Isolation clips Fenix's wings

The Salar del Hombre Muerto (dead man's salt lake) lithium operation in northwest Argentina's Catamarca province, operated by Minera Fenix, is being hurt by isolation and a lack of infrastructure, general manager Oscar Lacher told a conference. All consumables and raw materials, including acids, have to be brought in from a considerable distance, while personnel are flown in and out, he said. Roads are rudimentary and rail transportation non-existent. Distance to ports is another factor. At some 1,000km from the nearest Atlantic port, Fenix transports its product over the Andes to Antofagasta, Chile, for export, again raising costs, Lacher added. The company's chief markets are Japan, the US and the UK. As a result of the isolation, production costs have been negatively impacted, he said. Minera Fenix is a subsidiary of Philadelphia-based chemicals company FMC Corporation (NYSE: FMC). FMC first became interested in northwest Argentina's lithium potential in the early 1980s when its North Carolina deposits ran out and it was found that evaporation-based lithium production from salt lakes was the most economical method of extracting the mineral. After a six-year exploration, evaluation and construction period, production began in 1997. The company has the capability of producing lithium chloride and lithium carbonate, but the latter is not economic at today's prices. Apart from the operations at Hombre Muerto, Fenix manages the lithium chloride plant at General Guemes in Salta province. Another factor limiting Fenix's profitability is the current economic climate in Argentina, which has caused the federal government to renege on agreements to eliminate value added tax on goods used to make exports, and on tax breaks for investments in remote areas of the northwest provinces, according to Lacher. He was speaking at a mining and infrastructure conference in Tucuman, Catamarca, organized by Editorial RN communications company. However, despite the setbacks Fenix registered US$35mn in sales last year. The company aims to double that figure over the next few years once it boosts efficiency in its lithium carbonate line, and steps up lithium chloride production, Lacher said. Catamarca province and the surrounding areas in northwest Argentina have potential to host much more lithium production, with several other sites already being evaluated by Fenix, he said. Talks are underway with a group of Australian investors to develop one such site, known as Salar del Rincon, Lacher added. Such investments could put northwest Argentina on a par with the neighboring lithium producing region of Salar de Uyuni in southwest Bolivia and Salar de Atacama in northern Chile, he said. Chile has greatly increased its lithium production in recent years, with major investments by local firms SQM (NYSE: SQM) and Chemetall (Sociedad Chilena de Litio), the executive said. The resulting increase in production has driven down lithium, and especially lithium carbonate prices, Lacher told the conference. The chief uses of lithium are in batteries, pharmaceuticals, and rubber and plastics products.