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Morales looks to lithium production to drive Bolivia’s economy
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Bolivia is home to the world’s second largest lithium resources but skeptics question the government’s approach
By Tom Azzopardi
The Salar de Uyuni can play tricks on your eyes.
At 3,600 meters above sea level, the air is thin, the 11,000 square kilometers of table flat landscape cast no shadows, and the titanium white surface eliminates all sense of perspective. Don’t wander off, guides warn visitors.
Beneath a brittle crust of salt lie reservoirs of mineral-rich brine, which the US Geological Survey estimates contain at least nine million tons of lithium, making it the world’s second largest resource.
The world’s lightest known metal, lithium is used in industrial applications, ranging from heat-resistant glass to steel and aluminum production. It’s also used in mood-stabilizing drugs. But its greatest potential lies in batteries—particularly in those that power electric cars.
President Evo Morales, who has led the country since 2006, has promised his countrymen that the riches beneath Uyuni and other salares, or salt flats, could turn Bolivia into the Saudi Arabia of the 21st century by controlling a vital energy resources.
But delivering on that promise is another matter. Over the last decade, several multinationals, including France’s Bolloré and South Korea’s POSCO Corp., have courted Morales seeking access to Bolivia’s lithium. The suitors walked away empty-handed as the president insisted the government retain ultimate control over the mineral.
Pride in national ownership has a long history in Bolivia and Morales has reasserted state ownership over much of the country’s natural resources by expropriating tin mines, oilfields and gas pipelines. These moves have alienated foreign investors.
Now, though, Morales is under pressure. Following major lithium finds in neighboring Argentina and Brazil, revenues from gas exports, which have fueled public spending on roads, hospitals and schools, have plummeted and strained government finances.
Morales is running for a fourth consecutive term in office in October’s elections.
More than mineral wealth, Bolivia wants to use its geological endowment as a springboard to propel South America’s poorest nation to the forefront of the electric car revolution.
As electric vehicles take off, the lithium market is expected to triple over the next decade to annual demand of around 1 million tons LCE (lithium carbonate equivalent – the lithium derivative most commonly used in lithium ion batteries).
To meet rampant demand, producers are rapidly increasing production across the globe. Australia, which produces lithium from mines rather than brines, has more than doubled production over the last decade to almost 200,000 tons LCE last year. Bolivia’s neighbor Chile aims to triple output from the Salar de Atacama, Uyuni’s smaller cousin.
Although prices for lithium carbonate have fallen sharply over the last year in response to increased supply, the market is expected to continue growing at double-digit rates for years to come.
“No one sees any let-up in demand,†says battery metals analyst Chris Berry of House Mountain Partners, a New York-based consulting firm.
In response, carmakers, battery factories and lithium processors are scouring the world for secure supplies of the mineral. Last year, China’s Tianqi Lithium Corp. bought a 24% stake in Chile’s largest producer, SQM, for $4.1 billion.
Raw materials, such as lithium, can represent up to 40% of the cost of battery cathodes and securing competitive supplies will be crucial to ensuring the industry’s survival in an increasingly electric future, says automotive expert Wolfgang Bernhart of consultancy firm Roland Berger.
In 2017, Morales created a new state-owned lithium company, Yacimientos de Litio Bolivianos (YLB), that will extract the lithium and other minerals from the salares backed with state funding.
YLB has already launched a plant to manufacture potash from the brines of Uyuni. An industrial plant with the annual capacity to produce 15,000 tons of lithium carbonate is under construction and should begin production during the second-half of next year, says YLB’s executive director Juan Carlos Montenegro.
To move further up the value chain, the government is looking for help from abroad. Last December, YLB signed a joint venture agreement with German-based ACI Systems to build a €300 million ($331.4 million) facility to use residual brine from the YLB plant to produce 35,000-40,000 tons a year of lithium hydroxide, beginning in 2023.
A second agreement with Chinese consortium Xinjiang TBEA Group is even more ambitious. Covering two smaller salares, Coipasa and Pastos Grandes, the deal foresees $2.3 billion of investment in eight plants producing a range of chemicals, including 100,000 tons a year of lithium chemicals, and the construction of a Bolivian-controlled battery factory in China.
Combining production from Uyuni and the other salares, Montenegro is confident that Bolivia will soon muscle its way into lithium’s major league, producing more than 150,000 tons a year of LCE by 2025, or almost twice the amount produced by Chile last year.
But outside Bolivia, experts are unconvinced.
Compared to the others in South America’s lithium triangle, Uyuni isn’t a rich salar. It contains a lithium concentration just one-third of Chile’s Salar de Atacama, says Daniel Jimenez, an industry consultant who worked at Chile’s SQM for nearly 30 years.
The Uyuni brine also contains a magnesium/lithium ratio four times as high as Atacama, complicating the chemical extraction process.
Worse, while the bone-dry climate of northern Chile offers ideal evaporation conditions, YLB has to contend with three to four months of summer rain each year. That leads to longer production times, larger evaporation pools and higher production costs.
Meanwhile, the government’s chosen partners aren’t well-known in the lithium industry. Prior to the Uyuni deal, ACI was an equipment supplier to Germany’s carmakers with no previous experience of lithium production. TBEA Group produces equipment for the power industry.
“I don’t see Bolivia becoming a major producer in the next six to eight years,†says Jimenez.
Montenegro dismisses such concerns. Supported by K-Utec AG Salt Technologies (the privatized former research center of Germany’s potash industry), he says YLB is using proprietary technology to produce lithium carbonate from lithium sulfates rather than lithium chloride, the process used in most brine operations. The technology has already been proven at a pilot-scale plant in operation since 2013.
In an emailed response to written questions, ACI told LatinFinance that it is backed by a large network of experts and companies, including Germany’s Fraunhofer Institute and the German Association of the Mechanical Engineering Industry, which could provide technical support and financing backing.
Morales has claimed that Bolivia will produce not just lithium but use the metal as a basis to make more advanced products, lithium-ion batteries and even electric vehicles.
But ACI has said that more than 80% of the lithium produced by the project will go to Germany, supporting battery manufacturing there rather than in Bolivia.
Morales will likely use state funds to drive industrialization, but it’s not clear whether such ventures could ever be profitable. The country already produces cellphone batteries, albeit on a tiny scale.
The economics of producing cathode materials and more value-added products are questionable. Of the three countries in the lithium triangle, only Argentina makes cars, none of them electric yet.
A plan to attract cathode production to Chile with guaranteed supplies of lithium at preferential prices collapsed earlier this year when all three winning consortia pulled out of the deal.
Meanwhile, some Bolivian politicians are concerned about how much tax the new industry will generate. YLB says that a 3% provincial royalty on mineral production will be paid on lithium extracted from the brine. But this will not apply to lithium hydroxide produced by the joint venture with ACI, as this is classed as a byproduct of the initial process, says Juan Carlos Zuleta, a local lithium expert and critic of the government’s industrialization program.
The issue is likely to come up again as elections approach.
Still, Bolivia is not standing still. Since signing the deals with German and Chinese companies, Morales has this year courted interest in the country’s lithium resources from India, Russia, and the United Arab Emirates.
Bolivia is working to realize its huge lithium potential. But how far it has to go may be as difficult to judge as Uyuni’s own shimmering horizon.
