The outpost of the lithium Triangle: Argentina, Bolivia and Chile monopolize global investments

Jujuy, Salta and Catamarca. Three provinces located in the northwest of Argentina that have become an important enclave for the extraction and production of lithium. Such is the wealth of this metal in this area, that at the beginning of October the governors of these provinces signed an interprovincial treaty for the creation of the Lithium Mining Region. “In this way we advance so that the three provinces offer the same opportunities for those who want to invest, with clear rules, legal certainty and predictability,” said the governor of Salta, Gustavo Sáenz, after announcing the creation of this region. The Salta authority knows that with electromobility stepping on the accelerator in the world, time is money (in this case white). Thus, in recent months this province has managed to attract large investments, as is the case of the world’s most important lithium company, the Chinese Ganfeng Lithium, which announced an investment of US $ 580 million to carry out the Mariana project in the Salar del Llullaillaco, southwest of the Los Andes department, in Salta. In the neighboring province of Catamarca, another Chinese giant, this time Zijin Mining, one of the largest gold and copper producers in the Asian country, recently announced an agreement to acquire all of Canada’s Neo Lithium, focused on the exploitation of its mine. of lithium from Tres Quebradas. The amount of the transaction: US $ 740 million To date, Argentina has a portfolio of 20 lithium projects and their progress is diverse. In addition, Investors come not only from the mining sector, but also from the automotive and technology industries. This is the case of Toyota, which confirmed an investment of US $ 400 million to increase the production of lithium carbonate for the manufacture of batteries through the company Sales de Jujuy – where Toyota Tsusho owns 25% in association with the mining company Orocobre ( 66.5%) and the Jujuy state company Jemse (8.5%) -. BMW, for its part, signed a contract in March 2021 with the US mining company Livent for US $ 334 million for the purchase of lithium from the project that the company has in the Salar del Hombre Muerto located in Catamarca. With this agreement, Argentina would become the German automaker’s second lithium supplier from 2022, behind Australia. Thus, Argentina, which is part of the famous Lithium Triangle, A region that concentrates more than 50% of this resource in the world, also made up of Chile and Bolivia, is emerging as one of the few countries that is able to respond to the growing demand for this input for the production of ion batteries. Rechargeable lithium, a key part for the operation of electric vehicles. Chile and Bolivia also meet this profile, although in the Altiplano country, despite having the largest amount of reserves in the world (21 million tons), it still cannot extract it. 

THE DREAM OF ELECTROMOBILITY COME TRUE Before the pandemic, electromobility sounded like a dream far from being realized. Changing a gasoline car for one that needs electricity to function in a world that still does not have the recharging infrastructure to guarantee its operation and when its price that can be up to 100% more expensive than a conventional car, were not the best incentives to opt for an electric car. Today the panorama is different. The pandemic quarantine gave a break to the world automobile fleet and the reduction in the use of fossil fuels brought a considerable improvement in air quality, causing many countries to take seriously their electromobility plans that would be reflected in a greater demand for electric cars together with other efforts to slow the advance of climate change. According to a report prepared by the Ultima Media consultancy for the Swiss group ABB, the global battery manufacturing capacity expected by 2030 will not be sufficient to meet the demand from the automotive industry. This is due to the fact that electric cars will exceed those of combustion in sales in 2036, the year in which 80 battery factories will be in operation around the world. “There is concrete data and evidence that allows us to visualize that there is a strong accelerated trend of electromobility cannibalism on internal combustion in the transportation industry. Therefore, being this one of the largest industries in the world, this technological mutation will imply unthinkable changes in our lives and civilization. For all this, I consider the enthusiasm on the subject justified and even timid, ”says Jaime Alée, president of ESK Consulting. For Chris Berry, founder and president of the consultancy House Mountain Partners, although interest in electric mobility is at an all-time high and sales of electric vehicles continue to increase, this high demand for this type of car has had an effect on production systems of the automotive industry. “Recent data with clogged supply chains and a lack of semiconductor chips for all cars shows that this is starting to affect automotive sales in general and may also affect EV sales in the future until supply chains can begin to operate efficiently again. This could take more than a year to resolve, ”he says. And although in Latin America the lithium supply chain has not yet reached the stage of production of batteries and much less of vehicles, all the experts consulted for this report agree that this great optimism about the high demand for electric vehicles has good fundamentals and now is the time for the countries of the Lithium Triangle to take advantage of this boom and become strategic suppliers especially for the future automotive industry. Thus, the security of lithium supply has become a priority for technology companies in the United States and Asia. Thus, In recent months, strategic alliances and joint ventures have been established between technology companies and exploration companies (such as those mentioned above in Argentina) to guarantee a reliable and diversified supply of lithium for battery suppliers and vehicle manufacturers. For Patricia Vásquez, Global Fellow at The Wilson Center, at this juncture there is no time to lose. 

“The optimism for the Lithium Triangle and other countries like Peru, Mexico and Brazil is well founded, especially for countries like Argentina and Chile that are very advanced. Countries like the United States and Europe have made important commitments to electromobility and in the next 10 or 15 years Latin America is very well positioned to respond to part of that demand. Although it is true that lithium is abundant and many countries are looking for it even at the bottom of the sea, the technology must be developed to extract it, make the investments and that takes a long time. That’s why the opportunity for the Lithium Triangle is now, before the competition starts, ”he says. For now, according to data from the United States Geological Survey (USGS, its acronym in English), identified lithium resources have increased substantially worldwide and total around 86 million tons. Only the Lithium Triangle concentrates 47 million tons, with Bolivia being the country with the largest quantity: 21 million tons. “The Lithium Triangle will always be attractive from a cost perspective with some of the largest and lowest cost lithium resources on the planet. The recent lithium deals in Argentina with the Chinese company CATL buying Millennial Lithium and Zijin Mining buying NeoLithium are two examples of the attractiveness of Argentine lithium assets. In addition, Sigma Lithium is building the first phase of its hard rock lithium mine in Brazil with first production planned for the end of 2022. They have current purchase agreements with Mitsui and LG Energy Solution, which are world-class partners. South America will remain an important part of the lithium supply chain for many years to come, ”says Chris Berry. In addition, countries should take advantage of good lithium prices to attract more investment. Especially when the price of lithium carbonate is at its best. Benchmark Mineral Intelligence, The global battery supply chain investigation and price information agency reported that last September lithium carbonate increased in China (the main consumer of lithium) 170% so far this year, to 142,000 yuan a ton (US $ 22,000), its highest level since April 2018. Meanwhile, in other markets, the price of lithium rose from US $ 17,500 per ton at the beginning of September and reached US $ 19,000 in the first half of that month.

A year ago, when the COVID-19 pandemic halted lithium extraction and crippled mining activity in general, the metal’s value fell below $ 7,600 per tonne. “Lithium will stay at that value in the long term or it will go down. Possibly there is some adjustment volatility between supply and demand, but the trend is that there will be no shortage of supply and prices will adjust ”, says Jaime Alée. FROM THE TRIANGLE TO THE SQUARE Although many countries around the world have launched into the search for lithium, some Latin American nations have already made some progress, although still far behind the Lithium Triangle. This is the case of Peru, where the Canadian junior Plateau Energy found in 2017 a lithium deposit in the Andean region of Puno called the Falchani lithium project. This year, another Canadian, American Lithium, completed the acquisition of its compatriot, the parent company of Macusani Yellowcake, a mining company that operates and manages Falchani. “The new owner, American Lithium, is giving a lot of movement to the project. You are going to resume exploration so that once the resources are defined, that is good news. With this, the quality of proven reserves will be verified and quantified. The company also operates in Nevada, United States, whereas the previous owner was a junior mining company ”, says Rómulo Mucho, former president of the Peruvian Institute of Mining Engineers (IIMP). Regarding the amount of resources in Falchani, the Ministry of Energy and Mines (Minem) of Peru estimates that 23,000 metric tons of lithium carbonate can be extracted per year. In addition, the Minem projects Falchani a useful life of 26 years. “There is lithium all over the world, but not from Peru’s concentration of more than 3,000 parts per million. That is a fabulous law and much more than the 500 parts per million that the Bolivian salt flats have. 

In the case of Peruvian lithium, which is in rock and requires another process to extract it, the concentration is up to six times higher. Thus, to the Lithium Triangle, which has considerable reserves, Peru could be added. I see a great future for the project, taking into account that it is an obligation to go towards renewable energies ”, says Rómulo Mucho. Mexico is another country that has been causing people to talk, not only because of its clay-based lithium project located in the state of Sonora and in the hands of the British Bacanora Lithium, but also because of the way in which the government of Andrés Manuel López Obrador wants to manage it. From copying the Bolivian model and taking charge of the entire lithium production chain to the controversial proposal for constitutional reform with which the Mexican president intends to put total control of the electricity sector in the hands of the state Federal Electricity Commission (CFE), disappear regulatory bodies, eliminate permits and guarantee the control of the State over the precious reserves of lithium. This has set off all the alarms of potential investors and even the Mexican Mining Chamber (Camimex) has already warned that this rule would make several projects unviable. The truth is that the lithium project arouses a lot of interest. And it is that Bacanora Lithium has as a joint venture partner Gangfeng Lithium, which owns half of the project and is struggling to get 100%. For now, the Chinese company, which is a Tesla supplier, has already announced that it will build a plant in Sonora to recycle electric car batteries, an important process in the production and adoption of these vehicles in America. And the scenario could not be better for the Sonora lithium project, taking into account the large automotive industry of the North American country and its proximity to the United States, an economy that has been driving the demand for electric cars and that together with Canada have the T-Mec, a commercial agreement that stipulates that 75% of the content used in the The automotive industry must be regional, which encourages investment in this field. “Imitating the Bolivian model or nationalizing lithium is absolutely a political discourse, which has no practical or economic sense. In Bolivia, Evo Morales invested about US $ 500 million to develop lithium batteries. The result is that he created a company that has not sold a single gram of lithium, even though it has one of the largest reserves. This shows that there is a great distance between having reserves and producing them. The national lithium industry has only consumed money. Mexico is probably going to manufacture batteries and electric cars for its main industry, which is led by American companies that have their factories there, ”says Jaime Alée. The political plane could also play against Chile, the second largest lithium producer in the world. 

“In this country we do not know what will happen with the change of the Constitution. Although Chilean production is higher than in Argentina, this country has a larger project portfolio despite its economic and political ups and downs that characterize it. Currently in Argentina there are fewer barriers to investment while Chile demands that companies have to form a joint venture with the national company and give 25% of production, because in this country lithium is considered strategic ”, says Patricia Vásquez. The southern country, whose lithium industry is dominated by companies SQM and Albemarle, knows that it has lost competitiveness in recent years, giving its rivals a certain advantage. In this regard, last week Chile announced an auction process to award operating contracts to explore and produce 400,000 tons of lithium metal for batteries, in an attempt to boost production and meet global demand. “Our country, which until 2012 was the world’s leading lithium producer, was surpassed by Australia and it is expected that by the end of this decade China will displace us to third place,” the Chilean Ministry of Mining and Energy acknowledged in its statement. For Chris Berry, Latin American governments must ensure that they do not “kill the goose that lays the golden eggs” by increasing royalties, taxes or regulations. “They have to strike a balance between allowing companies to operate in the country and doing it in a responsible manner so that all stakeholders can benefit. Chile is rewriting its constitution and the next presidential elections in Brazil are two events to take into account in South America, ”he says.

 

Source: America Economy

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