Eye on Lithium: California’s proposed lithium tax could delay local projects, miners say
All your ASX lithium news for Thursday, June 30
California is proposing a flat rate tax on lithium produced in the Salton Sea region and mining companies not happy about it, strangely enough.
EnergySource Minerals CEO Eric Spomer told Reuters his company has halted discussions with potential financiers and a major automaker while California’s legislature debates the tax.
“This tax would stifle our industry before it even begins,” he said. “We’re willing to pay and contribute to the local community, but it has to be a rational tax.”
Controlled Thermal Resources has contracts to supply lithium to General Motors by 2024 and Stellantis by 2025, and CEO Rod Colwell said the tax would force the company to miss those delivery deadlines.
“Just the mere concept of this type of tax is having a chilling effect on development,” Colwell said.
CTR plans to produce 60,000 tonnes of lithium – enough to make roughly 6 million EVs – by mid-2024 in California, which would make it the largest U.S. lithium producer.
Colwell said those plans are now in jeopardy.
“If this passes, we will fight it or we will leave,” he said.
General Motors expects California to supply a “sizable” amount of its lithium for its EV fleet. But a proposed state tax could imperil that plan. https://t.co/EgD7HYnCKH
— Ernest Scheyder (@ErnestScheyder) June 30, 2022
The proposal would impose a tax of $400 per metric tonne for the first 20,000 metric tonnes of lithium produced annually, $600 per metric tonne for the next 10,000 metric tonnes, and $800 per metric tonne with output of 30,000 metric tonnes or more.
That’s a tax of $400 per tonne when spot prices are around $77,500 per metric tonne.
But most automakers pay a negotiated price for lithium that can vary greatly from spot prices, and while industry executives say they support mitigation efforts, they’d prefer a levy of 2% or less of their sales because they feel a flat tax could be economically ruinous when prices for the metal drop in the future.
California Assembly member Eduardo Garcia said a flat tax would be more appropriate.
“We believe the people living in and around these communities deserve to see a direct benefit from lithium production,” he said.
Warren Buffet’s Berkshire Hathaway division BHE Renewables doesn’t oppose the proposed tax.
“We recognize the opportunity a lithium tax provides for the local community, and that a balanced outcome will ensure California-sourced lithium can compete in the world market,” BHE spokesperson Dan Winters said.
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Only 33 stocks were in the green today, 36 flatlined and 61 were in the red.
The company is on the cusp of producing its first battery grade lithium carbonate in Argentina, putting it on track to be the ASX’s next lithium producer.
Argosy owns the Rincon project in Argentina’s Salta Province, a brine development it is turning on in stages beginning with a 2000tpa start-up operation.
Brine projects are generally cheaper to operate than hard rock mines as most of the processing is done by solar evaporation in large ponds, but they have long lead times to production due to the slow nature of this process, and are seen as water intensive, a bone of contention in the arid regions of South America where those miners operate.
Argosy said today the first battery grade lithium carbonate is due in the third quarter, with its construction 94% complete and plant commissioning 42% of the way there. Longer term, Argosy plans to expand to 12,000tpa.
“The company’s Puna operations team are getting closer to completing construction works and progressing with plant commissioning works, and then commencing lithium carbonate production operations,” MD Jerko Zuvela said.
“The lithium market remains very positive and lithium carbonate prices are forecast to continue around record highs during 2022 and 2023, resulting in very robust upcoming product sales revenues.
“The company is very excited with our progress to become the next commercial scale lithium carbonate production operation, transforming into a cashflow generator, and progressing toward the next stage 12,000tpa scale operations.”
Rock Chip sampling at the company’s Turner River Lithium project in WA has returned grades of up to 4.90% Li2O.
“Given the project is only 15km south of Wodgina, we believe we are in the right location to identify further high- grade lithium mineralisation,” executive chairman Maurice Feilich says.
Further assay results from recent sampling programs at Turner River, Western Shaw and Split Rock, are expected in coming weeks.