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Can Bolivia Capitalize On Its Huge Lithium Reserves?

Bolivia, one of the poorest countries in Latin America, has began shipping lithium to China in what is considered the first step towards fulfilling its ambitions to becoming the world’s No. 1 exporter of the commodity, used in high tech devices such as smart phones and electric cars, as well as in the pharmaceutical industry.

With a price tag of barely $70,000, Bolivia's lithium shipment to China is being seen more like a symbolic transaction than a financial breakthrough for the country.

Those first 10 tonnes of lithium carbonate were extracted from a pilot plant at the country’s salt flats, located in the southwestern region of Uyuni, local newspaper EFE News Agency reports (in Spanish).

But with a price tag of barely $70,000, the move is being seen more like a symbolic transaction than a financial breakthrough for the country, which expects to multiply the figure into millions of dollars by 2020.

Lithium, frequently referred to as "white petroleum," drives much of the modern world, as it has become an irreplaceable component of rechargeable batteries used in high tech devices.

And Bolivia should be in a great position to take advantage of the lithium boom — the country holds the world’s largest identified reserves, but it first has several issues to overcome.

Jennifer Bates, analyst at UK-based risk management solutions provider PGI, believes that rudimentary infrastructure, a challenging regulatory environment and doubts around the security of investments in the land-locked nation area likely to continue posing obstacles to investors.

“Bolivia’s Salar de Uyuni (…) presents a challenging operating environment that will require significant start-up costs (…) Moreover, the type of lithium at Uyuni requires a consistent supply of chemicals for the processing of brine, the transport for which will be hindered by the region’s poor accessibility,” she says in her latest report. Related: Saudis Ramping Up Oil Output To Gain Leverage In OPEC Talks

The country’s salt flats also have a lower evaporation rate than the current top three lithium producers — Chile, Australia and Argentina, in that order, the analyst notes.

But perhaps the main challenge for Bolivia will be persuading foreign investors the country is a safe bet, Bates writes:

"Investment security will remain a concern in light of the previous nationalisation of foreign mining companies and the limited investor protections provided by the 2015 law on arbitration. In 2012, the government nationalised Glencore’s Colquiri tin and zinc mine and South American Silver’s Malku Khota silver-indium mine. The nationalization of Malku Khota was justified on the grounds of violent civil unrest, which could serve as a future pretext for nationalisation as lithium mining could see a resurgence in civil unrest if community engagement efforts fail or environmental impact and intensive use of water are not managed."

As a result, Swiss miner and commodity trader Glencore (LON:GLEN) announced this week that it’s taking Bolivia to an arbitration court over the nationalization of those and other assets.

In recent years, leftist President Evo Morales has repeatedly rejected foreign partners to help develop the country’s fledgling industry, opting instead for going at it alone.

Bolivia is willing to work with Chile and Argentina, the two other dominant players in South America, to exploit together what it is known as the “lithium triangle.”

However, he has softened its position lately, saying he’d be willing to work with Chile and Argentina, the two other dominant players in South America, to exploit together what it is known as the “lithium triangle,” a unique high-altitude area covered with lakes and bright white salt flats that straddles the three countries’ borders.

Bolivian authorities say they plan to invest $790 million from now until 2018 to keep developing the local lithium industry. Between 2008 and 2014, the country spent $115 million on it.

In terms of exports, Bolivia aims to ship 10,000 tonnes of lithium carbonate and 168,000 tonnes of potassium chloride by 2021.

By Cecilia Jamasmie via Mining.com

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