Don't Cry for "Li" - Argentina........ Joe Lowry It is clear...

Don't Cry for "Li" - Argentina........


Joe Lowry

It is clear that future lithium demand growth will require continued development of the top tier brine and spodumene reserves on the planet. Contrary to what many people believed just a few years ago, the Atacama in Chile (although the best of the world's brine) alone is not sufficient to power the unfolding battery revolution. The market needs continued development of spodumene resources in Australia and more brine projects in South America. So much the better if slightly lesser reserves in places like Canada make it to market too.

Now that the "Boys from Baton Rouge" aka ALB have “MOUed” their undying love for Chile, we may see over the next several years what the limits of the Atacama are. The lowest cost lithium resource may not be able to support the greatly increased pumping rate without changing the characteristics of the brine impacting both quality and cost. Besides that, the currently “left leaning” Chilean government will continue to insist on getting a bigger piece of the pie. Anyway time will tell. Rather than continue to ponder the future of the Lithium Superpower let’s move to the east - across the Andes.

OK - full disclosure: Argentina is one of my favorite places on the planet. No disrespect to my adopted "homes" of Japan and China, I am also a big fan of Argentina - people, land, culture (not to mention Malbec and beef). I am hoping the coming decade sees Argentina transition from lithium “also ran” to major power.

Argentina - what's not to like?

Argentina is just beginning to emerge from a nightmare decade of too much government, bad policies and the loss of credibility in international financial circles driving away global investment dollars. Hopefully the new administration’s policies will encourage the return of international capital and the development of one or more of the lithium projects that have been seeking investment for several years.

Argentina’s economic decline in the recent past has been mirrored in the performance of their only major lithium operator – FMC. Since the beginning of the decade FMC’s upstream operation at Hombre Muerto has gone from being “nearly world class” to the “gang that couldn’t shoot straight”. You don’t need to take my word for it just look at their reported lithium financial performance and compare it with ALB/Rockwood’s and SQM’s. In this case the policies of the government were a minor contributor to the decline but they certainly didn’t help. The root cause of most of FMC’s problems at Hombre Muerto are ~7,500 km to the north. It would be great if FMC would sell their lithium business to someone who is more interested in and capable of running it than the current crew.

Orocobre is the newcomer to the Argentina lithium scene. They have been hampered by both government policies and poor planning / project management. The fact that their recent AUD 85 million capital raise was 5X oversubscribed shows that investor interest in even a fledgling lithium project is strong – undiminished by several false starts and the extended ramp-up of their plant in Jujuy province which still operates at less than half of capacity and cannot yet produce battery quality product. The change in government was likely a major contributor to the success of the recent offering.

Chile’s Atacama may have the lowest cost brine production but Argentina has more diversity of viable new brine projects and ironically may have a better political climate for development going forward. Chile’s desire to extract lithium value “for the people” may cost ALB more than they are currently admitting – let’s see if and when their MOU becomes a contract.

Argentina will only become a lithium powerhouse rivaling Chile in the brine based world if one or more projects like Galaxy’s Sal de Vida, WLC’s LAC, or Enirgi’s Rincon get financed soon and make it to market by the end of the decade. No disrespect intended to several other early stage projects - that is a topic for another day.

I have feelings about what the rank of these projects is but I will keep that to myself at this point. Hopefully investors in Argentine lithium assets will be crying tears of joy in the not too distant future.

https://www.linkedin.com/pulse/dont-cry-li-argentina-joe-lowry