Eramet acquires Tsingshan’s stake in Argentina lithium project

French mining group Eramet has bought Chinese partner Tsingshan’s 49.9% stake in a major lithium project in Argentina, the company announced on Thursday.

With an investment of $699 million, Eramet has assumed full control of the Centenario project, which is about to begin production in the coming weeks. This acquisition, carried out with available liquidity funds, will allow Eramet to make strategic decisions on the expansion of production, including the construction of a second plant in the country.

The Centenario project, located in northwest Argentina, is a significant bet for Eramet despite the recent drop in lithium prices. Eramet President and CEO Christel Bories explained to reporters that the acquisition of the entire project will provide greater flexibility to develop future facilities, with a view to increasing lithium production in the coming years. As the global lithium market continues to fluctuate, having full control of the operation puts the company in a strong position to decide the best way to proceed in this key market for the global energy transition.

Following the announcement, Eramet shares rose 6% in the first hours of trading, recovering part of the losses suffered last week due to the reduction in the group’s production targets, which had taken the shares to their lowest levels. in three years. Tsingshan, for its part, will continue to be a partner of Eramet in a nickel mining project in Indonesia, another sector in which both companies collaborate closely.

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The Centenario project aims to reach an annual production capacity of 24,000 metric tons of lithium by mid-2025. Tsingshan was responsible for building the initial processing plant at the Eramet lithium mine, consolidating the infrastructure necessary to achieve this goal. Now, with full control of the project, Eramet will evaluate how to proceed with the planned expansion of the second plant, whose construction, initially scheduled to begin next year, has been delayed until at least 2026.

Nicolas Carre, chief financial officer of Eramet, noted during a call with analysts that the decision on the construction of this second facility in Argentina will be made in 2024. This postponement is due to the current economic situation and the need to adjust the capital investment of the company. In addition, Eramet announced the temporary suspension of its production at a manganese mine in Gabon, in response to the fall in manganese prices, which has affected the global market due to an increased supply of low-quality ore from South Africa and a decline in demand from Chinese steel producers.

Despite these challenges, the company is confident that manganese market conditions will improve in the fourth quarter of 2024. Eramet did not update its adjusted earnings forecast for the year, although it reiterated its expectation that second half EBITDA will be higher than in the first half, and that the company will achieve net profits by the end of the year.

In parallel, Eramet has decided to temporarily suspend an electric vehicle battery recycling project in France due to the slow development of this market in Europe. The company is carefully evaluating its investment portfolio, prioritizing those areas with greater profitability in the short and medium term, such as lithium, which continues to be a key resource in the manufacture of batteries for electric vehicles.