China’s Ganfeng Lithium Co said it will take control of an Argentina lithium project it has been developing with Lithium Americas Corp, cementing its control over a key source of the white metal for electric vehicle batteries.
The move helps Lithium Americas cut its debt - up more than eight times in the past year - and also reduce its exposure to recession-hit Argentina as it tries to develop another lithium project in Nevada.
It also helps Ganfeng, which counts BMW, Tesla Inc and LG Chem Ltd as key customers, expand its dominance over the EV supply chain.
The deal, which is set to close before August, is an about-face for Lithium Americas, which had said last spring that it had no interest in selling more than 50% of its stake in the Cauchari-Olaroz project in Argentina’s far north.
Last fall Argentina elected Alberto Fernandez, a Peronist who favors government economic intervention, as president. Lithium prices have also dropped, unnerving investors.
“We don’t know what could happen in Argentina long term,” Jon Evans, Lithium Americas’ chief executive said. “We see Nevada as a better place to put our money.”
Ganfeng will pay US$16 million to increase its stake in the Argentina project by 1 percentage point to 51%. Lithium Americas will retain a 49% stake and also get US$ 40 million cash.
Ganfeng approached Vancouver-based Lithium Americas with the proposal a few weeks ago and its board finalized the agreement early on Friday after the Lithium Americas board approved it.
When asked if Ganfeng could one day control all of the Cauchari-Olaroz project, which is set to start production next year, Evans said, “Sure.”
“We remain firmly committed to investing in Argentina,” said Xiaoshen Wang, Ganfeng’s vice chairman. Ganfeng is the largest Lithium Americas shareholder, though Evans and other board members are also major holders.
Lithium Americas plans to start building its US$ 400 million Thacker Pass lithium project in Nevada next year. U.S. regulators last month moved a step closer toward approving the project and could issue permits as soon as next January.