The lithium that powers our smartphones, computers, and electric vehicles is a resource of rising global importance. In previous blogs, we’ve talked about the booming market for it, its abundance in South America’s Lithium Triangle, and the impact of supply chain disruptions. “The electric car revolution will stall in the West if supplies of crucial battery elements like lithium fail to keep up with the forecast huge increase in demand,” we cited an article in Forbes from late 2021.
Fast forward to the second half of 2022. As lithium producers announce record profits, automakers are making bold moves, like paying up to two years in advance, to secure their supply. Within Latin America, nations have been making gestures toward regional collaboration. Chile and Argentina launched the Binational Working Group on Lithium and Salt Flats, and Argentina has been conducting discussions with Yacimientos de Litio Bolivianos, Bolivia’s state-owned lithium company.
Yet no discussion of today’s Lithium Triangle is complete without talking about the fourth player in the equation: China. Ganfeng Lithium is the majority stakeholder in Argentina’s Cauchari-Olaroz operation, Tianqi Lithium is the second-largest shareholder in Chile’s SQM, and Chile’s Ministry of Mining awarded China-based BYD a sizable contract at the beginning of 2022. As China’s investments here and throughout the world continued, a record summer heat wave disrupted domestic production of the coveted resource.
As shortages, demand, and global interconnectivity continue, what lies ahead for the Lithium Triangle?
Argentina: Deals and momentum in a business-friendly environment
Mining companies have been probing the world from Australia to Mexico to less expected places like Greenland and Afghanistan for in-demand battery metals. Amid this activity, Argentina has over a dozen lithium projects in the pipeline, according to an August 2022 news release published in Bloomberg, plus no shortage of growth-focused acquisitions and partnerships.
In January 2022, Lithium America, “the next lithium giant,” completed its acquisition of Millennial Lithium and its Pastos Grandes project, with the potential for production within three years. In March, Rio Tinto completed its acquisition of the Rincon project in the heart of the Argentina’s Salta Province, a hub for greenfields projects. Meanwhile, expansion plans have been reported for US-based Livent, the first mining company operating in Argentina’s Catamarca Province, and Australia’s Orocobre, which built and now operates a commercial, brine-based lithium operation in partnership with Toyota and state-run power company JEMSE.
A business-friendly regulatory environment is one reason. For example, here a corporation or individual can own a lithium exploration or production concession in perpetuity if they meet the investment criteria.
International alliances and investments are also catalyzing growth. We’ve written in previous blogs about China’s involvement in Argentina’s lithium industry: Zijin Mining Group’s investment in a lithium carbonate plant and purchase of Canadian mining operator Neo Lithium Corp. and Zangge Mining Investment’s partnership with Canada’s Ultra Lithium for exploration, development and a stake in Ultra Argentina. With Argentina now a member of China’s Belt and Road Initiative, look for investments in infrastructure, rail projects, hydropower, and more.
Chile: A regulatory work in progress
Few industries in the world are as highly regulated as mining. Few regulatory reforms are as sweeping as a new constitution. Bring the two together, and things get complicated.
“Chile has been flailing for half a decade to create a legal framework to sell concessions to developers to extract its 19.9 million tonnes of lithium reserves,” wrote S&P Global. As President Gabriel Boric assembled a sweeping draft constitution, mining was one of the less highly publicized topics. But issues such as mineral rights, environmental evaluations, and nationalization became hot topics of discussion within the industry.
In a September 4 vote, the people of Chile rejected Boric’s proposed constitution. “Now he and his country will be left to start from scratch,” the Washington Post reported. “To write a new charter, constitutional experts say, Chileans will have to bring the matter to congress, launch an election for a new assembly, and begin the drafting process anew.”
Miguel Zauschkevich, president of the Chilean chamber of mines, talked with BNAmericas in late August about the wide-reaching impacts of constitutional reform on his industry, from concessions to labor to taxes. “I hope that a balance will be struck between the political authorities and the mining sector. I’m optimistic and I believe that it can be achieved.”
Throughout this ongoing Congressional journey, AMI’s 2022 Latin America Mining Risk Index, stated that Chile, “once investors’ darling … now presents more risks, but it remains the most welcoming jurisdiction for miners in the region.”
Bolivia: Incremental steps to unleash untapped wealth
Bolivia has the largest amount of lithium reserves in the world. But multiple attempts at lithium production and commercialization have failed to take hold.
In 2019, the government announced a partnership with China’s Xinjiang TBEA Group Baocheng to set up new lithium carbonate processing plants on the nation’s salt flats. Operations failed to start up in 2021 as scheduled. The government also rescinded a joint venture with Germany’s ACI Systems Alemania just a year later after protests that local communities were not benefitting from allocations as promised.
But future private sector players may face better odds. Under his national 2021-2025 agenda, President Luis Arce has made rapid lithium development a priority, including the comparatively more environmentally friendly process of direct lithium extraction.
The Bolivian government is taking action toward this objective. After it disqualified Argentina’s Tecpetrol and U.S. startup EnergyX, the government named six finalists (as of June 2022) to help its state-run lithium company mine these untapped resources:
- Lilac Solutions, a startup backed by BMW and Bill Gate’s Breakthrough Energy Ventures
- Chinese battery-maker CATL
- Fusion Enertech TBEA Co. Ltd., also from China
- China’s Guoan Group Co.
- Russia’s Uranium One
Getting your business in on the boom
A complex, capital-intensive industry like mining requires teamwork at every step, from joining forces for exploration or partnering on the production side, as Allkem and Toyota Tsusho are doing to build a processing plant. Here are some areas for your business to explore as South America’s Lithium Triangle continues to grow and evolve.
Join an urgently needed innovation ecosystem: From satellite imaging that detects new deposits to tools that extract precious resources from dead batteries, innovation can be a game-changer in the natural resources sector. It’s urgently needed to accelerate progress in the Lithium Triangle.
In Chile, former minister Sergio Bitar observed that “If Chile wants to maintain its market share and leverage the creation of added value, it must focus on production but also make the leap in research and cutting-edge technology developments. The question is how to do it.”
In Chile, the Boric government is aiming to create a national lithium company for everything from exploration to manufacturing. In Argentina, state-owned energy Y-TEC is working to develop a lithium battery with a greater proportion of domestically produced components. And in Bolivia, none of the contenders for the government’s mining project have exploited lithium at scale before. Could your business become a technology partner for the Lithium Triangle’s growing innovation ecosystem?
Help make mining more sustainable: Falling flamingo populations on the Atacama Desert are just the beginning of the Lithium Triangle’s environmental concerns. In a region where water is already scarce, researchers are linking mining more and more to contaminated local water basins, aquifer drainage, soil degradation, and negative impact on rural livelihoods. In Chile’s mining industry, violations have consequences. Barrick Gold’s Pascua Lama gold and copper mining project was shut down due to its impact on local glaciers, a local river, and water availability.
Companies, like Evove in the UK and EnergyX in the United States, are developing innovative technologies to extract lithium from brines and turn brackish or saline water into fresh water for consumption. In Europe, Vulcan Energy is aiming to extract lithium in the Rhine Valley with zero emissions. How might these and other innovations make mining more environmentally friendly in the Lithium Triangle—and power the EV revolution the world needs?
Get creative with a new product or service: Bolivian startup Quantum is hoping to help local communities benefit from the lithium boom by building tiny electric cars powered by locally made batteries. What similar innovations or business models could your business launch or support?
Ready to get started? Specialized consultants and advisors can help you navigate opportunities in mining, technology, and more, in Latin America and beyond. For more information, contact us.