.”
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