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Global lithium prices slump over 80% since last year

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Argentina lithium production forecasts trimmed

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M&A interest rises as firms seek deeper-pocketed backers

By Daina Beth Solomon

SANTIAGO, Oct 24 (Reuters) - The Argentine salt flats in

South America's "lithium triangle" have been one of the busiest

sites for ventures racing to extract the battery metal needed to

power the global shift to electric vehicles. Now firms are

hitting the brakes.

The global lithium sector from Chile to Zimbabwe is

struggling due to prices that have slumped over 80% since the

start of last year on oversupply and weaker-than-expected EV

demand. That's gummed up financing and hit profit margins at

miners both large and small.

Reuters interviews with nearly a dozen executives, officials

and analysts show how severe the situation is in Argentina, and

how that is likely to reduce lithium output in the years ahead.

Firms have cut staff, slashed spending and halted

exploration projects, and the plunging value of lithium assets

has left some firms vulnerable to takeover.

Globally, Argentina is the number four lithium producer. It

has the second largest resources of the metal and has been a key

spot for investors looking to lock up supply.

"We were prepared for a rainy day and we found a storm,"

said Juan Pablo Vargas de la Vega, managing director of

Australia-based Galan Lithium, which is developing a project in

the Hombre Muerto basin in Argentina's northern province of

Catamarca.

Galan is aiming for first production in the second half of

next year, but it has cut its phase one target by around a

quarter from 5,400 tons to 4,000 tons of lithium a year.

The lithium price squeeze is shaking up the global market,

putting pressure on miners to cut costs and spurring more merger

and acquisition (M&A) interest as companies look for

deeper-pocketed backers to ride out the downturn.

This month mining giant Rio Tinto agreed to buy

U.S.-based Arcadium Lithium ( ARLTF ) for $6.7 billion, a deal

that will make it the world's third largest miner of the metal.

Five analysts consulted by Reuters expect more M&A, particularly

for early-stage projects.

"For companies that aren't producing and have resources in

Argentina, it's very probable that they'll be receiving offers,"

said Federico Gay, a lithium analyst at Benchmark Mineral

Intelligence.

Arcadium operates two of the main projects in Argentina. The

wider region, including Chile and Bolivia, holds more than half

of the world's deposits of the metal, which despite the price

drop remains a critical mineral for governments and carmakers

worldwide.

Western investors consider the region to be a geopolitical

safe haven as the United States and Europe put tougher controls

on auto parts from China, the world's number three lithium

producer.

'STOP SPENDING MONEY'

To be sure, Argentina is still likely to see a slate of more

advanced projects coming online in the near-term. The hit will

come further down the road, denting output estimates by around

2026-2028, analysts said.

That could play into a supply shortfall that is expected to

hit around the end of the decade as demand rises for lithium for

EV batteries and energy storage.

"We had to make the call to sort of stop spending money,"

said Jerko Zuvela, managing director of Australia-based Argosy

Minerals ( ARYMF ), which took a pilot plant in Argentina offline and laid

off the site's workers.

Local media reported the plant closure cost 140 jobs.

Asked about the reports, Zuvela said the company reduced its

workforce given the stoppage at the demonstration facility, and

changed its focus to construction on the commercial plant.

"When the big guys are slowing down their expansion

strategies and cutting back on staff and operations and so

forth, it's no different for us," he said.

UK-based mining consultancy CRU Group told Reuters it had

lowered its Argentina production forecast for 2027 by about 10%

and no longer sees the potential for Argentina to overtake

Chile, the world's number two producer, by that year, as it

previously expected.

Lake Resources is seeking permits for its Kachi project in

Argentina, but meanwhile this year cut three-quarters of staff

and put four Argentina lithium assets up for sale.

CEO David Dickson told Reuters the company is looking for

funding via equity investment and supply deals, and expects

lithium demand to exceed supply by the end of the decade.

Arcadium in August put some expansion plans in Canada and

Argentina on hold, a move that it said would help save it $500

million in the next two years.

"We must adapt to the realities of the market we find

ourselves in today and the pace at which we can responsibly

invest capital," Arcadium CEO Paul Graves told analysts when

announcing the cuts.

Argentina stands out for its deep pipelines of projects

driven by private capital - in contrast to neighbor Chile where

two established players, SQM and Albemarle, dominate the sector.

Argentina had 30 companies in the prospecting, initial

exploration and advanced exploration phases across its lithium

region as of July, government records show. But that pipeline

could be slowed in coming years as earlier-stage exploration

takes the hardest hit from the downturn.

"Exploration is very impacted by the drop in lithium

prices," Flavia Royon, head of a government-sponsored lithium

booster committee, told Reuters, adding the main hit to output

would likely be from 2028.

In the key lithium province of Salta, advanced projects from

companies including Rio Tinto, Eramet, Posco and Ganfeng, are

moving forward, but earlier-stage projects are getting stuck,

according to Salta Mining Minister Romina Sassarini.

"There are at least six others coming along that aren't

being developed today, that aren't moving into construction and

production because they don't have the investment," she told

Reuters. She did not identify the projects she was referring to.

Argentina, looking to boost a flagging economy, has lured

investment from global firms in recent years with

market-friendly regulations. The current government is also

pushing investment incentives including tax breaks and targeted

easing of capital controls for large projects to access dollars.

"This in some ways counteracts the drop of lithium prices," said

Royon, citing Rio Tinto, Eramet, Posco and Ganfeng as projects

that were advanced enough to potentially benefit from the

incentives.

'NO BETTER TIME TO BUY'

The shakeout may be painful, but it has made projects more

attractive to potential suitors looking to pick up bargains:

valuations for lithium companies globally have dropped about 60%

to 70% in the last year and a half.

A half-dozen analysts and executives pointed to eight

projects in Argentina that could potentially be targets,

including Argosy Minerals ( ARYMF ), Galan Lithium and Lake Resources.

"There is no better time to buy assets than today," said

Jose Hofer, a lithium adviser at consultancy SC Insights,

without himself specifying who might be the top targets.

In fact, Galan was approached by lithium technology startup

EnergyX in August for a $150 million takeover, but rejected the

offer. Galan declined to comment on potential M&A, as did

Argosy.

Most executives were hopeful of prices rising again - even

if not to peak levels - as EV demand picked up.

Although the exact timing is hard to pin down, the price

turnaround is not expected to be any sooner than mid-2025.

The head of one early-stage lithium project in Argentina

that has struggled with funding, who declined to be identified,

said he expected prices to rise by the second or third quarter

of next year, at least enough to start mobilizing the projects.

However some analysts expect low pricing to persist through

the first half of 2026.

Argosy Minerals ( ARYMF ), which plans to build a 12,000-ton per year

facility at the Rincon salt flat in Salta province expects its

capital reserves to be enough to fund feasibility and

engineering works, said Zuvela, the managing director.

Once that is done, in about nine to 12 months, it would

return to the market to see if funding was available for

construction, he said.

"That's where higher lithium prices probably need to provide

an incentive for financiers to come out and support companies

like us to develop lithium projects," Zuvela said.