Monday , May 17 2021

A lithium dream "almost impossible" for Bolivia seduce an inexperienced mining company

Many suspect that Bolivia's lithium will ever support commercial mining. In the past, two companies tried to sign agreements with the government, but faced uncertainty or unreasonable demands from the government.

A small army of workers from cities and cities in Bolivia are running buses for the last time a journey can take days. The winding and uneven roads of dust, the narrow air at high altitude, have gone to take workers in the dazzling plane of the world's greatest solid things, all of which are among those dreaming of renewing Bolivian lithium wealth and turning them into electric batteries .

These workers will spend two weeks in Salar de Uyuni, an extreme south of Bolivia, before returning home for a seven-day break. They are trying to build a world-class lithium mine on the tip of the Andes, about 12,000 meters above sea level in the heart of Bolivia. The nearest port is at least 500 kilometers and the border.

From above, this huge area looks so white that it merges with a giant snow plain. The salt crystallizes in the dry season, forming millions of hexagonal hexagons covering an area that is large like Connecticut. During the wet season it is covered with a thin layer of water that forms a giant mirror, which reflects the sky so clearly that the line of the horizon disappears. The visual effect attracts thousands of visitors and the Dakar Rally each year, making it the main tourist destination in Bolivia.

Removing lithium will be much harder than it will bring tourists. Most observers doubt that Bolivia's lithium will ever support a commercial mining operation. However, the government is ready to use the global hunger for an important mineral to power electric cars and build storage batteries. The ambition is to transform Bolivia into a rechargeable battery maker for all Tesla electric cars and nearly 300 electric vehicle models (VEs) expected to hit the market by 2022, according to Bloomberg NEF.

"Bolivia will be a relevant player in the global lithium market within four or five years," said Juan Carlos Montenegro, general manager of the state Bolivian lithium deposits or YLB. "And we do not plan to stop there".

The Bolivian government, the longest-running populist regime in South America, has pledged to become an actor in the minerals and batteries market, using mainly its own engineers. Their Uyunty pilot plant produces about 250 tonnes of lithium carbonate this year, and YLB said it could bring production to 150,000 tons within five years. This will make Bolivia one of the nations with the highest production and source of about 20% of world lithium by 2022, according to Bloomberg NEF projections.

But the country also needs the help of several foreign companies that are not discouraged by the possibility of renewal of lithium from one of the farthest places on the planet. And there seems to be at least one who wants to take that risk. ACI Systems Germany.

Inexperienced mining company

Based in Zimmern o Rotweiler, a rural city in the heart of the German Black Forest, the company is a subsidiary of ACI Group, which provides support for managing photovoltaic, battery and automotive projects. ACI Systems Germany employs only 20 people and was created solely to focus on the construction of a lithium mine in Bolivia. Executive Director Wolfgang Schmutz is betting he will succeed in a poor country that has prevented a long list of elite lithium suitors.

"I know Bolivia:" I and the others in the company have personal relations with the country, "said Shmutz in a telephone interview." What we have promised so far. We trust that we want to continue to build. "

ACI recently signed an agreement with Bolivian President Evo Morales for the construction of a $ 250 million lithium operation, a first step towards the production of cathodes and batteries in Bolivia. The deal is expected to be formalized this month in a joint venture 49-51 with YLB. The German company has not yet received funding for the project.

"Bolivia is not hosting any manufactured cathode maker," said Andrew Miller, senior analyst at Benchmark Mineral Intelligence. "There are major obstacles in their production of lithium, let alone develop a secondary cathode industry battery".

The reason for this is clear: the demand for lithium is expected to double by 2025. Soft and light ore is extracted mainly in Australia, Chile and Argentina. Bolivia has a large amount: 9 million tons that have never been commercially exploited, the second largest in the world, but so far there has been no practical way to get out and sell.

Bringing Bolivia's offer to the market will help lithium miners who have fought to meet world needs. The main producers are FMC and Albemarle, from the United States; SQM, China and Tianqi Lithium, from China, are investing billions of dollars to expand their existing operations. Even the most experienced suffer from failures, with delays of SQM reporting and unexpected difficulties to expand in Chile. Albemarle reported a downturn in its operations in Chile, China and Australia for various reasons during the third quarter.

In the past, FMC and the South Korean steel producer POSCO have tried to sign contracts with the Morales government that would establish lithium operations in Uyuni. These attempts failed, the talks were blocked and investors faced uncertainty or unreasonable demands from the government.

The poorest nation in Latin America had at least 27 presidents and military junta over the past five decades. President Morales, elected in 2006, is a long-time leader and the latest generation of leftists, including Venezuela's Hugo Chavez, who came to power with a promise of social justice.

A risky bet

Morales nationalized hydrocarbons, the main source of revenue for Bolivia, and the electricity and telecommunications network. He pledged to "industrialize with dignity and sovereignty," announcing that foreign companies will not exploit the lithium in a rough condition, but will be processed from entities controlled by Bolivia and transformed into batteries. Morales once said he wants to see "Lithium Toyota produced in Bolivia".

"Bolivia is sincerely very risky compared to other parts of the world for investing in lithium," says Chris Barry, an analyst and founder of the House Mountains Partners. "Investors are concerned about the return of capital and the return of capital."

In South America, lithium is mixed in salty mud under the solitary flats high in the mountains. To extract it, the miners throw the brine into massive ponds, where it remains to disappear for months. This concentrated liquid is transformed into industrial chemical processing plants, where it is transformed into lithium carbonate or lithium hydroxide. Giant batteries such as Samsung SDI and Panasonic turn these products into rechargeable batteries that are used in electric vehicles.

ACI has no background in terms of shaving or making parts of batteries. But he has many optimistic goals in Bolivia.

The agreement of a German company with YLB requires an initial investment of $ 250 million to build a lithium processing plant in Uyuni, with production starting in 2021 and reaching a total capacity of up to 40,000 tonnes of lithium hydroxide annually by the end of 2022, roughly twice as much the capacity that FMC, the world's fourth largest producer, has in its operations in Argentina.

To achieve this venture, ACI will build new and untested technology from another German company K-UTEC AG Salt Technologies, which it believes will speed up the process by producing lithium hydroxide directly from the brine. The soap located in Uyuni has a high level of magnesium, which makes its lithium less clean and more expensive to produce than that of adjacent salts in Chile and Argentina.

"There are too many loose targets and a lot of secrecy on the part of the government," said Juan Carlos Zoleta, a Bolivian professor and lithium analyst. "ACI Systems has no technical or financial capacity to face the challenge of this size."

In the coming weeks, YLB will also begin building an industrial plant of $ 96m with the capacity to produce up to 18,000 tonnes of lithium carbonate by the beginning of 2020, said Montenegro. He added that the state-owned company has already noted interest from companies, mainly to serve the Chinese battery market, to sign supply contracts several years after it starts to operate.

But the extraction of lithium from brine is not easy, nor does it produce a chemical product that requires battery manufacturers with competitive costs. As the world's leading manufacturers already increase production, Bolivian and ACI efforts to produce lithium could start too late.

"The production of lithium at a certain level of purity for cathode production can take longer," said Barry. "For this project to get to where other players are around the world, it will last for years."

Prices of lithium reached historical levels earlier this year, as South American lithium carbonate was sold at an average of $ 15,700 per tonne in May and June, before prices fell to around US $ 14,375 per tonne in October, according to Benchmark mineral intelligence. Barry expects lithium prices to stabilize at around US $ 12,000 per tonne, in which nearly a third of ongoing projects are falling below the cost curve. The Bolivian big bet would, at best, be marginal.

Political conspiracy

The market dynamics may not be so important for the Bolivian government, which believes industrialization of lithium is the next step after the nationalization of mining and hydrocarbons. "I am sure that the lithium will be insurance from an economic and political point of view to contribute to the free and sovereign development of our beloved Bolivia," Morales said in August.

The country will hold presidential elections next year, and the government Morales is expected to try to close a lithium deal before it after a heavy defeat at the International Court of Justice in a Bolivian dispute. for maritime access to Chile.

"In Bolivia, we have a government that only sells illusions, tells about fairy tales, and now they are in a hurry to show that they have done a very good job and that lithium is progressing at a constant rate," Zuleeta said. "They are not interested in whether the country wins or loses, they are interested in staying in power".

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