Lithium Americas boosts budget, production target for Argentina project

Sept 30 (Reuters) - Lithium Americas Corp on Monday boosted its budget and production forecast for Argentina’s Cauchari-Olaroz lithium brine project, a bullish move linked to the electric vehicle revolution, sending its shares up more than 4 percent in after-hours trading.

The move is a tacit bet by the company and partner Ganfeng Lithium Co Ltd that a projected surge in long-term demand for the white metal will overcome any short-term concerns about Argentina’s economy. Embattled President Maurio Macri has initiated capital controls to protect the peso currency and is expected by many to lose re-election next month.

British Columbia-based Lithium Americas said an independent study showed the Argentina project can support annual production in excess of 40,000 tonnes per annum (tpa) of battery-quality lithium carbonate for 40 years. Lithium is a key component in electric vehicle batteries.

The company had previously expected to produce 25,000 tpa at the site, located in the northern part of the country bordering Chile and Bolivia, a region of South America known as the Lithium Triangle.

The project is technically overseen by Minera Exar S.A, a joint venture between the company and Ganfeng, based in southeastern China’s Jiangxi province and one of the world’s biggest producers of the white metal.

The partners now expect to spend $565 million to develop the project, up 33 percent from previous estimates. Production is expected to start by early 2021.

The costs are based on a long-term assumption of an exchange rate between the Argentine peso and the U.S. dollar of 45:1. On Monday, the exchange rate between the two currencies was nearly 58:1.

The increased production outlook comes amidst oversupply worries in certain parts of the lithium sector, especially in Australia and China, the world’s largest consumer of the metal.

The concerns are leading some investors to prefer low-cost projects, especially Argentine brine, over other costlier projects. Lithium Americas last week trimmed its plans for a development project in Nevada, which plans to extract lithium from clay.

Lithium Americas said on Monday it expects to fund its 50% share of Minera Exar with its debt and proceeds from the $160 million project investment by Ganfeng.

The company plans to hold a conference call to discuss the new outlook on Tuesday. ($1 = 57.5900 Argentine pesos) (Reporting by Ernest Scheyder in Houston; additional reporting by Shanti S Nair in Bengaluru; editing by Richard Pullin)