Officials at the agreement signing ceremony. Credit: Galaxy Resources Limited.

South Korea-based steel manufacturer Posco has signed a $280m agreement to buy lithium tenements in the northern area of the Salar del Hombre Muerto in Argentina from Australian firm Galaxy Resources.

POSCO is also planning to build a lithium plant in Argentina, with a production target of 25,000t a year for 20 years beginning 2021, Reuters reported.

The deal comes at a time when the demand for lithium from automotive and smartphone manufacturers is growing due to its use in batteries.

Through the acquisition, Posco intends to secure lithium supplies for its battery material manufacturing affiliate POSCO ES Materials.

The company reached a deal in May to acquire Galaxy’s northern basin assets in the Salar del Hombre Muerto.

“This transaction is also economically significant as it means there are well-advanced plans for two lithium projects to be developed concurrently on the Salar del Hombre Muerto.”

Situated to the north of Galaxy’s Sal de Vida Project, the package comprises around 1.58Mt lithium carbonate equivalent (LCE) of JORC compliant measured and indicated resources.

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Galaxy plans to use the proceeds from the sale to fund the development of Sal de Vida in the Catamarca Province.

The company disclosed in May that it will retain a 100% ownership of all tenements in the southern basin of the Salar del Hombre Muerto.

Sal De Vida project contains an estimated 4.09Mt LCE of JORC compliant measured and indicated resource.

Galaxy Resources chairman Martin Rowley said: “This transaction with POSCO underlines the significant previously unrecognised value of Galaxy’s tenements on the Salar del Hombre Muerto and provides a substantial cash injection which underwrites the development of the Sal de Vida lithium brine project.

“We are very pleased to have developed what we see as a mutually beneficial relationship with POSCO with this transaction and look forward to close co-operation with POSCO on our respective projects.

“This transaction is also economically significant as it means there are well-advanced plans for two lithium projects to be developed concurrently on the Salar del Hombre Muerto spanning across both Catamarca and Salta Provinces, which carries obvious benefits for all stakeholders in both regions in Argentina.”

Earlier this year, Posco signed a deal to buy lithium from another Australian miner, Pilbara Minerals.

This deal also entails the establishment of a downstream processing joint venture in South Korea.