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High Risk-High Reward Lithium Bet Drives Argentina Mining Surge

High risk/high reward. That’s the bet being made by global lithium miners in Argentina who are brushing aside a recession, a currency crisis and political uncertainty in their hunger for the mineral that helps power electric cars.

Rising demand and limited supply have resulted in lithium prices tripling over four years. In response, companies have been scrambling to build new mines, putting Argentina and Chile, two of the world’s largest producers of the mineral, squarely in their sights.

But while Chile may be more economically stable, top producers there -- Albemarle Corp. and Soc. Quimica y Minera de Chile SA -- have struggled to obtain licenses to expand. Meanwhile, Argentina President Mauricio Macri is pushing a more pro-market agenda.

"Looking at the recent experience of SQM and Albemarle, I’d much rather do business in Argentina than in Chile," said John Kanellitsas, executive vice chairman of Canada-based Lithium Americas Corp., which is undertaking a nearly $500-million joint project with China-based Jiangxi Ganfeng Lithium Co. Ltd. in Argentina’s Jujuy province.

"In Argentina a little patience is required over the long term,” Kanellitsas said in an interview. “But we think the situation will be resolved favorably."

Lithium Boom

The country is in the early stages of a lithium boom, according to an Economist Intelligence Unit report. Two mines are currently in production and over 60 projects are in development, with five close to coming on stream, the report said. Investment in lithium projects has increased tenfold in the past five years, according to an August report from Argentina’s undersecretary of Mining Development, Mariano Lamothe.

Argentina and Chile are part of the so-called lithium triangle, a vast Andean area peppered with salt flats that also spans across Bolivia to the north. Home to the world’s second-largest lithium resource, Bolivia has attempted to mine it for years --and failed. The country has produced 250 tons this year, but is investing in several projects that, it says, will bring production capacity to 150,000 tons in 5 years’ time.

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