➤ While many lithium producers are scaling back amid low prices, Galan Lithium Ltd. is "defying gravity" as it pushes ahead with the construction of its Hombre Muerto West project in Argentina.

➤ Argentina’s new laws should give miners long-term clarity on investments and relax exchange controls.

➤ Flat operating costs of lithium brine projects in Argentina will ensure Galan can ride the price volatility and achieve long-term supply security and profitability.

Juan Pablo Vargas de la Vega, managing director of Galan Lithium. Source: Galan Lithium

Argentina is expected to overtake Chile as South America's largest lithium producer in 2028, but it will need investments in the billions of dollars to get there.

Galan Lithium launched a A$25 million capital raise after securing a US$40 million offtake prepayment facility for its Hombre Muerto West project from Chengdu Chemphys Chemical Industry Co. Ltd.

The junior miner expects start production at Hombre Muerto West by the second half of 2025, with an initial capacity of 4,000 metric tons of lithium carbonate equivalent (LCE) per year. The project will expand to 5,400 metric tons of LCE when the market allows.

S&P Global Commodity Insights interviewed Juan Pablo Vargas de la Vega, managing director of Galan, about the challenges and opportunities Argentina faces in becoming the epicenter of new lithium supply in the current market environment. The interview has been edited for clarity and space.

S&P Global Commodity Insights: Galan's share price shot up nearly 10% on Sept. 11, following reports of Contemporary Amperex Technology Co. Ltd. suspending its lithium lepidolite operation in Jiangxi, which UBS said could result in an 8% dip in China's monthly LCE output. What does this say about the current low prices?

Juan Pablo Vargas de la Vega: The strong market reaction suggests the supply-demand rebalance could come a lot quicker than many expect. ... This high level of volatility makes it difficult to know which direction the price goes, but I believe that this downturn is temporary.

The only [lithium] operations that can make money today are the large-volume producers like [Albemarle Corp.'s] Greenbushes in Western Australia and the brine producers because of their low operating costs. That is one of the biggest challenges companies face in helping give Argentina a bigger share of global production.

Argentina's Mining Secretary Luis Lucero laid out plans in August to boost mining exports to $10 billion, led by lithium and copper. Is this easier said than done?

At the federal level, there's been new legislation passed that will hopefully help companies to get good long-term clarity on investments and optimism about relaxing exchange controls.

But if you are a chemical company looking to produce a lithium carbonate product, it's never a walk in the park when you're doing this for the first time. In lithium mining and chemicals production, you're trying to do two things — to produce a concentrate to specs that can feed a carbonate plant, and to do so in parallel with the mine operation. At the company level, that's the biggest challenge.

You see that in [Tianqi Lithium Corp. and IGO Ltd.'s] Kwinana for the companies trying to produce hydroxide in Western Australia. Sociedad Química y Minera de Chile SA has produced hydroxide successfully in Chile, while in Argentina, Arcadium Lithium PLC is expanding hydroxide output. Everyone is also keeping a close eye on Lithium Americas Corp. to see how they go producing battery-quality lithium carbonate from Thacker Pass ore in Nevada.

Given all that, how does Argentina fit into the future global production profile in terms of the cost curve?

All eyes are on Argentina now because in general, [the country has] low-cost lithium producers compared to Australia, which, despite having a lower country risk, has hard rock mines that are more expensive to operate. Our life of mine is 40 years for phases 1 and 2 and potentially a long life as well for phases 3 and 4. We also have a large inventory with flat operating costs because our process involves pumping brines.

In hard rock lithium, as you go on deeper your operating costs go up, so you need flatten your operating costs to remain competitive, which is something that we already have in brines. So in the long term, brine projects can ride volatility. That is why Argentina becomes very attractive for production security and long-term profitability.

You have a new deal with China's Chemphys. How is demand for your product looking?

We said yes to one offtaker, but no to many. Within the process of talking to offtakers we have spoken to lithium converters that want the concentrate for lithium-iron-phosphate batteries, which shows interest for lithium for batteries in the medium- and long-term remains very strong.

Galan is defying gravity in that, while everyone is in shutting down mode amid low prices, we are pushing ahead to finish construction on phase 1 at Hombre Muerto West because it is economically viable even in this current price environment.

In a July earnings call, Rio Tinto Group spoke about the need to use as little freshwater as possible at its Rincon direct lithium extraction project (DLE) in Argentina. Would you ever consider DLE, and what are the risks?

We have looked at several DLEs and most of what we saw involved high water and power usage. The power for us is coming from the sun, which is not going to invoice us, and we already have the brackish water that we need for our process, which requires low volumes.

We manage to balance the water situation by aiming to produce lithium chloride concentrate as an intermediate product during lithium brine processing. This process requires a tenth of the water requirement of a carbonate plant.

So we can execute something where we're not putting any more pressure into a very delicate balance that exists, and we don't want to go with DLE because it's too much for a junior company to bear the risk.