According to the Securities and Economics APP, the salt flats in Argentina's 'lithium triangle' in South America have always been one of the busiest locations for companies to compete in mining the lithium needed for global electrification transformation. However, these companies are now hitting the brakes. Due to oversupply and lower-than-expected demand for electric cars, since the beginning of last year, lithium prices have fallen by more than 80%, and the global lithium industry is struggling. This has hindered financing activities and has hit the profit margins of lithium mining companies of all sizes.

Argentina is the fourth largest lithium-producing country in the world, with the second largest lithium resources globally, making it a key location for investors seeking to secure supplies. Foreign media interviewed nearly 12 executives, officials, and analysts, highlighting the severity of the current situation in Argentina and the expected decrease in lithium production in the coming years. Companies are cutting staff, reducing expenses, halting exploration projects, and the sharp decline in lithium asset values has made some companies vulnerable to acquisition threats.

Juan Pablo Vargas de la Vega, General Manager of Galan Lithium, headquartered in Australia, said: "We were prepared for rainy days, but we encountered a storm."

The company is developing a project in the Hombre Muerto basin in the northern province of Catamarca, Argentina. Galan aims to start production in the second half of next year, but has reduced the target of the first phase from 5,400 tons per year to 4,000 tons, a reduction of about one-fourth.

Lithium price contraction is shaking the global market, bringing cost pressures to miners. At the same time, as companies are seeking stronger financial supporters to safely navigate through the economic downturn, it has also sparked more interest in mergers and acquisitions. This month, mining giant Rio Tinto agreed to acquire US-based Arcadium Lithium for $6.7 billion, making Rio Tinto the third largest lithium miner in the world.

Five analysts consulted by Reuters predict that there will be an increase in merger and acquisition activities, especially for early-stage projects. Federico Gay, a lithium analyst at Benchmark Mineral Intelligence, stated: "Companies in Argentina that have resources but no production are likely to receive quotes."

Arcadium operates two main projects in Argentina and holds more than half of global reserves in a broader region including Chile and Bolivia. Despite the drop in lithium prices, this remains an important mineral for governments and auto manufacturers worldwide.

"Stop burning cash"

It can be certain that Argentina may still see a series of more advanced projects launched recently. Analysts indicate that this setback will further exacerbate, with production expected to decline around 2026 to 2028. As the demand for lithium rises due to electric vehicle batteries and energy storage, a supply shortage may occur around the end of this decade.

Jerko Zuvela, Managing Director of Australia-based Argosy Minerals, said: "We had to make the decision to stop investing." The company closed a pilot factory in Argentina and laid off the workers there. The factory closure reportedly led to 140 people becoming unemployed.

Zuvela mentioned that due to the shutdown of the demo factory, the company reduced its workforce and shifted focus to the construction of commercial plants. He said: "When major companies slow down expansion strategies, lay off employees, and alter their operations, it's no different for us."

CRU Group, a mining consulting firm headquartered in the United Kingdom, has lowered its forecast for Argentina's 2027 production by about 10% and no longer believes that Argentina could surpass Chile, the world's second-largest producer, as previously expected that year.

Lake Resources is seeking permits for its Kachi project in Argentina, but at the same time, the company has laid off three-quarters of its employees this year and put four lithium assets in Argentina up for sale.

CEO David Dickson stated that the company is seeking financing through private equity investments and supply agreements, and expects a lithium supply shortage by 2030.

In August this year, Arcadium paused some expansion plans in Canada and Argentina, stating that this move will help save $0.5 billion over the next two years.

Arcadium CEO Paul Graves, when announcing layoffs, told analysts: "We must adapt to the current market conditions and the speed at which we can responsibly invest capital."

Argentina stands out for its numerous projects driven by private capital, in sharp contrast to neighboring Chile, where the industry is dominated by the longstanding companies SQM and Albemarle.

Government records show that as of July, Argentina has 30 companies in its lithium mining areas at the exploration, preliminary exploration, and advanced exploration stages. However, with early-stage exploration being hit hardest by the economic downturn, this plan may slow down in the coming years.

Flavia Royon, head of the government-supported Lithium Promotion Committee, stated that the decrease in lithium prices has a significant impact on exploration, and the major blow to production may start from 2028.

In the key lithium-producing province of Salta, advanced projects by companies like Rio Tinto, Eramet, posco (PKX.US), and ganfenglithium are advancing. However, Salta's Mining Minister Romina Sassarini stated that early-stage projects are at a standstill.

She said: "Currently, there are at least 6 projects that have not been developed, nor have they entered the construction and production stages because they lack investment." She did not specify which projects she was referring to.

Argentina aims to boost its ailing economy and has attracted global companies' investments in recent years through market-friendly regulations. The current government is also pushing for investment incentives, including tax cuts and targeted relaxation of capital controls on large projects to secure US dollars.

"This to some extent offsets the decline in lithium prices," Royon said, noting that projects by Rio Tinto, Eramet, posco, and ganfenglithium are advanced enough to potentially benefit from the incentive measures.

"Now is the best time to purchase assets."

This reshuffle may be painful, but it also makes these projects more attractive to potential buyers seeking cheap acquisitions: over the past year and a half, the valuation of global lithium companies has decreased by approximately 60% to 70%.

Six analysts and executives pointed out that there are eight projects in Argentina that could become potential targets, including Argosy Minerals, Galan Lithium, and Lake Resources.

Jose Hofer, a lithium resource consultant at consulting firm SC Insights, stated: "Now is the best time to purchase assets," without specifying specific top targets.

In fact, in August of this year, lithium technology startup EnergyX made a $0.15 billion acquisition offer to Galan, which was rejected. Galan and Argosy declined to comment on potential mergers and acquisitions.

With the revival in demand for electric vehicles, most executives are hopeful for a price increase, even if it does not reach the peak levels. Although the exact timing is difficult to predict, the price recovery is not expected before mid-2025.

A responsible person for an early-stage lithium project in Argentina, who is struggling with fundraising, expects prices to rise in the second or third quarter of next year, at least enough to start mobilizing these projects.

However, some analysts predict that low pricing will continue until the first half of 2026. Argosy Minerals director Zuvela stated that the company plans to build a facility with an annual production capacity of 0.012 million tons in the Rincon salt flat in Salta Province, and expects its capital reserves to be sufficient to fund feasibility studies and engineering & construction.

Zuvela said that once completed, approximately 9 to 12 months later, the company will return to the market to see if there is funding available for construction. He said, "This is why there may be a need for higher lithium prices to incentivize investors and support companies like ours in developing lithium projects."