The lithium industry has been somewhat immune to Argentina’s unstable political and economic scenario. Lithium is one of the few areas – at least so far – that has not been affected by partisan divisions and lacks the strict regulatory controls faced by most industries in the country.
The governors of the lithium-rich provinces of Catamarca, Jujuy and Salta, each from a different political party, formed a regional committee called the Mesa del litio to coordinate provincial regulations with the federal government.
In Argentina, private companies control lithium production and the government collects taxes and royalties and exercises environmental and administrative powers. This basic legal framework for mining has not changed in the last 30 years, the provinces are the owners of their mineral resources and may grant ownership of mining rights to private individuals, foreign or domestic, without restriction.
There is also a prohibition in the Argentine Mining Code for the State to carry out mining activities. This legislative framework has acted as protection against expropriation attempts, government controls and interventions and an excessively onerous tax scheme.
As is repeated ad nauseam, Argentina is located in the so-called “lithium triangle”, together with Bolivia and Chile, which contains approximately 70% of the world’s lithium reserves, mainly under its salt flats. The provinces of Salta, Catamarca and Jujuy, where the lithium deposits and producing companies are located, have strongly supported the activity, with a market-friendly regulatory scheme and an attractive economic incentive package.
Lithium production
In this context, Argentina’s lithium production has increased dramatically, from less than 1% of world production in 1994 to 10% today. The country has currently two projects in full operation (Sales de Jujuy and Fénix), one project that has recently started production (Caucharí Olaroz) and 34 projects in different stages of development. In the first four months of 2023, lithium carbonate sales abroad reached US$294 million, growing 98% year-on-year and representing 23% of total mining exports.
In terms of reserves, Argentina holds approximately 9% of the world total (2.2 million tons), being the third largest in the world. Chile is the main holder with 9.2 million tons, Australia has 5.7 million tons and China 1.5 million tons.
Market experts estimate that, by 2025, northern Argentina could generate up to 300,000 tons per year of lithium carbonate, making it the second largest producer in the world.
Investments
Canadian, Chinese, U.S. and Australian investments in this sector have steadily increased, amounting to approximately US$5 billion in the last two years, and significant investments are expected in the short term, both in new projects and in the expansion of existing ones.
Lithium carbonate export forecasts are also very optimistic, with an estimated 800,000 tons per year in five years. The construction of facilities to produce lithium batteries locally is also being seriously evaluated.
The Argentine legal regime has proven to be stable and favorable to the market, despite the political and economic fluctuations that Argentina has gone through in recent decades.
The projects that propose the declaration of lithium as a “strategic mineral” and even some that directly promote the nationalization of lithium production and commercialization are absolutely minority and do not have the necessary political support to be put into practice.
It would be desirable that we do not fall into the temptation of intervening in an industry that has developed under market conditions, marking a favorable differential against our neighbors.
This would discourage investments and affect the legal stability of the mining industry, which in my opinion has been a fundamental factor that explains the great development of the industry in the last 30 years, together with the unbeatable mining reserves that the country has.
SOURCE: econojournal.com.ar