Argentine Government gets lithium greedy, promotes local processing: 4 stocks to watch

The Argentine government is seeking to promote domestic downstream and value-add lithium processing to stop profits from leaving the country, according to Mecro Press.

“We have decided to implement a debate and negotiations with the companies and to implement measures so that as much lithium as possible remains in the Argentine Republic for its industrialization for value-added projects," said Jujuy Governor Gerardo Morales.

"We have also raised our concern since there is an exorbitant increase in lithium prices at an international level, which does not match the income that the lithium provinces are receiving."

Morales says the government plans to discuss the issue with companies of Jujuy, Salta and Catamarca provinces. Of note, approximately 17% of the world's lithium reserves are located in the Catamarca province alone.

Which ASX-listed companies are at risk?

Allkem (ASX: AKE): Is a diversified lithium miner and refiner with operations across Australia, South America, North America and Asia. However, its flagship Olaroz project is situated in the Jujuy province and emerging Sal de Vida project is in Catamarca. In FY22, Olaroz accounted for approximately 38% of Group revenues.

Argosy Minerals (ASX: AGY): It's flagship Rincon Lithium Project is in the Salta province. The project is currently in its preliminary ramp-up phase and expects to hit steady-state production by the end of the June quarter 2023 for 2,000 tonnes of lithium carbonate per annum.

Lake Resources (ASX: LKE): It's flagship Kachi Project sits in the Catamarca province. Lake is targeting a mid-2023 Definitive Feasibility Study for the project. A 2020 pre-feasibility study noted annual production of 25,500 tonnes of lithium carbonate per annum for a post-tax NPV of US$1.58bn.

Galan Lithium (ASX: GLN): Is developing the Humbre Muerto West project, located in the Puna province. A definitive feasibility study is planned for release in the late March quarter 2023.

Still up in the air

The Argentine government clearly wants a bigger piece of the lithium pie but such discussions remain indicative at this point in time.

"During the meeting, it was agreed that lithium-producing companies should allocate a percentage of their output to industrialisation and value addition in Argentina," noted MercoPress. "Measures to reverse this situation are to be analysed."

Lithium shares are experiencing broad-based weakness on Thursday, with Allkem (-3.9%), Lake (-3.3%) and Galan Lithium (-2.8%). Argosy is one of few names to buck the trend, up 1.3%.