Argentina Lithium uses local expertise to build asset portfolio in Lithium Triangle
The Grosso Group got into the Argentine mining industry when two-term President Carlos Menem opened up the country for foreign investment in the 1990s.
The group has been behind the discoveries of Yamana Gold’s Gualcamayo gold mine, SSR Mining’s Chinchillas silver deposit, two of the country’s largest operating mines. It was an intuitive move for the Grosso Group to get involved in the bidding rounds for lithium salt lake prospects in the so-called Lithium Triangle that straddles the borders of Argentine, Bolivia and Chile. It set up Argentina Lithium & Energy Corp. (TSXV: LIT | OTCQB: PNXLF) to focus on lithium exploration.
The Grosso Group has a deep understanding of how Argentine provincial authorities grant mining concessions. Each province has autonomy to set the rules for foreign investors, although President Mauricio Macri has requested that they match a broader federal strategy. The group is also familiar with many local prospectors who have acquired the rights to explore for lithium in the northwest of the country but lack the technical expertise to take a project forward.
The Lithium Triangle is home to about 61% of the world’s lithium reserves and two companies – Chile’s SQM and Albemarle Corp. – operate the two lowest cost lithium mines in the world on the Chilean side of the border. Chile has investment rules for the lithium industry that until now have prevented newcomers from building new capacity, and investors have shunned Bolivia because of geopolitical risk. That has made Argentina a hotbed for lithium exploration.
“Our management team has a quarter of a century of experience in Argentina,” CEO Nikolaos Cacos told InvestorIntel. “There’s enormous potential to make large lithium discoveries, and we’ve got all our local contacts and we are negotiating to acquire a much more meaningful portfolio.”
There is every reason to believe that the Argentine side of the border carries the same major deposits found in neighboring Chile, home to the world’s largest lithium deposit. Argentina Lithium ran out of piping when drilling on its Arizaro project, finding lithium brine at a depth of 400 meters. The company will return to carry out more exploratory work at Aziraro after finishing a drilling program at its Incahuasi target this year.
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The prospect of securing a long-term offtake agreement is getting higher, as the market hots up for the prospect of exponential growth in electric car batteries. The Grosso Group are seeing more and more battery makers, especially from China, trying to participate in provincial auctions for lithium concessions, indicating their desire to directly hold lithium assets, Cacos said.
FMC Corp. has operated a lithium mine in Argentina’s northwest since the 1990s. Australia’s Orocobre Ltd. began the second to produce lithium brine in 2015, after signing a joint venture with Toyota Tsusho Corp. to develop the Cauchari-Olaroz project. A host of other companies are lining up to tap more projects in the South American country.
Argentina is a complex country, both in terms of its recent geo-political history, and the way it runs its mining industry. True Argentina experts however know that several of the country’s best mining prospects are found in provinces with small populations with very low economic activity, and are very welcoming of foreign investors. The mining industry was left relatively unscathed during two terms in power of former President Cristina Fernandez de Kirchner, who routinely attacked foreign interests in Argentina.
Argentines voted for a radical change of government in 2015, electing former entrepreneur Mauricio Macri. Macri opened up Argentina to foreign investment, and targeted mining as a way to speed up the country’s economic recovery following years of crisis. That way Argentina is likely to become a major player in the global lithium industry, with Argentina Lithium riding that wave.
Matt Craze has covered commodity markets for more than 20 years, working as a researcher at CRU International, and for over 10 years as a ... <Read more about Matt Craze>