Just to remind the readers, before I go ahead with Lithium Americas (Argentina's) first quarterly result as a standalone company, the above chart is a summary of the details of the split of assets and obligations, which provides a clear picture regarding what investors are getting with each new company.

For the third quarter of the year, it was confirmed that Lithium Americas (Argentina's) Cauchari-Olaroz project will produce 5,000 tonnes of lithium carbonate in 2023 and that the first shipments commenced in the early part of the fourth quarter. Lithium Americas (Argentina) has a stake in the project of just less than 50%, and the project is expected to start producing at an annualized rate of 40,000 tonnes. As of right now, Lithium Americas (Argentina) recorded a net income of $6.6 million for its first quarter post-split. The financial results of the latest quarter tell us very little about the company's financial prospects. Perhaps the most important detail in the report is that 95% of the capital needed to fully develop the Cauchari-Olaroz project has already been deployed, meaning that at least for this first stage of full production commencement of its first project the capital investment has mostly been made.

There are further capital investment needs, given that the Cauchari-Olaroz project is still expected to undergo a second phase of production expansion. Other projects in the pipeline in its Argentina asset portfolio could potentially need significant capital investments to bring to completion in future years. Unlike Lithium Americas Corp, which is years away from seeing its first production commence, Lithium Americas (Argentina) will have a steady stream of revenues starting in the middle of next year, which should help to at the very least partially finance capital costs from internal sources.

Some borrowing, as well as more stock dilution, will play a role in raising funds for its capital investment needs, but not on the same scale as Lithium Americas Corp shareholders will experience for some years to come, given that its Thacker Pass project will only start producing in 2026 at the earliest, assuming there will be no delays.

Lithium Americas

A word on political and geopolitical risk

If there is one distinct advantage that can be attributed to Lithium Americas Corp, versus Lithium Americas (Argentina) is its location, with assets & projects in the US, versus Argentina for the latter. US-based mining projects may face certain regulatory hurdles, including environmental as well as public opposition that may arise, which needs to be addressed perhaps with more care. The constantly changing political environment may also play a role in adding some uncertainty regarding subsidies, and policies that may encourage a market for the mined product or discourage it. At this moment, the Biden administration's policies, aim to support EV production, by nurturing the entire supply chain, starting with mining of critical materials. This could change if the political winds blow in a different direction in the next few years.

While the US political situation may seem less than ideal for a startup mining company these days, it is arguably far worse in a country like Argentina. It is currently faced with financial instability, including an inflation rate of well over 100%. At the same time, it has had issues with financing its debt that leaves it in a tough position, having to deal with the IMF, with which it has a rocky relationship. Such problems can easily spiral and morph into a deeply unfavorable policy environment for miners in Argentina, such as perhaps a more draconian government tax or royalty regime. As the recent example of Chile highlights, lithium, and other miners may even be faced with prospects of nationalization in the region, as is the case with Albemarle and SQM and their mining operations in that country. At the moment, it seems that those plans are not gaining traction in Chile, but they may in Argentina given a far less uncertain financial future for the latter.

It should also be noted that South America may become a battleground for competing global blocks of power, namely the one led by the US and the other by China, as they both try to expand the influence of their respective alliances. This competition can lead to destabilizing actions such as regime change operations, rising frictions between neighbors, and demands to pick sides and decouple from the opposing side. In the case of Lithium Americas (Argentina), its partner in the Cauchari-Olaroz project is the Chinese company Ganfeng Lithium (OTCPK:GNENY). There is no telling what kind of geopolitical pressures Lithium Argentina might face as a result. Such uncertainties, as well as Argentina's internal issues, should be something that as investors we should factor in as a risk that should be priced into the company's valuation.

Lithium market outlook

While company-specific details are important when it comes to resource-extracting companies, the commodities market for the particular resources being mined is the primary factor that tends to drive most commodities mining stocks.

Trading Economics

The decline in lithium carbonate prices has been dramatic, which is precisely what ought to be expected when there is a high-growth market, with both supply & demand growing at exponential rates. Imbalances are likely to occur for the rest of the decade, with both supply gluts as well as shortfalls to be expected.

The current lithium price crash is also partially due to several negative signals regarding EV sales growth trends, in other words, driven by market sentiment rather than an actual supply glut situation. For this year, early forecasts had a slight supply deficit penciled in. Even if demand has been somewhat soft, it probably only led to a balancing of the market or a very slight supply glut at most. There doesn't seem to be an overly robust analyst conviction about a future supply glut either. Many analysts or institutions are forecasting supply shortfalls this decade, coming as soon as a year or two years from now. It is therefore hard to logically explain the fact that current lithium spot prices are barely a quarter of the price that miners were getting at the beginning of the year. As is very often the case, when fundamentals do not support market trends, eventually, at times after the patience of investors is tested for longer than many might be willing to withstand, the market does correct back towards reflecting fundamentals. I expect that this will be the case eventually with the lithium market, though the timing may be somewhat uncertain.

Investment implications

While Lithium Americas (Argentina) does come with a significantly higher political & geopolitical risk profile, the risk to its counterpart is arguably higher for investors within the context of higher capital investment needs, which Lithium Americas Corp cannot source from internal sources, for years to come. By contrast, Lithium Americas (Argentina) can afford to slow down its future expansion plans and rely more heavily on the revenue stream that will start to flow next year to cover those capital needs. It can always adjust and speed up investment in its expansion plans if lithium prices go higher and interest rates decline in coming years, making capital borrowing cheaper. It will therefore dilute its stock a lot less than Lithium Americas Corp will likely have to. It is therefore overall the better investment option of the two, which is why I decided to increase my stock position in Lithium Americas (Argentina). If interest rates retreat into the range we saw between 2009 and 2021, Lithium Americas Corp could become a potentially attractive investment option as well, as the cost of borrowing to finish its first project will decline. For now, however, Lithium Americas (Argentina) has a clear advantage as an investment opportunity in my view and the low lithium price provides a buying opportunity.