An Argentine province on the prowl for strategic partners

Bnamericas Published: Thursday, January 19, 2023
An Argentine province on the prowl for strategic partners

Argentina is the world’s fourth largest lithium producer thanks to two operations, one in Jujuy province (Olaroz, controlled by Allkem and Toyota Tsusho) and one in Catamarca (Fénix) that together recorded exports of close to US$700mn in 2022.

Lithium is in the crosshairs of the federal government, the provinces and investors who see opportunities in the global energy transition, with the growing production of electric vehicles and the installation of renewable energy plants.

In Jujuy, lithium was declared of strategic interest in a 2011 law, which guaranteed a share in exploration and mining of the metal for provincial company JEMSE.

As a result, JEMSE has 8.5% stakes in the companies that hold lithium projects in the province, such as Caucharí-Olaroz, which is operated by local miner Exar, a joint venture including Lithium Americas and Ganfeng Lithium.

JEMSE is also involved in the Caucharí solar parks, which are in an area with some of the highest radiation in the world.

BNamericas spoke with Felipe Albornoz, president of JEMSE, about the current situation in the country, legislative challenges, lithium and energy projects, and new business opportunities.

BNamericas: Will the current macroeconomic crisis affecting Argentina be a disincentive for investment?

Albornoz: The situation is complex. We have high inflation and a very high level of poverty. We also have problems with imports of materials that we must solve as quickly as possible. In the legal aspect, security is a concern and ensuring that the rules don’t change. But in the same way there are interested parties and at JEMSE we continue to hold meetings with new investors, especially for lithium.

BNamericas: What is the situation with the wetlands law?

Albornoz: The bill was presented but it must be worked on so that it doesn’t harm investments or projects. We’re not against this law, but we must work in consensus with all sectors.

BNamericas: What do you think of establishing a fixed price or forming a kind of OPEC for lithium, in order to control the market?

Albornoz: Here they set minimum prices in mid-2022, but it was not agreed upon. If the laws or modifications are discussed with the companies, it’s not bad. But when they’re imposed without knowledge, problems arise. Lithium is not a commodity, there is no international price, so basing it on a price taken from another part of the world and without analyzing the costs for each region is complicated. A general analysis must be made including all the participants of the business to establish the guidelines.

BNamericas: How much production did Olaroz reach in 2022 and when is the expansion expected?

Albornoz: I don't have the exact number of how the year ended, but production was estimated at between 16,000t and 17,000t for 2022, and its expansion is being completed, which would end this quarter and will allow it to reach around 41,000t per year from 2023.

BNamericas: Lithium production at Caucharí Olaroz could reach 40,000t/y. Will the goal be met?

Albornoz: The construction is finished and the commissioning is now being planned, which will take place this half. When it goes into production, you will really see the capacity that the plant will have in its first year of life.

BNamericas: Will Argentina be able to climb from fourth to third place in world lithium production?

Albornoz: That's what it's aiming for. Jujuy will have 80,000t/y in either 2023 or 2024, plus the new projects. The same happens with the other provinces, such as Salta where there are many projects that are starting. In Catamarca there is a plant operating, but also other projects. In four or five years, Argentina will have very good lithium carbonate production capacity.

BNamericas: What was the outcome of the tender for properties in the Salinas Grandes and Laguna de Guayatayoc basin with potential to explore and produce lithium carbonate?

Albornoz: The offers were analyzed and the award was made to a company with a lot of experience and solvency. I cannot give the name until the contract is signed, which will be at the end of the month, but it’s likely that exploration will begin this year on the 11,000ha that were tendered.

BNamericas: How is the project for a plant to manufacture lithium battery cells going?

Albornoz: The project is ready and investors are evaluating the financing. But to start construction a minimum level of demand is needed and that does not exist today because a law is needed for the national promotion of electromobility that really motivates the conversion of vehicles. We’re waiting for the necessary conditions to move forward.  

BNamericas: Does JEMSE have an interest in copper production?

Albornoz: In Jujuy there are copper projects of private companies, but JEMSE is not in the copper business at the moment. In the areas where there are gold, copper, silver and rare earths, we’re working to get strategic partners to come. There we will see some minimum participation or a canon [royalty] on what is obtained from the production. More than anything we look for projects to be developed and for them to be viable.

BNamericas: The Cauchari photovoltaic solar parks are in the process of being expanded. How many megawatts do you expect to achieve and when will they be available to supply the electricity grids?

Albornoz: The expansion of an additional 200MW in the Cauchari I, II and III parks has already been authorized at all levels of the nation and we have already sent the information to our financier which is Exim Bank of China. We’re waiting for the last stage of approval of the credit that would come out this quarter to start the purchases and the construction that will allow us to move to capacity of 500MW of photovoltaic production. This will be sold to the national grid through Cammesa for distribution throughout the country.

BNamericas: What is the current situation of the project comprising eight photovoltaic solar parks in Jujuy?

Albornoz: The project consists of a total of 96MW divided into two 48MW stages. A tender was called for the first stage consisting of the construction, operation and maintenance of the eight plants that will be strategically located in the province of Jujuy.

We made the contract with [provincial electricity company] Ejesa to distribute energy locally. The first park will be Cannava, which will supply energy to a cannabis plant for medicinal purposes. Then we have another project that will be located in the Perico industrial free trade zone. And the other parks like Humahuaca and Caimancito will also be in strategic places.

That is the first stage. For the next stage we’re already working on the location of the land. It’s a unique project in the country that works with local energy companies and if it works well, it will be a business model for other provinces to replicate.

BNamericas: What new JEMSE projects could be of interest to investors?

Albornoz: We have different renewable energy projects related to solar, geothermal and green hydrogen. Investors can ask us about the feasibility of these projects. We have a prototype of a renewable energy plant that we developed together with INVAP, which consists of a mixed solar thermal and photovoltaic system to generate energy 24 hours a day. We have industrial and retail commercial free zones. In mining we have lithium and many other interesting projects. We continue to look for strategic partners and we’ll provide all the tools so that the investor can comfortably develop their projects.  

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