South America’s lithium sector is poised to see more acquisitions as deep-pocketed companies purchase smaller players struggling to raise capital to shift into production, Ignacio Celorrio, president of Latin American operations at Lithium Americas Corp., told LatinFinance.
“This year and next year, there is going to be a shake-up of the industry,” he said in an interview on the sidelines of an event in Buenos Aires organized by local business consultancy ABECEB.
Celorrio said this disruption in the sector likely will lead to M&A deals at “more reasonable prices” than over the past few years. These potential sellers “have a need for capex and financing,” Celorrio said.
“Those companies that are just now looking to enter into construction are going to have a tougher challenge than in previous years because of the decline in prices,” he said.
High global interest rates and low lithium prices have made it harder for smaller players to raise capital to shift into the construction phase or complete their production facilities at lithium sites. The price of lithium carbonate fell to a two-year low of less than CNY163,000 ($22,289) per metric ton at the end of October after peaking at more than CNY636,000 in November last year, according to Trading Economics.
A number of M&A deals were made over the past month by larger players. Tecpetrol, the third-largest natural gas producer in Argentina, acquired 54% of Canada’s Alpha Lithium, which owns the Salar Tolillar project in northwest Argentina.
Chilean chemical company Sociedad Química y Minera has offered to pay around $900 million to acquire the 80% that it doesn’t already own in Australia’s Azure Minerals, while Codelco has agreed to buy Australia’s Lithium Power International for $244 million, the Chilean state-owned copper miner’s first acquisition in the lithium sector.
These projects are in the so-called lithium triangle, a region shared by Argentina, Bolivia and Chile that holds some of the largest reserves of the silvery white metal.
Vancouver-based Lithium Americas has operations in the Argentina section of this triangle, where it began production in the middle of this year and is completing the construction of the rest of its facilities to increase production over the next year. “We are in the ramp-up stage,” Celorrio said.
Lithium Americas is betting that with its growth in output it can fund itself going forward out of cash flow.
“We are not worried about financing right now,” he said. “There is demand for the product.”
Lithium is used in electric cars and batteries for storing energy from renewable power plants, and demand is expected to grow because of the energy transition to net-zero carbon dioxide emissions by 2050.