POSCO Holdings Secures 1 Trillion Won Funding for Argentina Lithium Project, Cuts Financing Costs

[Financial News] POSCO Holdings Inc. is accelerating the expansion of its lithium business after securing financing capacity of about 1 trillion won for its Argentina brine lithium project. Following approval under Argentina's Incentive Regime for Large Investments (RIGI), the company has now also secured support from an international financial institution, which is expected to boost production expansion and improve profitability.
POSCO Argentina S.A.U., POSCO Holdings Inc.'s Argentina brine lithium production unit, said on the 28th that it had obtained approval on the 4th for a short-term credit line worth a total of $700 million, or about 1 trillion won, from IDB Invest, the private-sector investment arm of the Inter-American Development Bank Group.
The financial support is part of the IDB Group's strategy to support critical mineral supply chains in Latin America and the Caribbean. The group provides financing to resource development projects in the region that have strong business viability and competitiveness.
The IDB side reportedly gave high marks to the lithium business of POSCO Argentina S.A.U. for meeting global Environmental, Social, and Governance (ESG) standards while also contributing to economic development in Latin America and the Caribbean.
With the credit line in place, POSCO Argentina S.A.U. can now secure working capital as needed for its first brine lithium plant and its second plant, which is scheduled for completion in the second half of this year. By securing liquidity in advance for large-scale production facilities, the company is expected to ease its financial burden as it expands output.
Lower financing costs are also expected. In addition to relatively low-interest working capital financing through the IDB, POSCO Argentina S.A.U. can benefit from tax incentives on interest and financial transaction taxes incurred during the borrowing process, under the intergovernmental agreement establishing the IDB. The structure should help reduce funding costs and improve the profitability of the Argentina lithium business.
Notably, the performance of the Argentina lithium business has recently been improving. POSCO Argentina S.A.U. posted its first quarterly profit in the second quarter of this year. Combined with Argentina's investment incentives and funding from international financial institutions, the business is now seen as having greater stability.
Earlier, POSCO Holdings Inc. also secured approval under RIGI from the Argentine government. RIGI is a system designed by the Argentine government to attract large-scale investment, and approved companies receive incentives such as tax and customs benefits.
POSCO Holdings Inc. views the successive RIGI approval and IDB Group financing support, which followed the Korea-Argentina summit on July 31, as a result of public-private cooperation to secure critical mineral supply chains.
The move is also expected to strengthen POSCO Group's resource-centered growth strategy. The group is pursuing a Triple Core growth strategy built around three pillars: industrial resources such as steel, strategic resources such as lithium, cathode material, anode material, rare-earth elements, and noble gases, and energy resources such as Liquefied Natural Gas (LNG) and new and renewable energy.
Meanwhile, POSCO Holdings Inc. plans to continue expanding its supply chain for critical minerals, including lithium, based on improvements in production and profitability in its Argentina lithium business.
[email protected] Lee Dong-hyeok Reporter