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Argentina became the hot destination for investment in lithium,
and the battery metals sector in general, in recent weeks, with
more deals expected in 2022, analysts say.
Mining giants and steel companies led the charge into Argentina
as 2021 came to a close, and more miners, large and small, are
likely to follow them, but so too are battery producers seeking
supplies, according to analysts.
The appetite will come from two areas, said IHS Markit Director
Stefan Schlag Leon Beraud, mining companies that don't want to miss
out on the upturn in the price and the sector's fortunes, and
battery producers that want to secure lithium supplies.
In addition, Argentina offers the lowest risks of any of the
three members of the "Lithium Triangle," veteran lithium executive
Robert Mintak told Net-Zero Business Daily. The other two
members of the triangle are Chile and Bolivia, Standard Lithium CEO
Mintak, said.
The underlying thirst for lithium is the coming jump in demand
for both electric vehicles (EVs) and battery storage systems, while
at the same time prices for both lithium-ion batteries and lithium
itself have recovered after previously slumping due to demand
exceeding supply.
The International Energy Agency (IEA) said in April that, based
on current trends and policies, it expects the number of electric
cars, vans, heavy trucks, and buses on the road globally to reach
145 million by 2030. But the worldwide fleet could reach 230
million by 2030 if governments accelerate efforts to reach
international climate and energy goals, it added. The IEA said the
figure for the end of 2020 topped 11 million for the first
time.
Lithium-ion battery prices increased by 10-20% in the later
months of 2021. Also, prices for lithium carbonate—the lithium
compound used in EVs' lithium iron phosphate batteries—rose
nearly 400% between the fourth quarter of 2020 and fourth quarter
of 2021, according to IHS Markit research.
Also, grid-connected energy storage installations will surpass
20 GW in 2024 and 30 GW in 2030, compared with less than 5 GW in
2020, according to IHS Markit estimates.
Splashing the cash
The dealmaking splurge of recent weeks was headlined by Rio
Tinto laying out more than $800 million as it chases what the
mining giant forecasts will be battery-grade lithium carbonate
growth of 25-35% per year over the next decade, which the company
expects to create a "significant supply demand deficit" in the
second half of the decade.
Rio Tinto on 21 December agreed to acquire the Rincon
project in Argentina from Rincon Mining for $825 million. Rio Tinto
said the acquisition demonstrates a commitment to building its
battery materials business and strengthening its portfolio for the
global energy transition.
Rincon is an undeveloped lithium brine project in Salta
Province, which Rio Tinto tabbed as "an emerging hub for greenfield
projects." It has the potential for one of the lowest carbon
footprints in the industry, the company said. Rio Tinto CEO Jakob
Stausholm said: "This acquisition is strongly aligned with our
strategy to prioritize growth capital in commodities that support
decarbonization."
Rio Tinto has been burnishing its green
credentials in recent months. In October, the company said it plans
to reduce its Scope 1 and 2 carbon emissions by 50% by 2030, more
than tripling its previous target, adding that a 15% reduction is
achievable for 2025, five years earlier than previously
planned.
Scope 1 emissions are direct emissions from sources controlled
by an organization. Scope 2 emissions are indirect emissions
associated with the purchase of power, steam, heat, or cooling. Rio
Tinto hopes to reach net-zero scopes 1 and 2 emissions by 2050. The
world's largest iron miner by volume, Rio Tinto plans to spend $7.5
billion between 2022 and 2030 on decarbonization efforts, it
said.
Almost matching Rio Tinto's ability to flash the cash in
Argentina a couple of days earlier was South Korean steelmaker
POSCO. The company committed to plans to build a
lithium hydroxide plant at the Salar del Hombre Muerto salt lake in
Argentina for 950 billion South Korean won (nearly $793 million).
Construction is expected to start in the first half of 2022 and
finish in the first half of 2024. Lithium hydroxide is a chemically
converted lithium carbonate compound.
POSCO's plant will have a capacity of 25,000 metric tons (mt) a
year, and that output could be doubled. The company said demand for
lithium hydroxide is increasing because it is more advantageous for
improving the mileage of EV batteries compared with lithium
carbonate. A year's worth of the plant's initial lithium hydroxide
production capacity can be utilized by around 600,000 EVs, POSCO
said.
This isn't POSCO's first foray into Argentina. In 2018, the
company spent $280 million on buying Galaxy Resources' mining
rights in Argentina. POSCO expects to be producing 220,000 mt of
lithium from all its projects by 2030.
Lithium hydroxide decomposes at a lower temperature than lithium
carbonate, allowing the process of producing battery cathodes to be
more sustainable and the product to be longer lasting, according to
raw materials group Bisley International.
The last couple of weeks also saw Lithium Americas' fight to
acquire Millennial Lithium conclude after a complex battle with
Chinese battery giant CATL and its domestic rival Ganfeng Lithium.
Lithium Americas' $400 million bid beat out an offer from CATL,
which itself was accepted after Millenial reached a deal to be
acquired by Ganfeng Lithium in July. The CATL offer was higher,
resulting in the termination of the transaction with Ganfeng.
On 5 January, some 98% of Millennial shareholders approved the company's
acquisition by Lithium Americas. That followed Vancouver,
Canada-based Lithium Americas inking a binding deal on 17
November after Millennial terminated its CATL deal. Millennial
spurned CATL's advances for a deal premium of about 22.1%, the
companies said.
The suitors were chasing the Pastos Grandes deposit, which
Lithium Americas CEO Jonathan Evans said 1 November is an
"attractive regional growth opportunity" near the company's
existing Caucharí-Olaroz project, which he previously called the
biggest yet in the Americas.
The prize
Argentina accounted for 19.3 million mt of the world's 86
million mt of identified lithium resources at the end of 2020, or
around 22.4%, lagging only Bolivia in the global rankings table,
according the US Geological Survey (USGS).
Global lithium production decreased 5% year on year to 86,000 mt
in 2020 due to an oversupplied market leading to falling prices,
the USGS noted. Batteries accounted for 71% of demand in 2020, it
added. The agency's figures for 2021 will not be released until
later this month, a source told Net-Zero Business
Daily.
Argentina is attractive to producers because of the diversity of
resources, said Schlag Leon Beraud. It has the greatest number of
salt lake options in the Lithium Triangle, while Chile only has one
big one, the Atacama region. Argentina and Chile are the lowest
price brine resources in the world at the moment, he added.
Argentina, especially the north of the country, holds political
advantages, said Schlag Leon Beraud. Salta, Jujuy, and Catamarca
provinces are poorer and less developed than some of their more
southerly counterparts like Chubut, but are still in a strong
position in terms of their framework.
Argentina has not designated lithium as a strategic resource,
unlike Chile, said IHS Markit Principal Research Analyst Lukasz
Bednarski, and individual provinces can offer developers a path to
securing a resource and winning permits. Paradoxically, he added,
Argentina doesn't have the storied history of mining to match
Chile's, but that might offer lithium development an advantage,
because it means negative experiences are less common.
Argentina only has two operational lithium projects at present:
Livent's Fenix facility in Catamarca province and Orocobre's Salar
de Olaroz site in Jujuy province. French mining company Eramet on
17 November said it had begun construction
of a production plant. The plant will have annual production
capacity of 24,000 mt and enter operations in 2024. The start date
has been a long time coming. The company began work on the project
in 2010 and halted work a couple of times, including due to the
COVID pandemic.
Lithium projects in the three northwestern provinces of
Argentina are likely to ship their output through Chile, most
likely the port of Antofagasta, said Bednarski. Those three
provinces are the heart of Argentina's lithium push, part of the
country's Strategic Plan for Mining
Development.
Lithium Triangle
Meanwhile, its neighbors and fellow members of the Lithium
Triangle face greater hurdles in the development of resources.
Bolivia's resources may be the greatest, but they also present
harder technical challenges, said Schlag Leon Beraud, as the brine
there also contains magnesium, which is difficult to separate from
the targeted lithium.
In addition, while the threat of nationalization of resources as
was seen under former President Evo Morales is expected to be lower
under President Luis Arce, who was elected in 2020, analysts say
state oversight is expected to be tighter and local protests over a
greater share of royalties more likely.
In November, Bolivia signed contracts with eight international
companies for pilot tests of direct lithium-extraction technology.
However, past experience hangs heavy over the prospects for
developments in Bolivia. In 2019, the Morales administration
withdrew from a $1.3-billion lithium development joint venture
agreement with German company ACI Systems.
Chile is undertaking an unprecedented rewriting of its
constitution, a process that is expected to lead to higher royalty
requirements for mining companies and greater local involvement in
projects, say analysts.
In the capital Santiago, protesters set up barricades to call
for the rejection of government bids for lithium contracts earlier
in January, and Minister of Mining Juan Carlos Jobet has pledged to
evaluate concerns among president-elect Gabriel Boric's staff about
the tender.