Despite a Global Lithium Price Downturn, Electric Vehicle Demand Remains Robust… Argentina Highlights Investment Attractiveness

Recently, as the price of lithium, a key raw material for electric vehicle batteries, has plummeted due to oversupply, lithium mining development and production projects worldwide are facing a slowdown. The price of lithium compounds, which exceeded $80,000 per ton at the end of 2022, has now fallen to around $9,100 per ton.

However, despite this price decline, the growth trend of the electric vehicle market remains steep. According to market research firm Rho Motion, global electric vehicle sales in the first quarter of 2025 reached 4.1 million units, a 29% increase compared to the same period last year. Notably, the Chinese market recorded a high growth rate of 36% with 2.4 million units sold, while the European and North American markets also showed growth of 22% (900,000 units) and 16% (500,000 units) respectively.

Fueled by this increase in electric vehicle demand in the transportation sector, along with the unexpected growth of the battery energy storage system (BESS) market, some anticipate that a lithium market supply deficit could emerge faster than expected. In a report at the end of last year, Citi projected a supply shortfall of 12,000 tonnes of lithium carbonate equivalent (LCE) in 2026 and 34,000 tonnes in 2027, which represents approximately 2% of the current supply.

This outlook is welcome news for market optimists like Aaron Revelle, CEO of Pursuit Minerals (ASX:PUR), which is advancing the Rio Grande Sur brine lithium project in Argentina. Revelle emphasized, "While some may view a 2% supply deficit lightly, we must remember the 'black swan' event where an 8% deficit caused lithium prices to skyrocket from $10,000 to over $80,000 per ton."

Emerging as an Investment 'Hotspot' Driven by Low Production Costs and Government Support Policies

Goldman Sachs has also stated its traditional preference for brine extraction over traditional hard rock mining. Brine lithium production has a lower cost structure compared to apatite from China and Zimbabwe, and spodumene mines in Western Australia, particularly situated at the bottom end of the global cost curve, excluding the high-grade Greenbushes mine in southwest Western Australia.

Argentina, in addition to these low production costs, is actively attracting foreign investment, buoyed by the recent efforts of Javier Milei's government to create a pro-development regulatory environment. This contrasts with Chile, a former major lithium producer, where foreign investment has contracted due to the 추진 of a salt lake nationalization policy.

Against this backdrop, Argentina's lithium projects are becoming major targets in the M&A market. Rio Tinto (ASX:RIO) recently invested $10 billion to acquire Arcadium Lithium and approved $2.5 billion at the end of 2024 for the construction of the 60,000-ton Rincon DLE project. Smaller miner Galan Lithium (ASX:GLN) also received a $150 million takeover offer from Renault and China's Zhejiang Huayou Cobalt but rejected it, demanding a higher price. Subsequently, Galan Lithium signed a lithium chloride supply and funding agreement with U.S.-based Authium, preparing for the production of lithium chloride concentrate from its Hombre Muerto West (HMW) salar in the first half of 2026.

Pursuit Minerals' Rio Grande Sur project holds a JORC resource of 1.104 million tonnes of lithium carbonate equivalent (LCE) with a lithium concentration of 505.8 mg/L. CEO Revelle explained that investor interest is high due to the scarcity of Argentine salar resources. He added, "There are 16 well-known salars in Argentina, and this region has been explored very systematically."

Nick Horsley, CEO of American Salars Lithium (CSE:USLI), a lithium brine exploration company in Argentina, stated, "Investors operating with so-called 'smart money' are viewing the current lithium market as a buying opportunity." He emphasized, "The fact that companies like Rio Tinto have invested over $9 billion in M&A in the past 48 months and plan to invest an additional $2.5 billion in the development of the Rincon project is evidence of this."

Growing Expectations for Government Deregulation and IMF Funding

The Argentine government recently reached an agreement with the International Monetary Fund (IMF) for a funding package of up to $20 billion and has agreed to ease strict foreign exchange controls. This is expected to increase investment attractiveness by allowing foreign investors to move funds in and out more easily. Additionally, the introduction of the RIGI (Large-Scale Investment Regime) regulations, which provide tax incentives for large-scale projects, is also attracting investment from major mining companies.

Revelle commented, "The Milei government is creating the best political environment at the federal level through pro-business policies like the introduction of RIGI. Easing currency controls, opening up the oil and gas sector, and providing regulatory stability are significant advantages, especially compared to Chile in the Lithium Triangle region."

Pursuit Minerals, with a market capitalization of approximately $5 million, is one of the affordable investment options for entering the Argentine lithium market. The company has already successfully produced its first high-purity lithium carbonate (98.9% LCE) from its 250-tonne pilot plant in Salta province. The future goal is to optimize the production process to produce battery-grade 99.95% LCE products to secure higher premiums. Feasibility studies are currently underway for commercial production scenarios of 5,000 tonnes and 15,000 tonnes per annum, and Revelle stated that they have already confirmed interest from Asian customers for 5,000 tonnes of lithium chloride and carbonate products.

American Salars Lithium's Pocitos project, including the Pocitos 1 (USLI-owned) and Pocitos 2 concessions, holds a total estimated resource of 760,000 tonnes of lithium carbonate equivalent. The NI 43-101 compliant resource estimate has only been completed for the Pocitos 1 concession, which represents approximately 60% of the total resource. CEO Horsley emphasized that the Pocitos project, located in Salta province, has "some of the best infrastructure in Argentina." He described its advantageous location with rail links to the port of Antofagasta in Chile, natural gas pipeline access, highway accessibility, and abundant water resources, adding, "Located south of Rio Tinto's Rincon development area, east of the large-scale anticipated development at Arizaro, and south of the Olaroz-Cauchari complex, it is optimally situated in terms of infrastructure."

CEO Horsley stated that the lithium oversupply situation remains volatile and that they are already in discussions with several potential buyers. He emphasized, "All analysts predict that the lithium market will face a supply deficit again from 2026. Supply and demand balances can shift rapidly due to factors such as production facility shutdowns or unexpected increases in demand, and we must particularly monitor the development of China's electric vehicle market and changes in lithium export policies."