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Milei’s Presidency and the Future of Argentina’s Lithium Landscape

29 November 2023 15:52

Javier Milei’s recent victory in Argentina’s presidential election has ignited considerable interest and speculation regarding the potential repercussions on diverse sectors, particularly the pivotal lithium industry. Milei’s libertarian stance and dedication to market-friendly policies signal forthcoming economic reforms poised to reshape Argentina’s economic terrain.

Market-Friendly Reforms and Positive Signals

Milei’s economic vision focuses on reducing government intervention and fostering a more productive, efficient economy.

Pursuit Minerals Managing Director and CEO, Aaron Revelle, says the Company, which operates in Argentina, is interesting to see how Milei’s reforms play out.

“We keenly observed Javier Milei made bold policy pledges during his campaign, and following his victory, it is expected Milei will present a strategy for slimming down the public sector and creating a more productive, efficient economy before the end of the year,” he says.

The appointment of Wall Street veterans Luis Caputo and Demian Reidel to lead the economic team signals a commitment to market-friendly policies. This alignment is underscored by the positive market response, marked by a surge in dollar bonds and a substantial uptick in the stock index and ETF, indicative of the investment community’s confidence in Milei’s strategic approach.

Currency Controls and Export Opportunities

One key aspect of Milei’s anticipated reforms is the easing of currency controls, a move reminiscent of the pro-business policies of the Macri government in 2015.

According to Revelle, “It is widely expected Milei will ease currency controls almost immediately, similar to the Macri government policies of 2015, focusing on creating an easier pro-business import/export operating climate.”

This move could significantly benefit the lithium industry, providing a more favourable environment for export operations and mitigating challenges posed by parallel exchange rates. Milei’s government has garnered widespread positive reception for Argentina in both the short and long term, a sentiment exemplified by the endorsement of Elon Musk.

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Figure 1: Twitter Post by Elon Musk

Mining Regulations and Provincial Support

Revelle says for lithium miners in Argentina, the Provinces regulates the mining code much like in Australia.

Provinces like Salta continue to be pro-mining, supporting various projects across commodities.

“Many of our line items are already priced in USD, such as drilling contracts, serving as an inbuilt hedge to the currency fluctuations and currency movements at a Federal level,” he commented.

International Relations and China’s Role

Milei’s initial statements distancing Argentina from China initially sparked concern, especially considering the significant role Chinese investments play in the country’s lithium sector.

China’s strategic interest in lithium, underscored by investments from companies like Tibet Summit Resources, Ganfeng Lithium, and Tsingshan Holding Group, is a complex situation.

“Striking a balance between Milei’s political stance and economic realities will be crucial to maintaining stability in Argentina’s lithium industry,” Revelle notes.

Pursuit Minerals Limited (ASX:PUR)

Pursuit Minerals strategically positioned itself as a key player in the lithium market with a recent acquisition, unveiling substantial lithium brine assets in Argentina.

This strategic move bestowed Pursuit with full ownership of approximately 9,260 hectares within the Rio Grande Sur Project, a significant tenement situated in the heart of the Lithium Triangle in Argentina. This region, boasting some of the world’s largest lithium reserves, positions Pursuit alongside industry giants like Livent’s Fenix operation and Allkem’s Olaroz Lithium Mine..

The Company stands poised to capitalise on this strategic move, backed by a recent Resolve Research report projecting a remarkable 575% upside in its share price, earning it a coveted ‘Strong Buy’ rating.

Although CEO Aaron Revelle welcomed Argentina’s new leadership, he says Pursuit is confident in the viability of the region as a tier 1 jurisdiction, despite the political party in power at the time.

PUR’s Australian Stock Exchange-listed share price is currently trading at $0.009 (4.00pm UTC+ 8 hours).

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