Amsterdam-based carmaker Stellantis (NYSE: STLA), whose iconic brands include Alfa Romeo, Chrysler, Citroën, Fiat, Opel, Maserati, Peugeot, Jeep and Vauxhall, has invested US$90 million equivalent in Argentine pesos in Canada’s Argentina Lithium & Energy (TSXV: LIT; US-OTC: PNXLF) via its Argentine subsidiary, as part of a wider effort to master the entire EV value chain from batteries to electric motors and e-transmissions.
Stellantis, which posted net revenues of US$190 billion last year, has plans to build five gigafactories, two in North America and three in Europe, and is nailing down future lithium supply.
“They approached us a year ago because of our reputation as a successful mineral exploration pioneer in Argentina,” says Nikolaos Cacos, president and CEO of Vancouver-based Argentina Lithium. “They didn’t want a control position — their interest was to secure an optionality for lithium. It’s the offtake they were after.”
Under the deal, Stellantis has invested the US$90 million equivalent into Argentina Lithium’s subsidiary, Argentina Litio y Energia S.A. (ALE), resulting in the automaker owning 19.9% and Argentina Lithium 80.1%. Stellantis can later convert its stake in ALE into shares in the parent company if it chooses. And Stellantis gets to appoint one director to ALE’s board, or LIT if it converts.
The multinational carmaker will secure a seven-year offtake agreement for up to 15,000 tonnes of lithium annually, if the junior becomes a producer. The lithium price will be based on an agreed market-based price formula at the time of each shipment. After the first seven years, Argentina Lithium would sell its lithium to Stellantis at regular market prices.
“They are confident that their equity position will give them a return not just on their money, but then some,” Cacos says. “It’s a fancy private placement for an offtake return.”
Prior to Stellantis, Argentina Lithium was fielding interest from battery makers, Chinese companies, hedge funds, investment companies, as well as other carmakers, Cacos says. But when Stellantis indicated it was intent on pursuing a deal, Argentina Lithium shut down talks with others.
“When things started looking serious with Stellantis we signed an exclusivity agreement and we cut off those other discussions,” Cacos says. “Now as far as automakers go, only Stellantis will be allowed to buy lithium from us for the auto sector. They are looking to ensure they have a steady flow of lithium into their operations because they see a shortfall.”
Rincon resource in sight
Argentina Lithium’s top projects are Rincon West and Antofalla North. Its goal is to have a resource estimate on Rincon West as early as the first quarter of 2024 and a prefeasibility study the following year. At Antofalla North, permitting is in progress. The company expects that if exploration goes well and a resource is delineated, advanced engineering studies could be underway within three years.
Rincon West shares the Rincon Salar in Salta province with Rio Tinto’s (NYSE: RIO; LSE: RIO; ASX: RIO) adjacent Rincon project, and with Argosy Minerals’ (ASX: AGY) Rincon project to the east.
Rincon West sits 3,760 metres above sea level. It is close to a railway and 17 km south of Provincial Route 51, an international road that connects to coastal ports in Chile. In addition, the project is within 1 km of the InterAndes power corridor.
Drill holes at Rincon West typically extend to greater than 300 metres depth, and some of the best intercepts include 153 metres grading from 329 to 393 mg per litre lithium in drill hole RW-DDH-006; drill hole RW-DDH-004, which intersected 334 to 382 mg per litre over 132 metres; and 70 metres of 225 to 380 mg per litre in drill hole RW-DDH-001.
Antofalla North on the Antofalla Salar, is 25 km from Livent’s (NYSE: LTHM) Fenix lithium mine at Salar del Hombre Muerto and the project’s southernmost boundary is adjacent to properties controlled by lithium producer Albemarle (NYSE: ALB). Albemarle owns the entire central section of the 150 km salar, and Argentina Lithium the northern section, the company says.
Elsewhere in Argentina, the company has two other projects, Pocitos and Incahuasi. All four of the projects are in the Lithium Triangle, a lithium-rich region of the Andes around the borders of Argentina, Bolivia and Chile that holds about 60% of the world’s known lithium reserves.
Pocitos is about 38 km from Rincon West and makes up about 20% of the entire Salar de Pocitos basin. Incahuasi is on the Incahuasi Salar. The company controls the 17 km by 2.5 km salar and an additional 17 km of sedimentary basin connected to the salar. The town of Antofagasta de la Sierra lies about 34 km to the northeast. The company has not yet completed detailed sampling at Pocitos, while lithium grades in brine from limited drilling at Incahuasi are lower, typically between 50 and 150 mg per litre, with limited additional surface samples including values in excess of 400 mg per litre.
The two projects will be explored more rigorously once the company’s key projects are well advanced, the company says.
Benefits of long history
Argentina Lithium is part of the Grosso Group of companies, which has been active in Argentina since 1993. Cacos notes that the Grosso Group’s long history in the country has given Argentina Lithium a “competitive advantage” in sourcing and acquiring strong exploration projects in good locations.
“Stellantis was intrigued by our projects because they are all well located, drilling had commenced, and we were getting good results,” Cacos says. “They undertook extensive due diligence and brought in some of the world’s best experts that had helped advance other projects into production.”
“We didn’t need to bring in investment bankers, we did it all inhouse,” he continues. “They weren’t trying to squeeze us out, they want to help advance the project and give access to funding. They’ve also said they will be available to raise financing for a production plant when the time comes.”
With the influx of new funds, Argentina Lithium will likely double if not triple its exploration program. “We can do multiple geophysical work programs and bring in additional drill rigs,” he says. “Right now, we have one drill rig at Rincon West, but I can see us having three or four there.”
“Drilling one hole in these lithium salt lake brines can take approximately a month, so if we can bring on more drill rigs it will shorten the time to complete resource estimates.”
The investment by Stellantis will also demonstrate to Argentine mines and energy officials that Argentina Lithium means business.
“Exploration is only limited by permits, and while we have an excellent rapport with all the government and mining officials in Argentina already, now that they see us with Stellantis, they might sit up a little straighter when we walk in.”
Stellantis hopes to boost net revenues to US$316 billion by 2030 from US$190 billion in 2022, some of which will be driven by sales of battery electric vehicles. Last year it boosted BEV sales by 41% year-on-year to 288,000. It currently has 23 BEVs on the market and plans to double its BEV portfolio to 47 by the end of next year.
“Having Stellantis invest in us and working as a partner validates our projects and what we’ve accomplished in Argentina so far,” Cacos says. “To have a company of that stature on our side makes us proud.”
News of the agreement on Sept. 27 sent Argentina Lithium’s shares up 113% or 26¢ to 49¢ per share. When the deal closed on Oct. 5, the junior’s shares popped 31% or 12.5¢ to 53¢. At press time in Toronto Argentina Lithium had a market cap of about $61 million.
The preceding Joint Venture Article is PROMOTED CONTENT sponsored by Argentina Lithium & Energy Corp. and produced in co-operation with The Northern Miner. Visit: www.argentinalithium.com for more information.