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open for lithium  business as Chile’s biggest producer invests","argentina-open-for-lithium-business-as-chiles-biggest-producer-invests","article/argentina-open-for-lithium-business-as-chiles-biggest-producer-invests",{"_uid":557,"date":558,"tags":559,"editor":566,"content":576,"excerpt":1014,"featured":50,"reporter":1015,"_editable":1019,"component":1020,"seo_title":553,"categories":1021,"visibility":1030,"author_company":49,"featured_image":1031,"seo_description":1014,"author_full_name":49,"author_job_title":49,"formattedDate":1036,"formattedArticleDate":1037},"57121404-6eb3-4caf-99fc-a295d3b6a4ef","2016-07-21 00:00",[560,563],{"slug":561,"name":562},"argentina","Argentina",{"slug":564,"name":565},"chile","Chile",[567],{"slug":568,"name":569,"content":570},"matthew-bird","Matthew Bird",{"job_title":571,"image":572,"bio":574,"linkedin":575},"Senior Editor - Supply Chains & Data Visualisation",{"filename":573},"https://a.storyblok.com/f/287943243085208/512x512/14738033ec/matthew-bird.jpeg","Matthew writes, edits and produces content for Benchmark Intelligence and Benchmark Source across the whole mine to grid supply chain. He also acts as a liaison to the press. He has a PhD in electrochemistry from the University of Nottingham.","https://www.linkedin.com/in/birdmatthew/",{"type":577,"content":578},"doc",[579,586,591,596,601,606,611,616,621,626,631,634,639,644,649,654,659,664,669,674,679,684,691,696,701,706,711,716,721,726,731,736,741,746,751,756,761,766,771,774,779,784,789,794,799,804,809,814,819,824,829,834,839,844,849,854,859,864,869,874,879,884,889,894,899,904,909,914,919,924,929,934,939,944,949,954,959,964,969,974,979,984,989,994,999,1004,1009],{"type":580,"attrs":581,"content":582},"paragraph",{"textAlign":49},[583],{"text":584,"type":585}," As Chile waivers on lithium development, Argentina opens its doors to new business and welcomes SQM investment in the Salar de Cauchri","text",{"type":580,"attrs":587,"content":588},{"textAlign":49},[589],{"text":590,"type":585}," By Simon Moores",{"type":580,"attrs":592,"content":593},{"textAlign":49},[594],{"text":595,"type":585},"The balance of power in South America’s lithium industry is shifting after a new political era engulfed Argentina and declared it ‘open for business’ for the first time in more than a decade.",{"type":580,"attrs":597,"content":598},{"textAlign":49},[599],{"text":600,"type":585},"The election of Mauricio Macri’s Republican Proposal Party (PRO) has given Argentina a renewed expectation that a new economic era could be upon the country and one that includes lithium as a significant contributor.",{"type":580,"attrs":602,"content":603},{"textAlign":49},[604],{"text":605,"type":585},"And it is a situation that has attracted Chile’s leading lithium producer, SQM SA, to invest in developing a major lithium resource in the country’s north.",{"type":580,"attrs":607,"content":608},{"textAlign":49},[609],{"text":610,"type":585},"As Benchmark was going to press, SQM revealed it has signed a definitive agreement with Lithium Americas to develop the CauchariOlaroz Project. On 28 March 2016, SQM committed $50m to the",{"type":580,"attrs":612,"content":613},{"textAlign":49},[614],{"text":615,"type":585},"venture: $25m to acquire 50% of Minera Exar, Lithium Americas subsidiary that operates the project, another $10m to achieve economic feasibility, and $15m to cover intercompany loans.",{"type":580,"attrs":617,"content":618},{"textAlign":49},[619],{"text":620,"type":585},"Patricio de Solminihac, SQM’s CEO explained the move: “The Salar de Caucharí is a great complement to our existing lithium operations in Chile, and it is located just a few hundred kilometres from the Salar de Atacama.",{"type":580,"attrs":622,"content":623},{"textAlign":49},[624],{"text":625,"type":585},"“We expect to have similar production processes at both sites, and as a result we should benefit from operating synergies,” he added.",{"type":580,"attrs":627,"content":628},{"textAlign":49},[629],{"text":630,"type":585},"The development is a major coup for both Lithium Americas and Argentina and will almost certainly see a new lithium brine operation being developed in the country before 2020.",{"type":580,"attrs":632,"content":633},{"textAlign":49},[],{"type":580,"attrs":635,"content":636},{"textAlign":49},[637],{"text":638,"type":585},"While some quarters of the investment community have questioned the implied valuation of the resource at $50m, the move is a bold one by both companies.",{"type":580,"attrs":640,"content":641},{"textAlign":49},[642],{"text":643,"type":585},"For SQM the rationale is strategic.",{"type":580,"attrs":645,"content":646},{"textAlign":49},[647],{"text":648,"type":585},"Chile has become a political minefield for SQM over the last 18 months and this has stifled any new supply from the Atacama Desert – the country’s primary source – and development of new assets elsewhere.",{"type":580,"attrs":650,"content":651},{"textAlign":49},[652],{"text":653,"type":585},"With Chile favouring Codelco – the state owned copper producer – to enter the lithium industry and develop new brine resources, coupled with SQM’s failure to date to renegotiate extraction rights in the Atacama, political risk for the company was rising.",{"type":580,"attrs":655,"content":656},{"textAlign":49},[657],{"text":658,"type":585},"Therefore, the timing of Argentina’s change in government and the emergence of internationally business friendly policies for the first time in over a decade, together with some of the world’s best lithium resources, was an opportunity SQM could not pass on.",{"type":580,"attrs":660,"content":661},{"textAlign":49},[662],{"text":663,"type":585},"For Lithium Americas, the move was bold because of the implied valuation of the asset. For many years now, speciality mineral projects such as lithium are often overvalued and, as a result, never developed.",{"type":580,"attrs":665,"content":666},{"textAlign":49},[667],{"text":668,"type":585},"Lithium Americas’ realistic valuation is one that has got on board one of the most sought after technical partners, but it is also a price that will almost certainly get the resource into production in the next 3 years.",{"type":580,"attrs":670,"content":671},{"textAlign":49},[672],{"text":673,"type":585},"The planned 40,000 tonne LCE plant at Cauchari-Olaroz is lithium supply the industry will need.",{"type":580,"attrs":675,"content":676},{"textAlign":49},[677],{"text":678,"type":585},"It is also supply SQM will need to maintain its position as the world’s leading brine producer, and Argentina will need to become the world’s leading lithium producer and take on its neighbour, Chile, for the number one spot.",{"type":580,"attrs":680,"content":681},{"textAlign":49},[682],{"text":683,"type":585},"It is just an intriguing turn of events that Argentina could do so with the aid of Chile’s home-grown major.",{"type":685,"attrs":686,"content":688},"heading",{"level":687,"textAlign":49},3,[689],{"text":690,"type":585}," Argentina is open",{"type":580,"attrs":692,"content":693},{"textAlign":49},[694],{"text":695,"type":585},"President Macri’s politics will play a key role in developing an economy that includes lithium and energy storage. But the rapid way in which the former entrepreneur, with interests in construction, finance and car manufacturing, has set about his business has given immense confidence to investors.",{"type":580,"attrs":697,"content":698},{"textAlign":49},[699],{"text":700,"type":585},"“The 21st century demands that we have to be open,” Macri explained to CBS’ 60 Minutes, “…and not put any ideological differences in front of the best solutions.”",{"type":580,"attrs":702,"content":703},{"textAlign":49},[704],{"text":705,"type":585},"Within a matter of weeks of his election, Macri cut export taxes, lifted all currency controls and allowed the peso to float, cut all electricity subsidies and sacked many government workers. And he did this by Presidential decree, while the country’s congress was on summer recess.",{"type":580,"attrs":707,"content":708},{"textAlign":49},[709],{"text":710,"type":585},"“I am using the constitution… we have a good one,” explained Macri.",{"type":580,"attrs":712,"content":713},{"textAlign":49},[714],{"text":715,"type":585},"“We need to put our country back to growth… we were trapped with so many rules that we could not move,” he added.",{"type":580,"attrs":717,"content":718},{"textAlign":49},[719],{"text":720,"type":585},"Another key development for the new president was the settling of a $4.65bn bill with four US hedge funds, a legacy from Argentina’s 2001 default.",{"type":580,"attrs":722,"content":723},{"textAlign":49},[724],{"text":725,"type":585},"The new agreement, however, is a move that was described as “the equivalent of a giant albatross being lifted from Argentina’s neck” by Brett Diment, head of emerging market debt at Aberdeen Asset Management to The New York Times.",{"type":580,"attrs":727,"content":728},{"textAlign":49},[729],{"text":730,"type":585},"The country will pay the outstanding debt by selling $15bn in bonds, and, in addition to the currency restrictions, can expect free flowing of international investment capital in 2016.",{"type":580,"attrs":732,"content":733},{"textAlign":49},[734],{"text":735,"type":585},"As a result, the new premier has immediately courted $20bn of foreign investment and a new low carbon economy based on lithium and electric cars is high on the agenda of the government.",{"type":580,"attrs":737,"content":738},{"textAlign":49},[739],{"text":740,"type":585},"“President Macri is moving at lightning speed and using a machete to cut through red tape and bureaucracy, and to reverse harmful policies of the past,” explained John Kanellitsas, vice-chairman of Lithium Americas in an interview with Benchmark Mineral Intelligence.",{"type":580,"attrs":742,"content":743},{"textAlign":49},[744],{"text":745,"type":585},"“For nearly a generation, Argentina has been practically closed to the international investment community and global capital markets. Now today we see the same progressive people, with the same skill-sets and resources, but with a new, totally optimistic outlook,” he added.",{"type":580,"attrs":747,"content":748},{"textAlign":49},[749],{"text":750,"type":585},"US President Obama’s visit to Argentina has threatened to overshadow his visit to Cuba – the first in 88 years by a US president – such is the scope of change in a country that has been dominated by leftist political groups that did not favour US policies.",{"type":580,"attrs":752,"content":753},{"textAlign":49},[754],{"text":755,"type":585},"In fact, nearly all of the Latin American region, besides Chile, has been dominated by left-wing political leaders since the late 1990s with many believing Hugo Chavez’s appointment as President of Venezuela marking the beginning of the modern Latin American Socialism.",{"type":580,"attrs":757,"content":758},{"textAlign":49},[759],{"text":760,"type":585},"It is a political movement that has stifled significant economic development of the region, the mining sector, and especially, lithium with some of the richest brine resources in the world locked in Chile, Argentina and Bolivia.",{"type":580,"attrs":762,"content":763},{"textAlign":49},[764],{"text":765,"type":585},"It is a situation that Lithium Americas – a Toronto based company developing the Cauchari-Olaroz lithium project in northern Argentina – hopes will progress it from a 6-year development process to production.",{"type":580,"attrs":767,"content":768},{"textAlign":49},[769],{"text":770,"type":585},"“For our own [lithium] business, it is as if a switch has been turned on as we are dialoguing with potential investment partners that we would never have heard from even six months ago,” said Kanellitsas.",{"type":580,"attrs":772,"content":773},{"textAlign":49},[],{"type":580,"attrs":775,"content":776},{"textAlign":49},[777],{"text":778,"type":585},"“So we know the reforms are having a meaningful and positive impact and that Argentina today is very much open for business,” he added.",{"type":580,"attrs":780,"content":781},{"textAlign":49},[782],{"text":783,"type":585},"Argentina has the world’s third largest lithium brine resources after Chile and Bolivia but is fully yet to capitalise on its mineral wealth despite having the extraction and processing knowledge critical to commercialising the speciality mineral.",{"type":580,"attrs":785,"content":786},{"textAlign":49},[787],{"text":788,"type":585},"FMC Lithium has been operating its Salar de Hombre Muerto in the country since 1997 but has never increased output over 12,000 tpa of lithium carbonate despite a great hope of a significant expansion and one of the world’s elite lithium operations to compete on a volume basis with Chile.",{"type":580,"attrs":790,"content":791},{"textAlign":49},[792],{"text":793,"type":585},"The company has let its grip on the lithium industry slip over the last decade.",{"type":580,"attrs":795,"content":796},{"textAlign":49},[797],{"text":798,"type":585},"The country then turned to Orocobre and its Olaroz project in Jujuy, northern Argentina, the first and only lithium brine operation to come into production since lithium’s first exploration boom of the modern era, a phase which began in 2009.",{"type":580,"attrs":800,"content":801},{"textAlign":49},[802],{"text":803,"type":585},"Orocobre has been the lithium industry’s most successful exploration company taking seven years from establishment to first production and with it Argentina’s first new lithium brine operation since FMC.",{"type":580,"attrs":805,"content":806},{"textAlign":49},[807],{"text":808,"type":585},"“The changes in government policy will have a positive impact on our operations; reducing costs, increasing revenues, and allowing us to access the supplies and equipment we need in a more normal timeframe,” Orocobre’s Managing Director, Richard Seville, told Benchmark.",{"type":580,"attrs":810,"content":811},{"textAlign":49},[812],{"text":813,"type":585},"“This does not just affect the here and now but will provide a more positive landscape for future investment decisions,” he added.",{"type":580,"attrs":815,"content":816},{"textAlign":49},[817],{"text":818,"type":585},"Production ramp up has been slower than expected with the company anticipating between 1012,000 tonnes of lithium carbonate in 2016, its second year of operation, from a 17,000 tpa capacity. However, this a significant improvement on year one which saw just over 1,500 tonnes of lithium carbonate being produced from Olaroz.",{"type":580,"attrs":820,"content":821},{"textAlign":49},[822],{"text":823,"type":585},"In January and February 2016, Orocobre nearly doubled its monthly output of lithium carbonate to 699 tonnes and 761 tonnes of lithium carbonate respectively, and expects to produce 2,400 tonnes in Q1.",{"type":580,"attrs":825,"content":826},{"textAlign":49},[827],{"text":828,"type":585},"The company’s expansion is the quickest supply of lithium carbonate the lithium market can expect. As a result, it raised A$85m in February to aid the ramp up and strengthen its financial position. The fact that the raise was three-times oversubscribed was a result of putting two of the hottest investment prospects – lithium and Argentina – together.",{"type":580,"attrs":830,"content":831},{"textAlign":49},[832],{"text":833,"type":585},"Within weeks of Macri’s election, the first lithium deal of the country’s new era was announced when Lithium X Energy acquired the Sal de los Angeles lithium-potash brine project (formerly known as the Diablillos project) on 3 March 2016.",{"type":580,"attrs":835,"content":836},{"textAlign":49},[837],{"text":838,"type":585},"The move saw the Vancouverbased company’s shares spike by 60%.",{"type":580,"attrs":840,"content":841},{"textAlign":49},[842],{"text":843,"type":585},"“The new government has rapidly removed many of the restrictions that made operating a successful lithium business in Argentina difficult,” Lithium X’s vice president of exploration, William Randall, explained to Benchmark.",{"type":580,"attrs":845,"content":846},{"textAlign":49},[847],{"text":848,"type":585},"“The most important thing for us was the elimination of a dual exchange rate and the ability to get funds out of the country freely,” he added.",{"type":685,"attrs":850,"content":851},{"level":687,"textAlign":49},[852],{"text":853,"type":585}," Chile waivers, Codelco prepares",{"type":580,"attrs":855,"content":856},{"textAlign":49},[857],{"text":858,"type":585},"It is an interesting turn of events that at the same time as Argentina was conducting a 180 degree turn on economic policy, Chile continues to waiver on the future direction of its lithium industry.",{"type":580,"attrs":860,"content":861},{"textAlign":49},[862],{"text":863,"type":585},"In a situation unfathomable even 18 months ago, it appears Chile now has a greater political risk than Argentina.",{"type":580,"attrs":865,"content":866},{"textAlign":49},[867],{"text":868,"type":585},"The world’s number one producer of lithium from brine sources has been hesitant to open up the country to new exploration and grant new extraction rights to its existing producers – SQM and Albemarle.",{"type":580,"attrs":870,"content":871},{"textAlign":49},[872],{"text":873,"type":585},"While Albemarle was granted new extraction rights in February which tripled the quota of lithium it is allowed to extract for the next 27 years at a rate of 70,000 tpa lithium carbonate and 6,000 tpa lithium chloride, SQM remains in limbo amid disputes with the Chilean government and former Chairman, Julio Ponce. As a result, the company has invested in Argentina.",{"type":580,"attrs":875,"content":876},{"textAlign":49},[877],{"text":878,"type":585},"SQM has long been the volume leader in the lithium industry since its entry into the market in the mid1990s.",{"type":580,"attrs":880,"content":881},{"textAlign":49},[882],{"text":883,"type":585},"The country has also been reluctant to grant new lithium exploration rights with Li3 Energy’s Maricunga project and Talison Lithium’s Salares 7, the only development stage assets of note.",{"type":580,"attrs":885,"content":886},{"textAlign":49},[887],{"text":888,"type":585},"Chile also sees the Pedernales brine resources as another promising area of new production.",{"type":580,"attrs":890,"content":891},{"textAlign":49},[892],{"text":893,"type":585},"The future of Chile’s lithium industry may lie in a form of nationalisation, something that has been overshadowing its sector since the late 2000s.",{"type":580,"attrs":895,"content":896},{"textAlign":49},[897],{"text":898,"type":585},"For many years now the government has wanted a tighter grip on its lithium industry and in an interview with Benchmark, Chile’s Minster for Mines, Aurora Williams, spoke on this possibility.",{"type":580,"attrs":900,"content":901},{"textAlign":49},[902],{"text":903,"type":585},"“President Bachelet introduced the National Lithium Policy in January.",{"type":580,"attrs":905,"content":906},{"textAlign":49},[907],{"text":908,"type":585},"She has also entrusted Codelco to study the business mechanisms that could be used in the exploration and mining of lithium, particularly with reference to Maricunga and Pedernales,” explained Williams.",{"type":580,"attrs":910,"content":911},{"textAlign":49},[912],{"text":913,"type":585},"“In addition, and through one of its subsidiaries called Codelco Lab, the company is expanding its initiatives in areas of lithium innovation in Chile. Codelco Lab is mostly focussed on copper projects today, but it is being opened up to both molybdenum and lithium,” the minister added.",{"type":580,"attrs":915,"content":916},{"textAlign":49},[917],{"text":918,"type":585},"Government-owned Codelco, the country’s biggest copper miner, and its potential entry into the lithium market leaves a question mark over the future of lithium exploration in the country.",{"type":580,"attrs":920,"content":921},{"textAlign":49},[922],{"text":923,"type":585},"With Albemarle, SQM and potentially Codelco all active in the lithium industry, would Chile be willing to allow plots of land in the Atacama, Maricunga or Pedernales open up to smaller, international exploration companies?",{"type":580,"attrs":925,"content":926},{"textAlign":49},[927],{"text":928,"type":585},"It is more likely that Chile will save its most significant lithium resources for its major producers, and those it has more ownership in.",{"type":580,"attrs":930,"content":931},{"textAlign":49},[932],{"text":933,"type":585},"This strategy is the complete opposite to what is being proposed in Argentina.",{"type":580,"attrs":935,"content":936},{"textAlign":49},[937],{"text":938,"type":585},"Even in the most severe of political environments, Argentina still courted international exploration of its lithium assets, though these policies ultimately prevented the majority of projects reaching production, primarily through a lack of international investment.",{"type":580,"attrs":940,"content":941},{"textAlign":49},[942],{"text":943,"type":585},"Such a scenario in Chile would leave questions over any SQM expansion in the Atacama while seeing the rise of a significant industrial competitor in Codelco.",{"type":580,"attrs":945,"content":946},{"textAlign":49},[947],{"text":948,"type":585},"It is also a situation that is pushing SQM to look outside of Chile’s borders for new lithium resources for the first time.",{"type":685,"attrs":950,"content":951},{"level":687,"textAlign":49},[952],{"text":953,"type":585}," SQM targeted",{"type":580,"attrs":955,"content":956},{"textAlign":49},[957],{"text":958,"type":585},"SQM is one of Chile’s major success stories of the modern era, but it has also been targeted by the domestic press in recent weeks forcing it to deny exporting to North Korea.",{"type":580,"attrs":960,"content":961},{"textAlign":49},[962],{"text":963,"type":585},"“It is not true that SQM exported lithium products to North Korea,” the company explained.",{"type":580,"attrs":965,"content":966},{"textAlign":49},[967],{"text":968,"type":585},"“Two exports to the South Korean port of Busan were erroneously reflected as having been sent to North Korea in the export records… the numerical codes for these two countries are very similar,” it added.",{"type":580,"attrs":970,"content":971},{"textAlign":49},[972],{"text":973,"type":585},"South Korea’s lithium-ion battery industry is a major and growing customer for SQM.",{"type":580,"attrs":975,"content":976},{"textAlign":49},[977],{"text":978,"type":585},"Claims that SQM would risk this business relationship by exporting small volumes to North Korea is bizarre but another example of the anti-company rhetoric that has characterised the past 12 months.",{"type":580,"attrs":980,"content":981},{"textAlign":49},[982],{"text":983,"type":585},"SQM also had to clarify its position on royalty taxes it pays to the government after further criticism in the domestic press.",{"type":580,"attrs":985,"content":986},{"textAlign":49},[987],{"text":988,"type":585},"The producer is also continuing with its negotiations over new lithium extraction rights in the Atacama, eyeing a similar deal that was granted to Albemarle in Q1.",{"type":580,"attrs":990,"content":991},{"textAlign":49},[992],{"text":993,"type":585},"Speaking to Benchmark, the Chilean government comment: “At this point there’s a memorandum of understanding (MoU) under discussion that needs to be completed in order to formalise any modification of the contract. So it’s at the MoU stage,” explained the minster for mines.",{"type":580,"attrs":995,"content":996},{"textAlign":49},[997],{"text":998,"type":585},"“The situation that could develop between SQM and Corfo is down to a contractual relationship between those two parties,” Williams added.",{"type":580,"attrs":1000,"content":1001},{"textAlign":49},[1002],{"text":1003,"type":585},"The question for industry participants is not necessarily over SQM’s present lithium production in the Atacama but whether the company will be allowed to significantly expand to meet the rapidly growing demand or has to look outside of its borders to grow its business.",{"type":580,"attrs":1005,"content":1006},{"textAlign":49},[1007],{"text":1008,"type":585},"At the same time, Argentina’s lithium production is set to double to over the next 12-18 months while welcoming new investors for additional supply, SQM being the latest.",{"type":580,"attrs":1010,"content":1011},{"textAlign":49},[1012],{"text":1013,"type":585},"Lithium-ion battery producers await with interest.","As Chile waivers on lithium development, Argentina opens its doors to new business and welcomes SQM investment in the Salar de Cauchri",[1016],{"slug":568,"name":569,"content":1017},{"job_title":571,"image":1018,"bio":574,"linkedin":575},{"filename":573},"\u003C!--#storyblok#{\"name\": \"article\", \"space\": \"\", \"uid\": \"57121404-6eb3-4caf-99fc-a295d3b6a4ef\", \"id\": \"\"}-->","article",[1022,1025,1028],{"slug":1023,"name":1024},"batteries","Batteries",{"slug":1026,"name":1027},"critical-minerals","Critical Minerals",{"slug":1029,"name":8},"lithium","private",{"id":49,"alt":1032,"name":1032,"focus":1032,"title":1032,"source":1032,"filename":1033,"copyright":1032,"fieldtype":1034,"meta_data":1035,"is_external_url":51},"","https://a.storyblok.com/f/287943243085208/3011f2f4fc/bm-screen-shot-2016-07-21-at-133253.png","asset",{"alt":1032,"title":1032,"source":1032,"copyright":1032},"Jul 21, 2016","21st July 2016",[],[],1792773946924]