Argentina’s government will this month decide whether to implement a supercharged lithium tax which could spell disaster for a number of WA-based explorers and an Australian mining giant.
Federal and provincial leaders in the South American nation are proposing a special tax on lithium mining profits to fund significant infrastructure upgrades across the country.
The exact details of the tax are yet to be released but the plans are set to be finalised by October 30, according to local reports.
Argentina comprises a key part of the ‘lithium triangle’ in South America, a region rich in lithium brine deposits that also encompasses Chile and Bolivia.
The lithium triangle is estimated to account for approximately 60 per cent of the world’s known deposits.
For context, the WA State Government’s battery and critical minerals profile report estimated the State hosts approximately a quarter of the world’s lithium resources.
Argentina’s proposed tax has emerged as another headwind for WA-based companies with projects in Argentina whose share prices have already been hammered by a sharp downturn in lithium prices since July this year.
This includes Argosy Minerals, Galan Lithium and Lake Resources.
The share prices of these companies has declined by between 30 and 60 per cent since the beginning of July.
Argosy’s core focus is the Rincon lithium project, while Galan is developing the Hombre Muerto West and Candelas projects, and Lake Resources is progressing its flagship Kachi project.
All of these projects are situated in north-west Argentina across a variety of provinces.
Additionally, ASX-listed lithium major Allkem — which is in the middle of a US$10.6 billion mega merger with the United States’ Livent — holds its flagship Olaroz lithium carbonate project in Argentina.
Olaroz produced 16,700 tonnes of lithium carbonate in FY23 and is set to ramp up to 42.5ktpa over the long-term.
Livent also runs an Argentinian lithium project that is in production, with a key rationale behind the merger between Allkem and Livent being the synergies the combined entity could realise in Argentina.
Allkem declined to respond queries from The West Australian as to how the proposed tax changes may impact the company directly or its Livent merger, with a company spokesman citing imminent general elections in Argentina as reason for the silence.
Argentinians are set to go to the polls on October 22 for their general federal elections, which adds another layer of uncertainty to the lithium tax plans.
The centre-left Union for the Homeland coalition currently holds the balance of power, but the right-wing Libertarian Party recorded a shock win in the presidential primary in August and is poised to perform strongly in upcoming elections.
Libertarian Party presidential candidate Javier Milei has promised to deregulate the country’s struggling economy.
The Organisation for Economic Co-operation and Development estimates that Argentina’s economy will shrink by 1.6 per cent in 2023.
Mr Milei’s election promise could be welcome news for lithium miners if it materialises. But how a shift in power may subdue the lithium tax plans federally or provincially remains unclear.
The only certainty for many WA lithium investors is they will be holding their breath in anticipation come the end of October.