Posco shares rise as lithium reserve estimates jump

Posco shares rose 3.34 percent Thursday following reports that a salt lake in Argentina owned by the company could produce lithium worth up to 35 trillion won ($31 billion).

Hombre Muerto salt lake in Argentina. [POSCO]

Posco shares rose 3.34 percent Thursday following reports that a salt lake in Argentina owned by the company could produce lithium worth up to 35 trillion won ($31 billion).

Posco M-Tech, a 48.9 percent-owned Kosdaq-listed Posco subsidiary, rose by almost 30 percent to 8,720 won, a two-year high. Posco ICT, a 65.4 percent-owned and also Kosdaq-listed Posco subsidiary, rose 5.96 percent, while 62.9-percent owned Posco International fell by 1.6 percent.

On Wednesday, Posco claimed that the lithium reserves at its Hombre Muerto salt lake in Argentina could generate sales of up to 35 trillion won, based on current lithium prices. The company acquired the site for 310 billion won in 2018 and is currently establishing lithium production facilities. Completion is planned for 2023.

Posco’s updated valuation of the salt lake comes as lithium prices rose recently on global demand for electric vehicles (EV). Lithium is used in rechargeable EV batteries. China’s lithium carbonate prices, which are considered an industry standard, have more than doubled from around $5,000 a ton in July 2020 to $11,000 last month, the steelmaker said.

While critics question calculating potential gains from lithium reserves still in the ground, Posco said it anticipates lithium prices to continue increasing in the future, given the rising demand for EV batteries.

Last year, the company discovered that Hombre Muerto’s lithium reserve was much larger than what it forecast in 2018 when it purchased mining rights from Australia’s Galaxy Resources. Montgomery & Associates, a U.S. consulting firm in water resources, reported the salt lake contains 13.5 million tons of lithium, which is six times larger than 2.2 million tons Posco initially anticipated.

The steelmaker has its eyes set on EV battery components for future growth. It wants to supply raw materials and assemble battery parts.

In raw materials, Posco's investments are largely focused on lithium, nickel and graphite. Last month, it acquired 15 percent stake in Black Rock Mining, an Australian mining firm that owns a graphite mine in Tanzania.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]