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Macri view","lithiums-macri-view","article/lithiums-macri-view",{"_uid":557,"date":558,"tags":559,"editor":560,"content":570,"excerpt":800,"featured":50,"reporter":801,"_editable":805,"component":806,"seo_title":553,"categories":807,"visibility":816,"author_company":49,"featured_image":817,"seo_description":800,"author_full_name":49,"author_job_title":49,"formattedDate":822,"formattedArticleDate":823},"66bce16d-de2a-41b4-b022-0d249ea40520","2017-01-26 00:00",[],[561],{"slug":562,"name":563,"content":564},"matthew-bird","Matthew Bird",{"job_title":565,"image":566,"bio":568,"linkedin":569},"Senior Editor - Supply Chains & Data Visualisation",{"filename":567},"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":571,"content":572},"doc",[573,580,585,590,595,598,603,608,613,618,621,626,631,636,641,646,649,654,659,664,669,674,677,682,687,692,699,704,709,714,719,724,727,732,737,742,747,752,757,762,767,772,775,780,785,790,795],{"type":574,"attrs":575,"content":576},"paragraph",{"textAlign":49},[577],{"text":578,"type":579},"Argentina’s new president, Mauricio Macri, has introduced the country’s economy to the 21st Century. The impact of his revolutionary economic policies have begun to reenergise an Argentina that was on its knees.","text",{"type":574,"attrs":581,"content":582},{"textAlign":49},[583],{"text":584,"type":579},"The implications for its natural resource sector could be significant and there are few more promising today than lithium. Over the last decade, Argentina’s neighbour, Chile, has capitalised on the speciality mineral’s growing prominence in batteries however domestically developments have now stalled, despite the country having one of the world’s largest lithium brine operations.",{"type":574,"attrs":586,"content":587},{"textAlign":49},[588],{"text":589,"type":579},"With unresolved political problems in Chile delaying any significant expansion of the world’s number one brine resource, the door is now open for Argentina to make a serious bid to become a major player in the global energy storage revolution.",{"type":574,"attrs":591,"content":592},{"textAlign":49},[593],{"text":594,"type":579},"Central to this push is Lithium Americas’ Cauchari-Olaroz lithium brine project which has emerged as the next expected Argentina-based resource to enter the lithium industry by 2020 or sooner.",{"type":574,"attrs":596,"content":597},{"textAlign":49},[],{"type":574,"attrs":599,"content":600},{"textAlign":49},[601],{"text":602,"type":579},"Benchmark Mineral Intelligence spoke to Lithium Americas’ President, John Kanellitsas, about a new Argentina under President Macri, its partnership with Chile’s leading producer, SQM, and bringing new lithium units into a market in shortage.",{"type":574,"attrs":604,"content":605},{"textAlign":49},[606],{"text":607,"type":579},"The lithium development industry has been a melting pot of intense speculation. An incredible price run has seen lithium carbonate and lithium hydroxide grades reach multiples of over four-times 2015 prices as the lithium industry fell into its most significant shortage of modern times in the wake of demand from the burgeoning lithium ion battery market.",{"type":574,"attrs":609,"content":610},{"textAlign":49},[611],{"text":612,"type":579},"As is now standard fare with any mineral or metal that experiences such significant price increases, there was money to be made and the investment community stood up and took note. Soon to follow was a new wave of global exploration for hard rock and brine resources bringing with it over 100 new public lithium companies.",{"type":574,"attrs":614,"content":615},{"textAlign":49},[616],{"text":617,"type":579},"The exploration boom was lithium’s second in a 6-year period. But despite this surging demand from the lithium ion battery industry, which is expected to grow from 75 GWh to 180 GWh by end-2020 according to Benchmark Mineral Intelligence data, the search for new supplies very rarely translates to usable lithium product on the market. A significant oversupply of lithium in this period is not going to happen.",{"type":574,"attrs":619,"content":620},{"textAlign":49},[],{"type":574,"attrs":622,"content":623},{"textAlign":49},[624],{"text":625,"type":579},"Such is the lead time to develop new resources of both brine and hard rock and the expertise required to build new chemical plants tailored to each brine resource, lithium’s speciality nature is a far cry from the commodities onlookers are used to studying and investing in.",{"type":574,"attrs":627,"content":628},{"textAlign":49},[629],{"text":630,"type":579},"Still, there is also no doubt that the lithium industry is changing from once being dominated by three brine majors of SQM SA, Albemarle Corp, and FMC Lithium, and the hard rock leader, Talison Lithium. After seeing Orocobre Ltd begin the Olaroz brine resource in Argentina 18 months ago – lithium’s first since the late-1990s – the industry is now set to welcome more entrants over the next four years.",{"type":574,"attrs":632,"content":633},{"textAlign":49},[634],{"text":635,"type":579},"Two are expected to be hard rock producers – Neometals and Galaxy Resources – and only one additional new brine resource is anticipated to be in production by end-2020 – Lithium Americas Corp. The Vancouver-based company has been developing the Cauchari- Olaroz project in Argentina for the last six years and expects to need at least another three years to bring the asset to the beginning of a 25,000 tpa rate of lithium carbonate production.",{"type":574,"attrs":637,"content":638},{"textAlign":49},[639],{"text":640,"type":579},"Stage two will see the facility increase capacity to 50,000 tpa. Lithium Americas fast tracked its chances of achieving this goal when it teamed up with SQM SA in March 2016 to develop the resource in the country’s north-west.",{"type":574,"attrs":642,"content":643},{"textAlign":49},[644],{"text":645,"type":579},"To see such a major producer strike a partnership with an exploration stage company was an unprecedented step and a sign of the times: the majors can no longer rely on their own existing assets to supply lithium’s future. “We [the junior sector] have the responsibility to solve the very real problem that the world needs more low cost lithium supply to support the on-going revolution in the energy and transportation industries,” John Kanellitsas, President of Lithium Americas explained in an interview with Benchmark.",{"type":574,"attrs":647,"content":648},{"textAlign":49},[],{"type":574,"attrs":650,"content":651},{"textAlign":49},[652],{"text":653,"type":579},"“We believe entire process of developing new projects needs to be de-risked in order for us to fulfil our obligations to the lithium consumers, local communities and investors. The rapidly growing junior sector is challenged by a lack of both capital and operating experience, especially in brines,” he added.",{"type":574,"attrs":655,"content":656},{"textAlign":49},[657],{"text":658,"type":579},"Based in the Atacama, in Chile’s north, SQM became the lowest cost producer of lithium in the world and capitalised on its position in the early 2000s. The partnership with Lithium Americas was SQM’s first foray outside of Chile, helped by a continuing disagreement with the Chilean government organisation, CORFO.",{"type":574,"attrs":660,"content":661},{"textAlign":49},[662],{"text":663,"type":579},"The move took a step to solving one of the biggest challenges lithium resource developers face – the evolution from a mining company to a speciality chemicals one. Understanding the intricacies of developing a speciality chemical plant, let alone one that can produce battery-grade material to a consistent quality, is the single greatest challenge new entrants face and the hurdle where many fail.",{"type":574,"attrs":665,"content":666},{"textAlign":49},[667],{"text":668,"type":579},"“We are confident in part from our partnership with SQM and because of the significant work we have put into testing our brine to ensure a high quality product is feasible,” Kanellitsas said.",{"type":574,"attrs":670,"content":671},{"textAlign":49},[672],{"text":673,"type":579},"The company explained that significant ground work has been made on-site for a construction programme that is expected to begin in 2017. “Our permits are secured, and we have conducted significant engineering work in flow sheet and pond designs and updated hydrological models.",{"type":574,"attrs":675,"content":676},{"textAlign":49},[],{"type":574,"attrs":678,"content":679},{"textAlign":49},[680],{"text":681,"type":579},"Construction roads and a camp have been built. We have tremendous support from the Province of Jujuy as well as the federal government of Argentina. Local communities have already benefited from initial work contracts and employment is growing. We are looking forward to creating significant numbers of jobs when construction commences later in 2017,” he explained.",{"type":574,"attrs":683,"content":684},{"textAlign":49},[685],{"text":686,"type":579},"In terms of production cost, Lithium Americas is aiming production of lithium carbonate at the lower end of the cost curve and believes that despite being lower grade than the Atacama at 666ppm (proven and probable), it can achieve this objective. “We expect the Cauchari-Olaroz project to be at the lower end of the cost curve, as are most brine projects, and still be competitive with Atacama.",{"type":574,"attrs":688,"content":689},{"textAlign":49},[690],{"text":691,"type":579},"While lower grade than in Atacama, our project is fortunate to have scale, nearby infrastructure, and low levels of impurities like magnesium,” the company explained.",{"type":693,"attrs":694,"content":696},"heading",{"level":695,"textAlign":49},3,[697],{"text":698,"type":579},"Price points",{"type":574,"attrs":700,"content":701},{"textAlign":49},[702],{"text":703,"type":579},"Lithium’s price run between Q3 2015 and Q4 2016 (and whether it will continue or crash) has been the major point of discussion for some time. According to Benchmark Mineral Intelligence monthly lithium price assessments, in December prices remained at high levels of $8-12/ kg for lithium carbonate (FOB S. America) and $12-16/kg for lithium hydroxide (FOB N. America).",{"type":574,"attrs":705,"content":706},{"textAlign":49},[707],{"text":708,"type":579},"Signs were that lithium carbonate prices were set to increase in Q1 2016, especially in China, after Galaxy Resources agreed a significant increase on prices for its feedstock material.",{"type":574,"attrs":710,"content":711},{"textAlign":49},[712],{"text":713,"type":579},"In comment to the situation, Kanellitsas said: “As the market continues to grow, we expect prices to stay an attractive level, likely over $10,000/tonne [for lithium carbonate] to incentivize the capital investment needed to bring on new supply. “However, our focus is on adding supply at the low end of the cost curve, so we can preserve value through any point in the lithium price cycle.",{"type":574,"attrs":715,"content":716},{"textAlign":49},[717],{"text":718,"type":579},"Even lithium, which almost certainly has the best demand story of any mineral or metal, [still has commodity traits] and therefore is subject to price cycles and volatility. Again, to de-risk, you want to invest at the low end of the cost curve,” said Lithium Americas president.",{"type":574,"attrs":720,"content":721},{"textAlign":49},[722],{"text":723,"type":579},"Lithium is a speciality industry with prices set in private contracts through buyer and seller. Many of these contracts are traditionally longer term annual or multi-annual deals that are renegotiated at regular intervals.",{"type":574,"attrs":725,"content":726},{"textAlign":49},[],{"type":574,"attrs":728,"content":729},{"textAlign":49},[730],{"text":731,"type":579},"Test brine ponds at Lithium Americas’ project.",{"type":574,"attrs":733,"content":734},{"textAlign":49},[735],{"text":736,"type":579},"A spot market in the classic sense does not yet exist for lithium, but an evolution in the way lithium is traded could be on the cards, according to Kanellitsas. “We see a pricing dynamic evolving where end-users secure supply in long-term contracts in exchange for capital investments in new supply.",{"type":574,"attrs":738,"content":739},{"textAlign":49},[740],{"text":741,"type":579},"That is the most rational and sophisticated source of project capital,” he explained. “Over time, as more sources of supply come online and the market grows, we expect to see a larger spot market and more improved and transparent pricing mechanisms.”",{"type":693,"attrs":743,"content":744},{"level":695,"textAlign":49},[745],{"text":746,"type":579},"Lifting the dollar clamp",{"type":574,"attrs":748,"content":749},{"textAlign":49},[750],{"text":751,"type":579},"December 10th marked a year exactly since President Macri took office. There were number of very rapid economic policies enacted within the first two months that dramatically altered the path Argentina was on. None more so than lifting el cepo, the US dollar clamp.",{"type":574,"attrs":753,"content":754},{"textAlign":49},[755],{"text":756,"type":579},"When former President Cristina Fernández de Kirchner implemented currency controls in November 2011 it made it impossible for ordinary Argentinian’s to purchase US dollars, in a hope that it would encourage people to save in peso and protect the country’s foreign reserves. Instead a dual foreign exchange market was created that forced money to change hands unofficially at a “blue dollar rate”.",{"type":574,"attrs":758,"content":759},{"textAlign":49},[760],{"text":761,"type":579},"It also stifled exporters who struggled to sell goods with an overvalued peso, and prevented importers who needed the US dollar to buy goods. With a free-floating currency, and a long standing conflict with US funds finally settled, the shackles were released and the country was more economically free to conduct international trade.",{"type":574,"attrs":763,"content":764},{"textAlign":49},[765],{"text":766,"type":579},"For lithium, this has a number of immediate and positive implications. “The change in Argentina’s government late last year has provided a number of immediate benefits including the removal of the 5% mining export tax, foreign exchange controls, and key import restrictions,” explained Kanellitsas.",{"type":574,"attrs":768,"content":769},{"textAlign":49},[770],{"text":771,"type":579},"“We believe President Macri’s policies have increased access to lower cost sources of capital and brought more partners to the table, like SQM. It was if a switch was turned on. “The Cauchari-Olaroz project not only represents a significant investment in the country, but will directly benefit the local communities through the creation of a significant number of jobs and economic growth,” he added. The year has not been smooth sailing for Macri who won power with a slim majority and gaining 51.34% of the popular vote.",{"type":574,"attrs":773,"content":774},{"textAlign":49},[],{"type":574,"attrs":776,"content":777},{"textAlign":49},[778],{"text":779,"type":579},"The wave of promise and “magic” that Macri supporters expected almost immediately is taking longer to come to realisation and frustrations have grown. “If you want to see a magician, go and see [David] Copperfield,” Macri said to journalists in December.",{"type":574,"attrs":781,"content":782},{"textAlign":49},[783],{"text":784,"type":579},"However there appears to be a wider realisation that the country is going through the change it needs. “We believe Argentina’s path forward relies on attracting direct foreign investment, and are comfortable that this view is now shared across parties.",{"type":574,"attrs":786,"content":787},{"textAlign":49},[788],{"text":789,"type":579},"Capital markets are sending supporting signals that the policies have traction, and industry is responding by deploying investment capital,” said Kanellitsas.",{"type":574,"attrs":791,"content":792},{"textAlign":49},[793],{"text":794,"type":579},"We see a lot of potential for Argentina’s lithium industry in the coming years. The positive changes in government last year combined with a more favourable outlook for lithium makes Argentina the ideal source for adding low cost supply.",{"type":574,"attrs":796,"content":797},{"textAlign":49},[798],{"text":799,"type":579},"Compared with 18 months ago, the prospects for Argentina as a country and lithium as an industry have made a huge positive shift at almost the same time. With 14 lithium ion battery megafactories under construction – compared with 3 in Q1 2015 – a very clear path for lithium has been set. It is now up to Argentina, Lithium Americas, and SQM to follow the sign posts.","Argentina’s new president, Mauricio Macri, has introduced the country’s economy to the 21st Century. The impact of his revolutionary economic policies have begun to reenergise an Argentina that was on its knees. The implications for its natural resource sector could be significant and there are few more promising today than lithium. Over the last decade, […]",[802],{"slug":562,"name":563,"content":803},{"job_title":565,"image":804,"bio":568,"linkedin":569},{"filename":567},"\u003C!--#storyblok#{\"name\": \"article\", \"space\": \"\", \"uid\": \"66bce16d-de2a-41b4-b022-0d249ea40520\", \"id\": \"\"}-->","article",[808,811,814],{"slug":809,"name":810},"batteries","Batteries",{"slug":812,"name":813},"critical-minerals","Critical Minerals",{"slug":815,"name":8},"lithium","private",{"id":49,"alt":818,"name":818,"focus":818,"title":818,"source":818,"filename":819,"copyright":818,"fieldtype":820,"meta_data":821,"is_external_url":51},"","https://a.storyblok.com/f/287943243085208/25085dbb52/bm-exar-133-title-pic.jpg","asset",{"alt":818,"title":818,"source":818,"copyright":818},"Jan 26, 2017","26th January 2017",[],[],1792688599761]