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Bolivia could not wait any longer.The South American country's president said as much when he attended the Jan. 20 signing in the capital La Paz of an agreement between Bolivia's state lithium company and a consortium led by Chinese battery giant Contemporary Amperex Technology Ltd. (CATL) to collaborate on the mining, refining, processing, and sale of the country's lithium reserves."This is a historic day," Bolivian President Luis Alberto Arce Catacora said, according to an official video of the event. "Today begins the era of industrialization of Bolivian lithium."Arce's words are significant for a country that has struggled to capitalize on its abundant reserves of one of the world's most sought-after resources. In the last three years, the price of this key raw material in electric vehicle batteries has soared tenfold.The framework agreement between CATL and Yacimientos de Litio Bolivianos is the first fruit of an Arce administration initiative. In April 2021, the government issued bidding invitations to global companies to participate in the development of Bolivia's three major salt flats -- Uyuni, Coipasa and Pastos Grandes.In the first phase, the CATL-led consortium will invest more than $1 billion in infrastructure construction to prepare the ground for lithium projects, according to the country's Ministry of Hydrocarbons and Energy. In the future, the consortium plans to build a factory in each of the Uyuni and Coipasa salt flats, which together will be able to produce 50,000 tons of battery-grade lithium carbonate per year.Caixin has learned that two other companies are looking to sign similar agreements with Bolivia -- China's Citic Guoan and Russia's Uranium One. Sources familiar with the Bolivian salt flats bidding said Bolivia plans to have the winners build six plants in the three major salt flats. China is deeply involved. As of last June, Chinese companies made up four of the six that have passed the technical assessment and are now in the process of conducting investment capacity assessments and project pre-feasibility studies, Caixin has learned. The other two companies are from the United States and Russia.It is not hard to understand why Chinese companies are so interested in Bolivia's lithium reserves. Home to the dominant global EV-battery making industry, China's lithium demand is the largest in the world.Bolivia is the latest frontier in the global hunt for lithium. The country may have what are thought to be the largest reserves in the world, but it has yet to develop into a significant global supplier. There are a variety of reasons for this, including the country's geography, its colonial past, and the comparatively low concentration of its reserves, which require cutting-edge extraction technology to meet the Bolivian government's environmental protection requirements -- technology that Chinese companies are developing.Large, but not in chargeBolivia's lithium reserves account for 23.6% of the world's total, according to the U.S. Geological Survey, with much of it located in salt flats.Lithium exists in two forms -- salt flats and hard rock. Lithium in salt flats accounts for 70% of the world's total and is concentrated in three South American countries -- Bolivia, and neighboring Argentina and Chile. According to data from the U.S. Geological Survey, there were 89 million tons of lithium reserves worldwide in 2021, with 21 million tons located in Bolivia, 19 million tons in Argentina and 9.8 million in Chile. Those three countries are home to half of the global total.Located in central South America, Bolivia is a landlocked country with an area of 1.1 million square kilometers, making it slightly smaller than China's Tibet autonomous region. Despite its world-beating amount of lithium reserves, Bolivia exported only 635.5 tons of lithium carbonate in the first 11 months of 2022, according to Bolivian government statistics. That leaves it far behind top producer Australia, which produced 550,000 tons last year.Lithium salt flat projects in Bolivia have attracted the interest of many companies, particularly Chinese companies, but there have been very few successful cases of foreign companies developing mineral resources in the country, said Bo Shaochuan, an independent director of Zijin Mining and Sinomine Resource Group.Several obstacles have hindered development of Bolivia's lithium industry. Conquered by Spain at the end of the 15th century, Bolivians have long been wary of mining operations in the country, industry veterans told Caixin.In 2018, a joint Bolivian-German project was suspended a year after it started. In February 2019, the Chinese company Xinjiang TBEA Group signed a strategic agreement with Bolivia's state lithium corporation to develop the Coipasa and Pastos Grandes salt flats. The project was suspended later that year in November.During the administration of Arce's predecessor, Bolivia passed legislation prohibiting the sale or transfer of salt flats mining rights. The state owns 100% of the lithium mining rights and a 51% share of companies down the supply chain, such as lithium battery producers.A source who participated in acquiring a salt flat project in South America said that this legislation and legal framework are not conducive to attracting foreign investment, though the Arce administration is trying to revise them.Caixin has learned that the companies participating in the current bidding process remain cautious about Bolivia's existing legal framework and dealing with local communities.Bolivia's geography has also made mining a challenge in the country. The Uyuni salt flat, for example, is located in a high, dry and remote area where there are not enough roads or access to water and electricity to support mining on a large scale. This is why the CATL-led consortium's investment in Bolivia is starting with infrastructure construction.The CATL consortium's bid might also have been favored by the Bolivian government because it is not only a lithium miner but also a manufacturer of EV batteries, the source said. The Bolivian government wants the country to be more than just a resource supplier, so it is seeking a partner that can help develop related domestic industries.The nature of Bolivia's lithium reserves has also hindered their development. Compared with the salt flats in Chile and Argentina, Bolivia's Uyuni salt flat has a lower concentration of lithium ions, meaning higher extraction costs. Because the salt flats in Chile and Argentina have a higher concentration of lithium ions and a lower ratio of magnesium to lithium, companies can employ the cheaper sun-dry and sedimentation method to extract the metal, according to Tang Weiping, a professor at Shanghai Jiao Tong University and dean of the Shanghai Institute of Advanced Energy Power Source Technology.However, this method poses a threat to the environment because it requires the construction of large-scale salt pans, essentially gigantic lakes of salt from which the lithium can be extracted. For the latest bidding process, the Bolivian government has ruled out using this method, requiring bidders to use direct lithium extraction technology.China's experience edgeThere are about 190 known salt flats containing lithium in Chile, Argentina and Bolivia. Only four are currently in production, none of which are in Bolivia, according to an article published by researchers from the Development Research Center of the China Geological Survey.One of the authors, Chen Yuming, told Caixin that in the past two years, industrial exploration of salt flats has accelerated. Chinese companies have been active in the space. Tianqi Lithium has a 22.16% stake in Sociedad Quimica y Minera de Chile SA, which owns the mining rights of Chile's Atacama salt flat. In Argentina, Zijin Mining, Ganfeng Lithium Group, Tibet Summit Resources, Zhejiang Huayou Cobalt, Gotion High-tech and Sunwoda Electronic have all been active.Compared to hard rock lithium, salt flat lithium projects take longer to develop, said Wen Lining, Deputy Secretary General of China Inorganic Salts Industry Association.But Chinese companies have experience that will likely prove useful in developing Bolivia's salt flats. They have been developing Qinghai Lake in northwestern China, whose quality of lithium reserves, as measured by the concentration of lithium ions, is even lower than the salt flats in Bolivia, said Liu Chenglin, a professor at China University of Geosciences in Wuhan. This has inspired several Chinese companies to make advancements in their lithium extraction technology.The traditional sun-dry and sedimentation method takes anywhere from 18 to 24 months to produce lithium carbonate, far longer than hard rock extraction. The latest direct extraction technology for salt flats, however, does not require the most time-consuming step in the sun-dry and sedimentation process. Some Chinese companies are testing out methods that can take as little as 10 hours to produce lithium products from salt flat water, Lin Daoyong, a 20-year industry veteran and general manager of Shanghai Yiding New Material Co. Ltd.Sources familiar with South American salt flat projects said that this type of technology will be used in Bolivia.However, the new technology has high upfront costs. Lin said that a 10,000-ton salt flat lithium project requires an investment of about 1 billion yuan ($145.5 million), compared with about 300 million yuan to 400 million yuan for a hard rock lithium project. Still, once in production, salt flat lithium extraction and refining facilities have long-term cost advantages.Salt flat lithium projects also have an advantage in price stability because their industrial chain is shorter than hard rock lithium projects, where many participants along the way can cause prices to fluctuate, Wen said.Even if Chinese company can successfully implement their pilot technology to extract lithium from Bolivia's salt flats in a way that satisfies the government, actual production of the metal remains a ways off. According to the Bolivian government, its salt flats will not start producing lithium until 2025.And once production is up and running, the output will not be a game changer. According to one optimistic estimate, Bolivia's salt flats will not be able to produce more than 40,000 tons a year by 2025, industry insiders said, roughly 10% of Chile, Argentina and Bolivia's total annual output.--Read also the <a href="https://www.caixinglobal.com/2023-03-01/in-depth-why-chinas-lithium-firms-have-their-sights-set-on-bolivia-102003374.html" target="_blank" title="">original story</a>.<a href="https://www.caixinglobal.com/" title="">Caixinglobal.com</a> is the English-language online news portal of Chinese financial and business news media group Caixin. Nikkei has an agreement with the company to exchange articles in English.
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