Stellantis (Jeep, Chrysler, Peugeot) Goes Long on Argentina Lithium

While headlines right now might proclaim “EV Sales Are in a Slump” [NASDAQ], such declarations are not only misleading — they’re also describing a temporary situation. And auto groups like Stellantis (Jeep, Chrysler, Peugeot, Dodge, etc.) know this all too well.

To understand what’s going on here, there are two things to get straight.

1. The condition that led to a so-called “slump” in EV sales was automakers overestimating EV demand. That led to inventory levels rising to 88 days’ supply (normal levels for autos are around 60 days’ supply).
2. Despite the declaration of a “slump”, EV sales are still growing, and not by a small margin either. In fact, 2023 saw record EV sales, with the slowest quarter (Q4) still delivering 5.9% growth over Q4 2022.

In short, to quote a December 2023 S&P Global report, “reports of the demise of EVs have been greatly exaggerated.”

That same S&P report also estimates global EV sales to jump by almost 40% in 2024 alone, growing from 9.6 million units in 2023 to 13.3 million units this year.

This has sent auto groups like Stellantis scrambling to secure potential future lithium production while the market is relatively cool, as highlighted by a recent headline US$90 million investment (made in equivalent Argentine pesos) in Argentina Lithium & Energy Corp. [TSX.V: LIT | FSE: OAY3 | OTC: PNXLF].

Stellantis Backs Argentina Lithium to Secure Future Lithium Production in US$90M (in equivalent Argentine pesos) Deal

More specifically, the deal saw Peugeot Citroen Argentina S.A., a Stellantis N.V. (Stellantis) subsidiary invest the equivalent in Argentine pesos (ARS) of US$90 million into Argentina Lithium’s subsidiary, Argentina Litio y Energia S.A. (“ALE”). In exchange, Stellantis has the right to purchase up to 15,000 tonnes of potential future lithium production annually for seven years (the offtake agreement), with the option to extend. Additionally, Stellantis now holds a 19.9% equity stake in ALE, convertible into an equivalent stake in the parent company.

Commenting on the agreement, Miles Rideout, Vice President of Exploration for Argentina Lithium & Energy said, “Stellantis was inspired to invest in our company to help secure its supply lines as automotive producers have huge requirements for lithium in the coming years. It reflects a forward-thinking approach by the industry.”

“We have a mandate from Stellantis to get our projects through the exploration stage to resource assessment and, if positive, development as quickly as we can without overriding concerns about how to finance that work,” continued Rideout, who has decades of experience working with some of the top exploration teams in South America.

Stellantis Deal: A Tick of Approval That Underscores the Possible Impending Lithium Crunch

The Argentina Lithium deal with Stellantis comes in the wake of several reports predicting that the world could face a shortage of lithium as soon as 2025. For instance, the world produced 540,000 metric tons of lithium in 2021, and by 2030 the World Economic Forum projects that global demand will reach over 3 million metric tons, reported CNBC.

“We do fundamentally believe in a shortage for the lithium industry. We forecast supply growth of course, but demand is set to grow at a much faster pace,” said Corinne Blanchard, Deutsche Bank’s Director of Lithium and Clean Tech Equity Research, according to CNBC.

Alina Islam, a mining analyst at Red Cloud Securities said the investment from Stellantis is a major stamp of approval for Argentina Lithium.

“We believe that deals like this are very positive for the outlook for lithium, as it demonstrates the importance of the commodity in helping achieve the decarbonization goals set by various governments across the globe. We also believe that investment and M&A activity between automakers and miners will continue, as concerns around lithium scarcity grow, especially in the context of geopolitical issues,” said Islam.

What’s Ahead in 2024 for EVs and Argentina Lithium?

As highlighted by S&P Global, 2024 promises to be a bumper year for EVs, with nearly 40% growth over record 2023 sales estimated.

Nikolaos Cacos, CEO of Argentina Lithium also expects big things in 2024, buoyed not only by the forecast lithium crunch from growing EV sales, but also by Argentina Lithium’s achievements to date.

“We expect 2024 to be a transformative year for the Company, one in which we can significantly advance towards resource delineation at our two primary projects. We have cleared the biggest hurdle for any junior today, which is having financing secured for a significant amount of planned exploration activity, to the tune of up to US$15 million dollars next year alone if we complete all of our plans,” said Cacos.

“In fact, the Stellantis funding is expected to carry us through exploration drilling to potential resource definition work at Rincon West and Antofalla North allowing us to build value with minimal dilution for our investors,” he continued.

And his optimism is hardly misplaced. For reference, Argentina Lithium has assembled a group of highly prospective properties in the Argentinian portion of the so-called Lithium Triangle — a geographic area straddling Argentina, Bolivia, and Chile which is home to more than half of the world’s lithium resources.

In particular, Argentina Lithium has four key projects here, covering over 67,000 hectares in the Argentine portion of the Lithium Triangle, each with its unique prospects and strategic significance:

• The 5,000+ hectare Rincon West Project is located adjacent to the large Rio Tinto Rincon lithium project (acquired for US$825 million) and drilling over the last year at Rincon W has already recovered significant lithium-rich brines.
• The Antofalla North Project covers more than 10,000 hectares of mining claims.
• The Pocitos Project where historic sampling in a very large and under-explored basin measuring approximately 60 km by 20 km has already returned lithium values.
• The Incahuasi Project, another large basin of about 25,000 hectares, where Argentina Lithium has completed initial geophysical, surface sampling and drilling programs.

Adding to the allure of these projects, we also have the recent leadership change in Argentina that’s greatly expanding opportunities owing to Javier Milei’s development-friendly policies, which were a key topic that had the attention of the 1,700 attendees at the recent Litio En Sudamérica (Lithium South America) Seminar held in northwestern Argentina.

“If Argentina does not achieve its commitment as a major lithium chemical producer in the next few years, the EV revolution will be challenging,” Joe Lowry, President of consulting firm Global Lithium, told attendees.

Stellantis Deal to Greatly Accelerate Exploration & Development Programs

With high hopes for 2024, a portfolio of highly prospective projects, and a fresh cash injection following the Stellantis investment, Argentina Lithium & Energy Corp. [TSX.V: LIT | FSE: OAY3 | OTC: PNXLF] will be pursuing an aggressive 2024 exploration program.

The primary goal for 2024 is to complete the ongoing exploration drilling and planned pump tests at the Rincon West project to bring it to the resource delineation stage, followed by similar work at the even larger Antofalla North project.

Argentina Lithium & Energy has also expanded the exploration program plans for its Pocitos and Incahuasi projects. Currently, it is completing 170 line-km of transient electromagnetic(TEM) surveys at the Pocitos Salar, and has a 2024 survey planned for Incahuasi expanded to 90 line-km of TEM covering 25,582 hectares.

Adding to the momentum here, the situation in Argentina through 2024 has the potential to be highly favorable.

Currently, Argentina is home to the world’s second-largest lithium reserves, estimated to be in the region of 20 million tons according to the U.S. Geological Survey 2022 Mineral Commodity Summaries.

Forbes has also reported that the country’s lithium production is increasing significantly in response to global energy transition needs. It is now projected to reach up to 120,000 tons per year in 2024, a substantial increase from the current production level of about 40,000 tons per year.

Forbes noted that President “Milei’s encouragement of private sector investment could raise the game further.”

Argentina Lithium & Energy Corp. [TSX.V: LIT | FSE: OAY3 | OTC: PNXLF] finds itself in a favorable position coming into 2024. With projected continuing increases in global demand, the recent Stellantis investment, and a confluence of geological and geopolitical tailwinds converging, it finds itself well poised to accelerate its projects through 2024 and emerge in a prime position to capitalize on the so-called Lithium Decade.

To learn more about Argentina Lithium & Energy, visit their website here, as well as on:

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(Featured image courtesy of Argentina Lithium & Energy Corp.)

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