Lithium Americas to restart Cauchari-Olaroz in Argentina

Pausing for a photo at the Cauchari salt lake at Lithium Americas's Cauchari-Olaroz lithium brine project in northwestern Argentina's Jujuy province. Credit: Lithium Americas.Pausing for a photo at the Cauchari salt lake at Lithium Americas' Cauchari-Olaroz lithium brine project in northwestern Argentina's Jujuy province. Credit: Lithium Americas.

Lithium Americas (TSX: LAC; NYSE: LAC) is gearing up to resume construction activities at its Caucharí-Olaroz lithium project in Jujuy, Argentina, after halting operations in March to comply with the country’s measures against the coronavirus pandemic.

The company, which is developing the asset with the help of China’s Ganfeng Lithium, had to suspend construction at Caucharí-Olaroz again in July, after two workers tested positive for Covid-19.

“We remain focused on protecting our workers and communities, while coordinating closely with the province of Jujuy to ensure we operate responsibly and safely as we begin to restart construction activities over the next few weeks,” president and chief executive officer Jon Evans said while delivering second-quarter results.

The news sent shares in the company to a one-year high on Aug. 14 in Toronto, touching an intraday high of C$10.57  before closing up 7.7% at $10.44. At press time in Toronto on Aug. 17, its stock had risen a further 7.95% to $11.27.

Lithium Americas said Caucharí-Olaroz was 47% complete as of June 30, with 75%, or US$427 million, of the planned capital committed and 54%, or US$304 million, spent.

It also said that joint venture partner Ganfeng Lithium was increasing its stake in Caucharí-Olaroz from 50% to 51%. The transaction is expected to close by the end of the third quarter, Lithium Americas said.

Based on an updated feasibility study released last year, the proposed lithium mine is expected to produce 40,000 tonnes of the battery metal a year.

Caucharí-Olaroz was slated to begin operations in early 2021, with production ramping up to 15,250 tonnes. The plan was to then increase that rate to 36,000 tonnes in 2022 and achieve full production before year-end. The operation would then generate 40,000 tonnes per year from 2023 to 2060.

The projections were made before Covid-19 hit the world economy, however, and the Vancouver-based miner is now reviewing the impacts of the suspensions on its timeline and budget. Management said it would provide an update once those assessments were completed.

Argentina is part of South America’s “lithium triangle,” which includes neighbouring Chile and Bolivia, and which is home to more than 60% of the world’s annual lithium production.

Before the coronavirus pandemic, the South American nation was working towards exporting US$2.1 billion of lithium a year. The figure compares to the US$190 million the sector generated last year, when it shipped 50,000 tonnes of the white metal.

Last month, lithium miners operating in Argentina created an industry group that aims to boost the development of new projects and enable a transparent setting of prices for the battery metal on international markets.

The association, named Calbafina, has set as a first goal to create a lithium carbonate index to track and publish the price of the metal, which is key to the development of electric vehicles. The “USD INDEX LI” would list lithium prices per tonne in U.S. dollars.

Argentina’s push to grow lithium exports has already faced challenges, with main rivals Australia and Chile developing deposits faster and low prices hurting investment.

Global lithium demand tripled between 2015 and 2017. According to the latest report from Citi, demand could jump by another 500% by 2035.

The investment bank predicts prices will fall a further 5% to US$4,800 per tonne in the three months to September, but should recover in the fourth quarter of the year. By 2022, prices could rise 42% to US$7,200 per tonne and to US$9,000 per tonne by 2030, Citi said.

— This article first appeared in The Northern Miner and are part of Glacier Resource Innovation Group.


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