Latin lithium output mired in controversy

Oct. 4, 2012 at 11:52 AM
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LA PAZ, Bolivia, Oct. 4 (UPI) -- Latin America's emerging lithium giants Bolivia and Chile are finding tough hurdles need to be crossed before they can begin profiting from vast lithium reserves.

Investors and critics of governments in both countries blame bureaucracy, lack of government foresight and clear vision of what it means to be holding some of the world's largest lithium reserves and what to do about it.

Lithium is used in batteries for computers, cellphones and other electronic gadgetry but its most exciting future use will be in hybrid and electric automobiles and public transportation networks.

Lithium prices have soared from about $2,000 per ton to $6,000 per ton within a decade. Demand over the period has more than tripled.

Analysts say lithium's share in costs suggests the price of the metal could rise and rise.

"The battery market for lithium, which is well understood to be the strongest catalyst for future growth, might easily absorb a significant increase in lithium prices," Lithium Investing News said on its website.

"The actual raw cost of the lithium in vehicle batteries is currently less than 3 percent as a proportion of total input expenses. In theory, lithium prices could increase by several multiples and it would have a nominal impact on the actual price of the end battery," the specialist news service said.

And with a relatively small number of producers controlling a large percentage of global production the effective oligopoly will make lithium a strategic commodity in decades to come," it added.

Some recent problems with lithium exploitation in Latin America began as officials realized lithium could be classed as a strategic mineral.

Chile's plans to expand exploitation of its lithium reserves hit a snag this week after allegations of a "scandal" involving award of contracts for mineral exploitation.

The government of President Sebastian Pinera was forced to revoke a lithium concession amid charges the recipient firm had questionable links and the tender process was flawed.

A Special Tendering Committee meeting ended with Deputy Mining Minister Pablo Wagner resigning over a dispute, which arose after one of the unsuccessful bidders filed a complaint.

As a result a concession awarded to Sociedad Quimica y Minera de Chile to exploit lithium reserves in the Andes region was revoked.

Minera Li Energy SpA, a Chilean subsidiary of U.S. company Li3 Energy that was part of a bidding consortium led by South Korea's Posco, contested the award to SQM saying the company should have been barred from the tender because of ongoing litigation.

Chile's 1973 Mining Code defines lithium as a "strategic" mineral for which regular mining concessions cannot be awarded. However, the Chilean constitution allows private exploitation of strategic minerals under special contracts.

A Special Lithium Operation Contract devised by Pinera's administration to circumvent the legal constraint has come under fire while Wagner's departure is seen largely as a voluntary act to save the government embarrassment over the SQM tender.

Lithium exploitation in Bolivia lags farther behind. U.S. Geological Survey data indicate Bolivia contains almost half of the world's lithium reserves, which remain untapped, but investors are wary of the government's restrictive policies.

A third major lithium holder, Mexico, is seen as an alternative hotspot because of its easier investment climate, close ties with the United States and free trade environment.

China and other international investors see Mexico as a favored destination for low-cost lithium extraction and manufacture of lithium-based products for distribution across the Americas and the Pacific.

Deposits of lithium are found throughout the Andes Mountains and Argentina is also cited as a future source, though its investment policies continue to discourage international business.

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