China's Ganfeng to take control of Argentina lithium project
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 percent 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, told Reuters. “We see Nevada as a better place to put our money.”
Ganfeng will pay $16 million to increase its stake in the Argentina project by 1 percentage point to 51 percent. Lithium Americas will retain a 49 percent stake and also get $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.”
Argentina has been struggling with a steep recession and inflation above 50%. The government is trying to restructure $100 billion in sovereign debt. Those woes do not seem to unnerve Ganfeng, based in eastern China.
“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 $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.
Shares of Lithium Americas rose about 0.2 percent after the news to C$4.27. Shares of Ganfeng were unchanged overnight on Shanghai exchanges.
(Reporting by Ernest Scheyder; Editing by Steve Orlofsky)