The subsidiary of the Canadian junior American Lithium is moving full steam ahead to launch the first lithium project in Peru and take advantage of the good prices of the so-called white gold caused by the rising boom in global electromobility.
Since the discovery of Falchani, a lithium-rich deposit located in the Puno region of southern Peru, was announced in July 2018, a lot of water (or rather, lithium) has flowed under the bridge in South America.
Five years ago, electromobility was seen as a fairly distant alternative and at the regional level only Chile, through the companies SQM and Albemarle, was on the radar of investors in the so-called white gold industry.
Today the scenario is completely different: Chile has been joined by Argentina with a successive million-dollar arrival of investments from Chinese and European companies seeking to secure their supply chain to respond to the increasingly growing demand for electric vehicles. To date, the South American country already has its third lithium project in operation .
During all these years, the Macusani Yellowcake company, owner of the Falchani lithium project, has seen the evolution of this industry while dealing with a long and slow process of Peruvian mining. Finally, after 20 months of waiting, the company, which is a subsidiary of the Canadian junior American Lithium in Peru, received authorization (the first of three drilling permits requested) from the government of the environmental impact declaration (DIA) for the expansion of lithium resources in Quelcaya, a community adjacent to Chacaconisa, where the Falchani project is located.
With this permit, the company has been able to resume lithium exploration.
“We have 4.7 million tons of lithium carbonate equivalent as resources and the objective of this EIA was to expand the resources to the west of the deposit, in the community of Quelcaya, where we have found surface samples of lithium stocks, we hope that confirm,” says Ulises Solís, CEO of Macusani Yellowcake to AméricaEconomía .
The next step, according to the Peruvian executive, is to present the semi-detailed environmental impact study, whose approval - by the Ministry of Energy and Mines (Minem) - would take between six and eight months and, if so, would be ready in February approximately 2024. This permit would enable Macusani Yellowcake to begin drilling work to bring the resources to reserves (that is, the economically exploitable part of the available resources).
Meanwhile, the company estimates to present the detailed Environmental Impact Study (EIA) at the end of 2024 and approval would take 18 more months. “We believe that by mid-2026 the EIA could be approved and we would immediately begin project construction. We would start operations no later than the second quarter of 2027,” Solís projects.
The company is in a race against time, taking into account that in recent months Argentina and Chile have been successful in investment issues.
The government of President Dina Boluarte is aware of the urgency of attracting lithium investment, and mining in general for the Peruvian economy, which in 2023, according to the Central Reserve Bank (BCR), would grow 2.2% .
Thus, during a trip to Paris in the second week of June, Alex Contreras, Minister of Economy and Finance, assured that Peru will be "key to the decarbonization of the global economy" which is why the country wants to attract foreign investments for the exploitation of the lithium, mining and green hydrogen, without setting particular conditions.
In that sense, the head of the MEF told the EFE agency that its "openness is total" and that what they want is to "recompose themselves from this downward cycle of mining investment."
For Ulises Solís, there is no more time to lose since “the time for the crime is now.” And the CEO of Macusani Yellowcake is not referring only to the price per ton of lithium (in China, the current price of lithium carbonate is US$44,146), but to the situation that other South American countries are going through that could become a competitive advantage for the Andean country.
“In Bolivia, lithium is not going to work. It has the greatest resources in the world, but until its policies change it is going to be difficult. Furthermore, the Salar de Uyuni is not like the Atacama. It rains there every day so it is very difficult to decant things and metallurgically it has many problems. In the case of Chile, with its new policy, SQM's shares fell to the ground, there is no confidence. There is fear that companies will take away their deposits and there is total uncertainty,” says Ulises Solís.
Of course, the Argentine case stands out: “I applaud what Argentina has done. It has brought lithium projects to the market and all the investors are going to that country. Producing in a salt flat [like in Argentina] is much easier than in a rock deposit like the one in Peru. The permits are fewer and although there is an environmental impact, we have to work well to move the electric car industry forward.”
PROFITABILITY AND REFINERY
This week, Simon Clarke, CEO of American Lithium, announced that Falchani's costs would have increased by 20% .
"If you think about the post-COVID world, along with inflationary pressures, that bill (of $580 million) is probably more like $700 million today," he said.
Meanwhile, American Lithium's subsidiary in Peru is sure that when it starts producing the so-called white gold, the industry will still enjoy good prices.
And the price of lithium in the last two years has had an upward race. In 2021 it increased by almost 500% driven by automotive sales. The following year, the figure skyrocketed again and exceeded US$80,000 per ton of lithium carbonate.
However, specialists warn that this upward trend could be reversed. Thus, between December 2022 and the beginning of 2023 the price of lithium fell almost 30%, driven largely by China, which decided to eliminate incentives for the purchase of electric cars.
“Lithium has reached US$80,000 per ton, but we have not taken advantage of the time due to the obstacles for permits. Although the price has been dropping, it is still attractive. Today it is above US$40,000 per ton, it is recovering because there is not much supply of lithium carbonate, which is one of the several components that a battery has. “We are going to produce battery-grade lithium carbonate,” says the mining executive.
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To achieve this, the project includes the construction of a refinery that in the first four years of operation will produce US$25,000 tons of lithium carbonate annually. In the fifth year, the company plans to almost double this production to 48,000 tons. “By the eighth year of operation, Falchani will produce 100,000 tons of lithium carbonate,” says Solís.
Many already point out that the real business of lithium is in refining and not so much in extraction. China is currently the global leader in refining. However, these volumes are not enough to cover the giant demand of the battery industry, which is why refining plants have become a valuable asset for the global electromobility supply chain.
Even the CEO of Tesla, billionaire Elon Musk, has been warning about this for several months. “Investing in lithium refineries is like printing money. I would like to once again urge entrepreneurs to get into the lithium refining business. "Mining is relatively easy, refining is much more difficult," Musk said during a conference call that reported on Tesla's results in 2022. "You can't lose, it's a license to print money."
Solís is aware that the refinery is a great advantage, although he clarifies that they will not go beyond lithium carbonate. “We are going to deliver the lithium carbonate to the port of Callao or wherever, but from there to industrialize, no. Congress in Peru is promoting an industrialization law, but one law will not achieve it. A battery does not only live on lithium carbonate, there are other elements such as cobalt, nickel and graphite. Peru does not produce any of that,” he says.
And although the president of American Lithium spoke of the increase in operating costs of the lithium project in Peru, Solis assures that until the EIA is approved it will not be necessary to raise additional capital.
“We are a junior and the door is not closed to anyone, but we want to go to the end because as we advance the project, the value increases. We have enough capital, we just listed on Nasdaq. Later, in another stage of construction, of course we have to look for capital,” he says.
BEYOND LITHIUM
Although the Falchani lithium project does not contain uranium, Macusani Yellowcake has projects rich in this chemical element, close to the deposit. For it,
We started drilling for uranium and there were seven foreign juniors as well. “In the Isivilla community we have found uranium. We have consolidated the entire area by acquiring mining concessions from companies that had been exploring and currently we have seven uranium projects that contain lithium in low quantities,” says Ulises Solís.
In that sense, following a corporate decision, a split was made of the uranium and lithium projects and two companies were created: Macusani Uranium in charge of all concessions and projects that have uranium, while Macusani Yellowcake will only focus on lithium. The management and board remain the same.
In addition to uranium, the Falchani deposit will also produce potash or potash (muriate of potash, MOP, a potassium-rich salt that is used primarily as fertilizer.
“In reality, the greatest wealth that the lithium deposit has is potassium. We will produce fertilizers and we will be able to meet the demand of the Peruvian market and also export. Although the value of the fertilizer is low, we are going to satisfy the national market and become the most important exporter in South America of this input that is so important for agriculture,” explains Solís. " The deposit also has cesium that has to be separated from lithium. This is what gives strength and enhancement to this project. It is an emblematic project, as the authorities say."
Although in the global race to position itself among the main lithium producers, Peru has come out somewhat late - it has not yet made the leap to exploitation and production - optimism remains high. " According to economists, the price of lithium will continue to rise in the next 20 years and electric cars are already arriving and have to invade us," concludes Ulise Solís.
