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Latin America, A Treasure Called Lithium.

Argentina, Bolivia and Chile boast the world’s largest reserves of lithium. The three countries, however, have taken different approaches to this source of wealth. Australia and Afghanistan have also large deposits of this precious metal.

Experts consider lithium one of the most promising commodities, in fact this is a reactive metal with a high heat capacity and a low atomic mass. It has become a critical component for battery electrolytes and electrodes due to its high electrode potential and high charge- and power-to-weight ratio. Lithium-ion batteries, in particular, have a high energy density and are rechargeable. Demand for this metal in recent years has been driven by proliferation of personal technology, including smart phones and tablets. While this is expected to continue, future demand will be also propelled by the production of electric vehicles.

Lithium demand is expected to nearly triple by 2025, and this will lead to a major boom in lithium mining. Over half of the earth’s identified resources of the mineral are found in Argentina, Bolivia and Chile, South America’s ‘lithium triangle’.
The three countries have taken very different approaches to exploiting the ‘white gold’.
Chile is the country with the largest lithium reserve, which is located in the Atacama desert, one of the most arid places in the world and therefore ideal for lithium extraction and storage (the metal is highly flammable and potentially explosive when exposed to water). Atacama is also close to the town of Antofagasta, one of the main industrial ports in the country. These logistical advantages, along with the Chilean government’s liberal policies and low corruption rates, have made Chile dominate the lithium market for decades. In 2016, 76,000 tons of lithium were produced in the country. In recent times, however, Chile has not been able to meet lithium’s skyrocketing demand. This is due to several factors to which we must also add the regulatory measures in Chile, where this metal is considered as a strategic resource, and the limiting of lithium concessions and the levels of extraction also to protect the ecosystem of the area.

In order to develop local lithium production, the Chilean government has signed an agreement with the US company Albemarle (a premier specialty chemicals’ company and leader in the production of lithium and lithium derivatives). The US company was granted permission to increase its currently authorized lithium brine extraction rate at the company’s facility in the Salar de Atacama in Chile. According to this agreement Albemarle is supposed to sell, at favourable prices, a certain amount of the lithium extracted in the Salar de Atacama to Chilean companies that manufacture lithium-based products.
As far as Argentina is concerned, the country’s lithium production amounted to 30,000 tons in 2016, less than half of the Chilean production, though the country boasts vast lithium deposits which are located mainly in the northern provinces of Jujuy, Salta and Catamarca.

Argentina’s reserves have long been under-exploited as a result of investor worries about the government of Néstor Kirchner (2003-2007) followed by that of his wife, Cristina Fernández de Kirchner (2007-2015). Both of the Kirchners leaned heavily on the rhetoric of economic nationalism, which was often translated into restriction policies such as controversial nationalizations (for instance the YPF oil company), import limitations and foreign currency control. The investment climate, however, changed when market-oriented businessman Mauricio Macri was voted into the presidency in 2015. Since then, President Macri has used executive decrees in an effort to increase the amount of foreign direct investment in Argentina, particularly in the extractive industries.

Investors, including those interested in lithium extraction, have responded to Macri’s new policies. In 2016 lithium production increased by 60% compared to that of the previous years. At the same time, a number of major projects involving international companies for the development of new mining sites, including Salar del Chauchari Olaroz, Salar del Rincón and Salar del Hombre Muerto, are being studied and implemented in order to triple lithium production by 2021. But there is still much to do in order to unlock the Argentine market. Macri’s ability to promote lasting change is blunted by several obstacles such as Argentina’s mining code, which allows individual provinces to determine whether or not their lithium deposits are ‘strategic’, with strategic deposits being off-limits to private investment. The law also allows provinces to enact regulations designed to limit, or even prohibit, extractive ventures within their territory. In addition, the emphasis on production and foreign investment is likely to lead to policies that maximize short-term profit, with the consequence of ‘selling off’ part of its wealth. This is the story of the $280 million lithium mine Lithea which was sold off for only $15 million.

Bolivia has the largest deposits of the three countries of the lithium triangle, which are located in the Salar de Uyuni area, not far from Potosí, and in Salar de Coipasa. Although lithium reserves are estimated to be among the largest, if not the world’s largest, the production of this metal contributes only to a small extent to the country’s economy. In fact, Bolivia was able to sell only 25 tons of the precious metal in 2016. The reason for this limited exploitation is primarily political: in 2010, Bolivian President Evo Morales declared that his government intended to oppose the ‘neocolonialist’ exploitation by foreign multinationals, and to promote, instead, national production. Inizio moduloLithium deposits along with other strategic resources (primarily hydrocarbons), were therefore nationalized and their exploitation was managed by local companies. Despite good intentions, investment and national technological research have not been up to the challenge, so Bolivian production is now at death’s door, while all development plans of pilot projects are running behind schedule. Furthermore environmental and geopolitical issues make things more difficult, in fact. Unlike its neighbours’ regions, in the Salar de Uyuni, there is the ever present possibility of floods because of the regular heavy rains making the lithium extraction more complicated, while bad relations with Chile prevent Bolivia from using the nearby port of Antofagasta for export.

Recently, the Bolivian government has taken remedial measures by establishing the state-owned firm Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), in order to develop lithium production and marketing and to seek partnerships with foreign investors on the Chilean model. However, the high rate of corruption and legal uncertainty concerning investment and business makes some hesitant to invest and, as a consequence, Bolivia lacks foreign capital and technology of which the country is in great need.
In this white gold race of the 21st century, the three Latin American countries are not the only competitors. In recent years, Australia has attracted a number of foreign investments for its reserves, becoming the world’s second lithium producer and threatening Chilean supremacy. However, it is worth noting that intense underground exploitation might have a negative impact on the environment and on local communities.
Afghanistan could become the ‘Saudi Arabia of lithium’.
Seven years ago, a group of experts from the United States identified untapped mineral deposits in northern Afghanistan.
The previously unknown deposits – including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium – are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world: a prospect that could become the driving force that would make the war continue.

Umberto Guzzardi

 

 

 

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