April 23, 2018 - 9:44 AM EDT
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Chinese Lithium Acquisition Spree Shifts from Chile to Argentina

While one recent major Chinese lithium acquisition was being aggressively hindered in Chile, another was being approved in neighbouring Argentina—an all-cash deal worth $265 million.

Recent efforts by Chilean government agency Corfo to block Chinese firm Tianqi Lithium from acquiring a 32% stake in lithium giant Sociedad Quimica y Minera de Chile (NYSE: SQM) seem to be sending an alarming message to foreign firms who originally sought investment in Chile, and are now perhaps changing their target region to neighbouring Argentina.

With heavy development happening in the country, Chinese firms may start taking a more serious look at companies with assets in Argentina, which include SQM, Lithium X Energy (TSX.V: LIX) (OTC: LIXXF), Millennial Lithium Corp. (OTC: MLNLF) (TSX.V: ML), Orocobre Limited (TSX: ORL) (OTC: OROCF), and NRG Metals Inc. (OTC: NRGMF) (TSX.V: NGZ).

Foreign investors have been ramping up interest in South America’s precious lithium brines, which are much cheaper to produce than Australian hard-rock mining. This attention zeroes in on a region known as the Lithium Triangle, which spans Chile, Bolivia, and Argentina.

However, these three aren’t seen as equals on the international stage.

Bolivia’s far-left government turns away most foreign investment, leaving it far behind in the dust. But it seems that Chile and Argentina are duking it out for lithium supremacy—a duel that’s been spun around in recent years, as major government changes in both countries are seemingly swapping their reputations.

Lithium X Energy (TSX.V: LIX) (OTC: LIXXF) and the sale of its assets in Argentina show a completely different attitude towards the Chinese drive for lithium supplies—Having successfully completed an arrangement that netted the company an all-cash deal worth $265 million, to Chinese investment firm Nextview New Energy Lion Hong Kong Ltd.

Late last year, NRG Metals Inc. (OTC: NRGMF) (TSX.V: NGZ) sealed its own deal with Chinese high-purity lithium manufacturers Chengdu Chemphys Chemical Industry Co., Ltd (“Chemphys”)—Successfully meshing their new partners into the strategy going forward, which recently began drilling on its Salar Escondido Project.

What the lithium market is witnessing is the beginning of a shift to Argentina will inevitably boost interest and investment, and benefit companies such as Lithium X Energy (TSX.V: LIX) (OTC: LIXXF), Millennial Lithium Corp. (OTC: MLNLF) (TSX.V: ML), Orocobre Limited (TSX: ORL) (OTC: OROCF), and NRG Metals Inc. (OTC: NRGMF) (TSX.V: NGZ).

ARGENTINA’S LITHIUM ADVANTAGES (AND CHALLENGES)

Since President Mauricio Macri took power in 2015, Argentina opened itself up to foreign capital, and has set its sights on surpassing Chile on the way to becoming a lithium superpower.

As of December 2017, the country supplied about 16% of the world’s lithium—However, it has set the new goal of supplying as much as 45% of the market.

While Argentina certainly has the lithium supplies to meet these ambitious goals, it lags in supplying the brain trust to accomplish the feat. The country is swimming with doctors and lawyers, but has a dearth of skilled workers and technical personnel for lithium.

“There is a real potential that Argentina will leapfrog over Chile in terms of production in five years’ time,” Richard Seville, CEO of Orocobre Limited (TSX: ORL) (OTC: OROCF), told Reuters during a visit to the mine. “It is going to be a very important player.”

Orocobre produces 14,500 tonnes of lithium carbonate per year at its Olaroz salt flat mine. But when the company welcomed on partner Toyota Tsusho Corp, plans for the mine suddenly projected a doubling of its total production to 35,000 tonnes by 2019.

As of late 2017, Argentina held the rank of 3rd largest lithium producer in the world at 30,000 tonnes per year, which is less than half of Chile’s annual output of 70,000 tonnes.

But with projects like Orocobre’s, Lithium X’s, and NRG Metals’ getting boosts from foreign interests (mostly from East Asia), there appears to major shift happening.

LITHIUM TRIANGLE LEAPFROG

While Chile seems to be putting up obstacles against Tianqi Lithium, the agency responsible for the country’s lithium assets (and the resistance to Tianqi) known as Corfo followed up their block request by announcing it had also approved $754 million in new lithium industry investments.

Some of these investments still came from Chinese and South Korean interests.

But the timing of Corfo’s attempted blockade of Tianqi Lithium was on March 9th, whereas the $754 million-announcement was only on March 12th—leaving an impression of doubt for the foreign investment community.

Among this community, China is spearheading all types of mergers and acquisition, with Tianqi Lithium and Ganfeng Lithium leading the way.

So, while Corfo sends mixed signals to the world with its move to block Tianqi from acquiring a stake in Sociedad Quimica y Minera de Chile (NYSE: SQM), Argentina is stepping up to take on all comers.

Prior to the Tianqi offer in Chile, NRG Metals Inc. (OTC: NRGMF) (TSX.V: NGZ) already made an example of a healthy relationship with a Chinese investment partner.

NRG METALS LEADING BY EXAMPLE

Back in November of 2017, NRG Metals Inc. (OTC: NRGMF) (TSX.V: NGZ) finalized its own major deal in the form of a strategic alliance with Chinese high-purity lithium manufacturers Chengdu Chemphys Chemical Industry Co., Ltd (“Chemphys”).

The alliance proudly announced in January 2018 that Chemphys would have representation on the NRG Board of Directors.

Company President Adrian F.C. Hobkirk said in the announcement:

"We are very pleased to have obtained the support of our shareholders in regards to our business plan for the exploration and development of lithium projects in Argentina. We welcome Ms. Dai to the board of the Company, and look forward to working closely with Chemphys to quickly advance the development of the Company."

The Chemphys deal represented a major shift for companies the in the same size category, and development stage as NRG. The Chinese lithium firm entered the partnership with the junior to advance the exploration and development of NRG’s flagship Hombre Muerto North Lithium Project (“HMN Project”).

And the relationship is already paying off, as the HMN Project has already secured a contract for initial drilling, with drilling expected to commence in April 2018.

Sampling on the project at the beginning of the year yielded very high lithium values, with several sites returning values over 1000 mg/l Li.

Similarly high values were already reported on the company’s other Argentinean asset the Salar Escondido Lithium Project—Phase II drilling has just recently began on the massive 29,000-hectare property.

With Chemphys supporting the process, and a push from the Argentinean government to move lithium projects forward, NRG Metals Inc. appears capable of becoming a major benefactor from the coming sea-change of lithium activity from Chile to Argentina.

POTENTIAL COMPARABLES

Lithium X Energy Corp. (TSX.V: LIX) (OTC: LIXXF)

Lithium X Energy Corp., is a resource company operating as a lithium explorer and developer in Argentina and the United States. The company owns a 50% interest in the Sal de los Angeles project comprising 8,156 hectares located in Salta Province, Argentina. Lithium X Energy Corp. was founded in 1997 and is headquartered in Vancouver, Canada.

Millennial Lithium Corp. (OTC: MLNLF) (TSX.V: ML)

Millennial Lithium engages in the acquisition, exploration, and development of lithium mineral properties and oil and gas resource properties. It primarily holds 100% interest in the Pastos Grandes Lithium Project located in Salta Province, Argentina. Millennial Lithium Corp. was incorporated in 2005 and is headquartered in Vancouver, Canada.

Orocobre Limited (TSX: ORL) (OTC: OROCF)

Orocobre Limited explores for and develops lithium and potash deposits in Argentina. Its flagship project is the Salar de Olaroz lithium project located in north-west province of Jujuy. The company also produces boron minerals and refined chemicals. Orocobre Limited is based in Milton, Australia.

Sociedad Quimica y Minera de Chile (NYSE: SQM)

Sociedad Quimica y Minera de Chile S.A., is a producer of potassium nitrate and iodine. The Company produces specialty plant nutrients, iodine derivatives, lithium and its derivatives, potassium chloride, potassium sulfate and certain industrial chemicals. Its segments include specialty plant nutrients, industrial chemicals, iodine and derivatives, lithium and derivatives, potassium, and other products and services Lithium and its derivatives are used in batteries, greases and frits for production of ceramics. Potassium chloride is a commodity fertilizer that is produced and sold by the Company across the world.

For a more in-depth look into NRG Metals you can view the in-depth report at Energy Metal News: http://energymetalnews.com/2018/01/13/energy-metals-prices-will-continue-to-grow-past-2024-junior-miners-are-the-catalyst/

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Source: Livemoney (April 23, 2018 - 9:44 AM EDT)

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