Argosy Minerals Limited (ASX: AGY) shares are under significant pressure on Wednesday morning.
In early trade, the ASX lithium stock is down 33% to a 52-week low of 5.4 cents.
Why is this ASX lithium stock crashing deep into the red?
Investors have been rushing to the exits this morning after Argosy Minerals released a major update on the Rincon Lithium Project in Argentina.
According to the release, in response to current lithium market conditions and near-term lithium price forecasts, the company has decided to suspend operations at the 2,000 tonnes per annum (tpa) facility.
Management intends to maintain and preserve the facility during this period. It will also retain optionality to resume operations if there is a sustained increase in lithium prices and appropriate operational conditions.
In the meantime, it will focus its near-term works on completing the 10,000 tonne per annum (tpa) project pre-development engineering works to achieve a construction-ready stage and to significantly de-risk the project.
Upon successful completion of the engineering works, together with the recent hydrogeological dynamic modelling results, it expects the project to be able to extract lithium brine for up to 42 years to produce 12,000tpa of LCE product (or up to 22 years to produce 24,000tpa of LCE product).
The ASX lithium stock's managing director, Jerko Zuvela, commented:
The Company is resetting to achieve long-term and sustained success, and to realise Argosy's ambition to fully develop the Rincon Lithium Project. We are very proud of the substantial progress made to date. We are cognisant of current lithium market conditions and are establishing the optimal strategic pathway to maximise shareholder value to become an international lithium carbonate producer.
Searching for a strategic partner
The ASX lithium stock is looking for a strategic partner to help it achieve its Rincon Lithium Project goals. The good news is that it has received interest from a number of unnamed parties despite the unfavourable market conditions. It said:
With the onset of weakened lithium prices and current lithium market sentiment, strategic interest and investment in new lithium production facilities for long term lithium product procurement is receiving ever greater scrutiny and related due diligence by potential strategic groups. Notwithstanding this, industry analysis of forecast lithium supply/demand is indicating a structural deficit over coming years.
The Company has continued to receive inbound interest relating to the strategic partner process targeting funding investment associated with long-term off-take arrangements for the 10,000tpa project from groups within the battery/EV supply chain and broader lithium industry participants. The Company continues to assess and review each opportunity, will maintain engagement with the international investment bank, and refocus on already established strategic relationships. In parallel, various groups continue their due diligence processes on the Project, with the aim of determining a preferred strategic partner and investment structure.
These clearly are tough times for Argosy Minerals and other ASX lithium stocks.
