"You can't easily land a good mining right if you just wait for it to come on the market."
A senior official at POSCO Argentina whom we met in Salta, Argentina, on the 19th local time said this. Even with the same amount of buried lithium, production costs vary widely depending on concentration and impurities. It means that the ability to spot high-quality mining rights before others, and the local network that turns that into actual mining right consolidation, are crucial in the race to secure resources.
The "Hombre Muerto" salt-lake mining right that POSCO Holdings bought in 2018 for $280 million (about 310 billion won at the exchange rate at the time) is one such case. The estimated lithium reserves at acquisition were 2.25 million tons, but the company's own exploration put them at 13.5 million tons, six times higher. It was a "jackpot" found ahead of others, but it is also a high-risk business in which investment value varies greatly depending on exploration results.
POSCO recently gained a safety net to reduce the risks of such resource projects. The upstream process of the second brine-lithium plant in the 4,000-meter-high plateau of Salta and Catamarca provinces won approval last month under Argentina's "Large Investment Incentive Regime (RIGI)." It was the result of nearly two years of effort, cutting the corporate tax rate from 35% to 25% and allowing export proceeds to be held entirely in foreign currency starting in four years. The export tax on lithium carbonate will also be exempt starting in three years, and these investment conditions are guaranteed for 30 years.
POSCO Holdings estimates the benefit at about $900 million (about 1.24 trillion won). For POSCO Holdings, which has invested $2.3 billion (about 3.17 trillion won) in Argentina, a country that has flipped its foreign exchange and tax policies depending on the administration, it was a desperately needed mechanism. Fernando Ávila, chair of the mining committee in Argentina's lower house, told Korean reporters, "Given investors' significant concerns over past policy changes, RIGI is a system designed with international arbitration procedures so that benefits are maintained even if the administration changes."
As resource-rich countries dangle benefits to attract capital and technology, countries that need resources are providing covering fire behind corporations with finance and diplomacy. Critical minerals are essential raw materials for advanced industries, but deposits and production are concentrated in a few countries; if supplies are cut off, it leads to production disruptions in advanced manufacturing such as batteries and semiconductors.
China is putting in the most effort. Zijin Mining, whose largest shareholder is a Chinese state-owned enterprise, acquired an entire Canadian resource company for about $770 million (about 1 trillion won) to secure a high-grade salt-lake mining right in Argentina. In Jujuy province, where lithium development is concentrated, Chinese corporations built a 300-megawatt solar complex to generate electricity for operating plants. The Export-Import Bank of China lent the Argentine government up to $331.5 million (about 450 billion won), equivalent to 85% of the down payment for the solar complex construction contract, at an annual interest rate of 3%.
The Center for Strategic and International Studies (CSIS) analyzed, "China has expanded its lithium business by strengthening ties with Argentine State Governments that hold core authority over mine permits and regulations." It is a structure in which corporations' mining-right investments, local government networks, and policy finance move together. Using this approach to extend its influence from securing lithium raw materials to processing, China accounts for about 70% of the world's lithium refining and processing volume.
Japan has the government share risks with corporations from the early stage of searching for mining rights. When Toyota Tsusho jumped into developing the Olaroz salt lake in Argentina, the Japan Organization for Metals and Energy Security (JOGMEC), a public institution, covered half the initial exploration costs and provided a debt guarantee for development loans. With JOGMEC sharing the early investment risk, Toyota Tsusho secured 25% equity in the project and the right to sell the output.
The trend of the race to secure critical minerals expanding from corporations to a contest of resource security between countries also shows up in the numbers. According to the International Energy Agency (IEA), due to price volatility, oversupply, and policy uncertainty, global investment by critical mineral corporations fell 9% last year from the previous year, and investment by lithium-focused corporations dropped 40%.
By contrast, the amount that advanced economies such as the United States, Japan, and Europe pledged to support critical mineral projects with loans, guarantees, and subsidies reached about $65 billion (about 90 trillion won), more than four times the 2023 level. The IEA said that as private investment has slowed, governments are expanding their role in lowering project risk with public finance and drawing in private capital.
Korea went the other way. After Korea Resources Corporation, which led overseas resource development during the Lee Myung-bak administration, invested 5.2 trillion won but recovered only around 500 billion won and fell into complete capital erosion, the government in 2021 merged the corporation into the Korea Mine Reclamation and Mineral Resources Corporation and removed its function of making new direct investments in overseas resource development. Since then, overseas investment in general minerals has also fallen more than 70%, from $1.9 billion (about 2.6 trillion won) in 2014 to around $500 million (about 700 billion won) in 2021.
There is support in place. POSCO Argentina was able to borrow up to $668 million (about 920 billion won) with support from the Export-Import Bank of Korea and Korea Trade Insurance Corporation, but the support came at the stage of building the second plant, after the mining right was secured and the resource volume confirmed.
There is also a special loan that lends exploration funds to corporations. But according to the Korea Energy Economics Institute (KEEI), over the past five years all special loans went to oil and gas, with no support for critical minerals. This year's total budget is 67.5 billion won, one-fifth of what POSCO Holdings spent to buy a single mining right (about 310 billion won at the time). The function of state-owned enterprises directly taking equity in overseas mining rights to share early risks, as Korea Resources Corporation once did, has been blocked since the 2021 merger.
As the competition for resource hegemony intensifies, the government is also preparing to fill the support gap. This year it raised the special-loan coverage ratio from 50% to 70% of project costs, and relevant ministries are discussing a legal revision to restore the overseas direct investment function of the Korea Mine Reclamation and Mineral Resources Corporation and to establish a resource security fund. An industry official said, "Countries are pouring live ammunition into securing resources," adding, "Given the high risk of failure in resource investments, there needs to be a structure in which the government shares part of the burden so corporations can hold the line at the front."