Several mining companies have had to adjust their lithium projects in Argentina due to the collapse of international prices, resulting in the suspension of operations, cost reductions, and halted investments.
The 50 lithium projects in Argentina—only four currently in production and six under construction—have been significantly impacted by the decline in the price of ‘white gold’.
A tonne of lithium carbonate equivalent (LCE) is now trading at $10,483, which is less than one-third of its value from exactly one year ago and far from the peak of $80,909 in November 2022.
This decline is attributed to an oversupply of lithium and a slowdown in electric vehicle sales, which utilize this soft metal as a key component in batteries.
“The rapid increase in the price of lithium carbonate at the beginning of the decade spurred massive investments in lithium projects. Production rose 2.5 times in three years,” stated Fernando Zevallos Sulca, senior analyst at CRU, a British consultancy specializing in minerals, metals, and fertilizer markets, in an interview with EFE.
In this scenario of imbalance between supply and demand, the price drop affects all producers, but particularly impacts industries in the development phase, like those in Argentina.
“With declining revenues, companies are prioritizing cash generation and cost-cutting measures to maintain a healthy balance sheet and navigate current challenges,” Zevallos Sulca added.
Lithium projects in Argentina struggle due to metal prices
An example of this is the Australian mining company Argosy Minerals, which announced at the end of June its decision to suspend certain operations and restructure its workforce while maintaining “financial prudence” to “significantly reduce the risks” associated with its Rincón project in the northern Argentine province of Salta.
Shortly thereafter, Galan Lithium, also from Australia, made the “prudent decision to strategically slow down” the construction of the Hombre Muerto Oeste project in the province of Catamarca in northwestern Argentina.
Additionally, the Australian company Lake Resources announced in July that it would implement cost and staff reductions and sell non-core lithium assets in the provinces of Jujuy and Catamarca to “optimize” its finances and focus on the Kachi project in Catamarca, for which it is also seeking strategic partners.
Several weeks ago, Arcadium Lithium, the merger of Australian company Allkem and American company Livent, announced that it would not proceed with the expansion of its Fénix project and the construction of the Sal de Vida project, both located in Catamarca, postponing its investments.
However, in announcing this decision, Paul Graves, President and CEO of Arcadium, noted that despite current prices, he anticipates “a strong long-term growth trajectory for lithium demand” and expects “a return to healthier market fundamentals over time.”
“Robust investments, which are plentiful in Argentina, will not be canceled, but we will likely see delays and postponements in relation to previously announced plans,” observed Zevallos Sulca.
Chile continues to lead lithium production in Latin America
Argentina, which has tripled its capacity to produce lithium carbonate over the last two years, ranks as the fourth-largest producer in the world (behind Australia, Chile, and China), the third in reserves (behind Chile and Australia), and the second in resources (behind Bolivia).
“Our forecast is that production in Argentina will increase and compete with Chile in the next decade. This, of course, assumes that current projects receive financing, which means that between 3.5 and 4 billion dollars would be needed.” stated Zevallos Sulca.
The sector views its geological characteristics and the new incentive regime for large investments (RIGI), enacted last Friday, as appealing for lithium development in Argentina.
According to official sources, several companies have expressed their intention to participate in the RIGI for the multimillion-dollar investments they plan to make in lithium, including South Korean company Posco ($2 billion); Chinese company Ganfeng ($1 billion); Eramine, a merger of French company Eramet and Chinese company Tsingshan (between $800 million and $1 billion); and Anglo-Australian company Rio Tinto ($300 million).
Lithium Projects in Argentina: Navigating Price Drops and Future Prospects
Several mining companies have had to recalibrate their lithium projects in Argentina in the face of the collapse of international prices, suspending operations, reducing costs, and halting investments.
The 50 lithium projects in Argentina—only four of them in production and six under construction—have been severely affected by the drop in the price of ‘white gold’. A tonne of lithium carbonate equivalent (LCE) is currently trading at $10,483, less than a third of what it was worth exactly one year ago and a long way from the peak of $80,909 in November 2022.
The drop is explained by an oversupply of lithium and a moderation in sales of electric vehicles (EVs), whose batteries rely on lithium as a key component. “The explosive rise in the price of lithium carbonate at the beginning of the decade encouraged massive investment in lithium projects. Production increased 2.5 times in three years,” explains Fernando Zevallos Sulca, senior analyst at CRU, a British consultancy specializing in minerals, metals, and fertilizer markets.
In this scenario of imbalance between supply and demand, the fall in price affects all producers, but especially industries in the process of development, as is the case in Argentina.
“Faced with falling revenues, companies are prioritizing cash generation and cost cutting to maintain a healthy balance sheet and be able to overcome current challenges,” states Zevallos Sulca.
Lithium Projects in Argentina Stumble Due to Metal Prices
An example is the Australian mining company Argosy Minerals, which announced at the end of June that it had decided to suspend certain operations and restructure its workforce, while maintaining “financial prudence” to “significantly reduce the risks” of its Rincón project in the northern Argentine province of Salta.
Shortly after, the Australian company Galan Lithium made the “prudent decision to strategically slow down” construction of the Hombre Muerto Oeste project in the province of Catamarca in northwestern Argentina.
Additionally, Lake Resources announced in July that it would be implementing cost and staff reductions as well as selling non-core lithium assets in the provinces of Jujuy and Catamarca to “optimize” its finances and concentrate efforts on the Kachi project in Catamarca, for which it is also seeking strategic partners.
A few weeks ago, Arcadium Lithium, the merger of the Australian company Allkem and the American company Livent, announced that it will not carry out the expansion of its Fénix project and the construction of the Sal de Vida project, both in Catamarca, in a sequential manner, postponing its investments.
However, in announcing this decision, Paul Graves, President and CEO of Arcadium, noted that despite current prices, he sees “a strong long-term growth trajectory for lithium demand” and expects “over time a return to healthier market fundamentals.”
“Robust investments, which are abundant in Argentina, will not be cancelled, but we will see delays and postponements regarding previously announced plans,” Zevallos Sulca observes.
Market Conditions: The Impact on Investment and Production
As lithium prices continue to fluctuate, mining companies are adopting a cautious approach. Here are some key factors influencing the current landscape:
- **Supply Oversaturation**: The influx of lithium into the market due to increased production has led to lower prices.
- **Demand for EV Batteries**: A slowdown in electric vehicle sales has further pressured lithium prices.
- **Investment Prioritization**: With prices low, companies are focusing on cash flow management and cost reduction strategies.
Chile Continues to Lead Lithium Production in Latin America
Despite the challenges, Argentina remains a key player in the global lithium market. Over the last two years, Argentina has tripled its capacity to produce lithium carbonate and is currently the fourth largest producer in the world, behind Australia, Chile, and China.
“Our forecast is that production in Argentina will increase and compete with Chile in the next decade. This assumes that current projects are financed, with an estimated need for between $3.5 and $4 billion.” says Zevallos Sulca.
The geological characteristics of Argentina, coupled with the new incentive regime for large investments (RIGI), are viewed as attractive for lithium development in the region. According to official sources, multiple companies have expressed their interest in the RIGI for significant investments in lithium, including:
| Company | Investment Amount |
|---|---|
| Posco (South Korea) | $2 Billion |
| Ganfeng (China) | $1 Billion |
| Eramine (France/China) | $800 to $1,000 Million |
| Rio Tinto (Anglo-Australian) | $300 Million |
Future Outlook for Lithium in Argentina
As the lithium market grapples with fluctuating prices, the outlook for Argentina remains cautiously optimistic. With substantial investments planned and a potential for increased production, the country aims to rise to the forefront of lithium suppliers within Latin America.
The recognition of Argentina’s vast lithium reserves and the push towards greener technologies create a unique opportunity for the sector. With ongoing exploration and the potential for future demand from electric vehicles and renewable energy storage, Argentina’s lithium projects may yet prove to be the key to unlocking the country’s mineral wealth.
