Discussion on Government Support Including Tax Benefits with Argentina
Consultation with Chilean Government on New Lithium Salt Lake Development
A view of POSCO Group's brine pond storing lithium brine extracted from Hombre Muerto salt lake in Argentina. Photo by POSCO Group
POSCO Group has been meeting consecutively with the governments of Argentina and Chile to strengthen competitiveness in the lithium business for secondary batteries and to secure additional lithium resources. Despite the electric vehicle chasm (a temporary stagnation in a growth industry), the move to reinforce the lithium business is an effort to dispel notions of slowing down or retreating in the secondary battery sector that have surfaced since Chairman Jang In-hwa took office.
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According to POSCO Group on the 17th, Jung Ki-seop, President of Strategic Planning at POSCO Holdings, met with Luis Caputo, Minister of Economy of Argentina, on the 12th in Buenos Aires, the capital of Argentina, to discuss cooperation on POSCO Group’s lithium business for secondary batteries in Argentina.
President Jung requested continuous attention and support from the local government to include POSCO Group’s lithium business in the 'Incentives for Large-scale Investments' program promoted by the Argentine government. In response, Minister Luis Caputo promised to create a friendly investment and business environment, including infrastructure and permit support. The Incentives for Large-scale Investments (RIGI, Regimen de Incentivo para grandes inversiones) is a new policy the Argentine government is preparing to attract foreign investment, offering benefits such as tax reductions to investing companies.
POSCO Group acquired the Hombre Muerto lithium salt lake in Argentina in 2018. They are constructing a brine lithium production plant for secondary batteries with a total annual capacity of 50,000 tons in two phases. The 50,000 tons of lithium can produce secondary batteries for 1.2 million electric vehicles. The first phase production plant with an annual capacity of 25,000 tons is scheduled to be completed this year, and the second phase plant of the same scale aims for completion in 2025. Additionally, a third phase investment for an annual capacity of 50,000 tons of brine lithium is under consideration.
If POSCO Group is included in the Argentine government’s incentives for large-scale investments, it will be able to receive tax benefits such as reductions in corporate tax and withholding tax, which will enhance financial stability when deciding on the third phase investment in Argentine brine lithium. Argentina also expects to leverage POSCO Group’s representative investment case to attract investment opportunities from global companies.
'Lithium Powerhouse' Chile Also Advancing Business: "Opportunity to Acquire Quality Assets During Mineral Price Downturn"
POSCO Group has also begun securing lithium resources in Chile, which has the world’s largest lithium reserves. Following Argentina, President Jung met with senior officials from the Chilean Ministry of Mining on the 14th in Santiago, the capital of Chile, to discuss the development of Chilean lithium salt lakes.
During the meeting, President Jung emphasized that POSCO Group has the financial soundness to undertake large-scale investments such as lithium resource development, possesses proven know-how in constructing and operating lithium production plants through its Argentine brine lithium and Australian ore lithium businesses, and especially has strengths in eco-friendly and high-efficiency lithium extraction technology, making it the optimal business partner for successful project execution in developing Chilean salt lakes.
On the 12th in Buenos Aires, Argentina, Jeong Gi-seop, President of POSCO Holdings (left), met with Luis Caputo, Minister of Economy of Argentina, to discuss cooperation on lithium business for secondary batteries. Photo by POSCO Group
An official from the Chilean Ministry of Mining explained that Chile has a Free Trade Agreement (FTA) with the United States, allowing lithium produced in Chile to benefit from the U.S. Inflation Reduction Act (IRA). The official expressed interest in POSCO Group’s lithium business capabilities and requested active participation in the ongoing bids for the Maricunga and Altoandinos salt lakes.
Furthermore, the Chilean Ministry of Mining emphasized that there are many opportunities for POSCO Group to participate in new lithium salt lake development projects planned by the Chilean government beyond Maricunga and Altoandinos. They proposed that POSCO Group expand investments in the secondary battery materials supply chain within Chile and said they would consider government-level support.
Since President Gabriel Boric announced the 'National Lithium Strategy' in April last year, Chile has been promoting state-led lithium resource development. The core strategic salt lake development projects are conducted through public-private partnerships with the government holding a majority stake, with key measures to minimize environmental damage during development.
Meanwhile, POSCO Group has established a stable supply system for both brine and ore lithium through the acquisition of Argentine lithium salt lakes and equity investment in Pilbara Minerals in Australia. Notably, since Chairman Jang In-hwa’s inauguration, POSCO Group has declared its unwavering commitment to continue investing in the secondary battery materials business. POSCO Group plans to leverage the electric vehicle market chasm and mineral price downturn as opportunities to acquire high-quality assets such as lithium salt lakes and mines at low prices, completing a competitive full value chain in the secondary battery materials business and strengthening the foundation for sustainable future growth.
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