Lithium Economics

The complicated reality of the pilot project of lithium in Bolivia

Jul 10, 2011

Comments on recent statements by Mr. Satoshi Hashimoto, Deputy Director of the Department of Mineral Resources, Ministry of Economy, Trade and Industry (METI) of Japan, in an interview published last Sunday in the newspaper La Razón, that reveal the serious problems still facing the pilot project of lithium in Bolivia.

Recent statements by Mr. Satoshi Hashimoto, Deputy Director of the Department of Mineral Resources, Ministry of Economy, Trade and Industry (METI) of Japan, in an interview published last Sunday in the newspaper La Razón, reveal the serious problems still facing the pilot project of lithium in Bolivia.

But let's see what the young Japanese economist said and what these views mean for the fate of the pilot project in Bolivia. At first, Mr. Hashimoto talks about the first experimental work (not indeed the only one) agreed with the government – which would start in September this year and last about six months - aimed at obtaining lithium carbonate based on a modern method of extraction, "new in the world."

He later said that COMIBOL has a pressure to define the method of extraction of lithium in the pilot plant that would enable it then to advance towards the industrial production itself. Later, he suggests that impurities supposedly existing in the Salar de Uyuni are not as important due to the extension of the salt lake; he also contends that with the knowledge and technology of Japan, other biproducts can be obtained to lower costs, all of this in order to achieve "a high purity and competitive lithium."

Then, the Japanese official expressed doubts about the real possibility that Bolivia produce lithium with the purity required for the manufacture of batteries, and then suggested that the country should begin producing lithium carbonate, not for batteries but for glass and lubricants, emphasizing that currently and in the future increased consumption of lithium is and will be found precisely in the area of ??glass and not in that of batteries. Finally, the high-ranked official of METI concluded the interview saying that the country would be able to produce lithium carbonate with Japanese technology in five years, noting that Japan needed between 30 and 40 years to perfect its technology for manufacturing batteries.

Let´s crumble now these important statements. At the outset, several questions arise: What does this mean? Was it not that the pilot project was moving forward alone in the first two phases of the so-called industrialization strategy of evaporite resources of Bolivia? Apparently, the pilot project is almost like a Pandora's box because no one knows what might come out of it. Let me tell you why. First, Mr. Hashimoto informs the country that Japan maintains its interest in supporting Bolivia in the production of lithium carbonate.

This is an issue of utmost importance, although, of course, it would have been nice to know first the results of the research that Japan should have done with the brine samples received from the government last year. But, let´s move on. It does seem now that Japan, unlike Korea and China, for example, decided to take a step further: Working together with the pilot project in defining the most appropriate method of extraction of lithium carbonate.

If so, then it means that so far, and after more than 3 years of work, the pilot project has not yet determined something as basic as the extraction method to be used in the industrial phase of production of the compound. It is also clear that Japan does not endorse at all the results obtained so far by the project in the experimental stage.

All this confirms my arguments that to date the pilot project has not done anything other than trying to "reinvent the wheel", while the lithium race is making strides in other countries that possess large deposits of the resource and Bolivia appears lagging behind and – what is worse - rudderless.

Additional questions arise on this point: How will South Korea and China react, in relation to Japan's plans? Will the pilot project work the same way with these countries? How will the whole issue of patents and proprietary rights between all participants in the endevour be addressed? So now the opinion of the president of the state that the Chinese proposal stands out among all proposals submitted to the government so far, implying that the final agreement with the Chinese company CITIC to advance the industrialization of lithium and other evaporite resources was already virtually a fact is no longer valid?

Second, what Mr. Hashimoto says with respect to impurities, and the scope for offsetting the high cost of their treatment by obtaining byproducts, given the extension of the salar, is quite transcendental.

It debunks the arguments of some uninformed analysts interested in the failure of the lithium project in Bolivia, exagerating about the alleged disadvantages of brine composition in Bolivia and gives me all credit for what I've been saying about the extraordinary prospects of Salar de Uyuni, not only with lithium but also - mostly – with magnesium and sodium, as strategic energy resources in the new cleantech paradigm of clean in process of consolidation in the world.

Gradually, the various powers interested in the Bolivian lithium are beginning to acknowledge that the country actually meets all the requirements to become the energy center of the world.However, Bolivia should know that none of this is a merit of the pilot project or the people in charge of it, who have rather been wandering the paths of an outdated technological development, when neither lithium nor the other evaporite resources had an expectable value in the market.

Thirdly, the issue of the purity of lithium carbonate to be produced by the pilot project approached by the Japanese official must have left many readers of the newspaper which published the interview stunned. In fact, very few people know that the industry of advanced lithium-ion batteries requires “battery grade” lithium carbonate with a purity exceeding 99.8% and that in the current circumstances it is very unlikely that the project promoted by the government will be able to achieve that level of purity, without using foreign technology.

The country should also know that in an article already published on Hora 25 early in December 2009, I warned about the importance of advancing towards the production of battery grade lithium carbonate in Bolivia. Given these limitations, it appears that Mr. Hashimoto is correct when he argues that the country would have no choice but to engage in producing "technical grade" lithium carbonate with approximately 99.5% purity, which is used primarily in glass and lubricants industries.

This reasoning is further strenghthened when Mr. Hashimoto rushes to point out that increased consumption (both present and future) of lithium carbonate would be linked to glass and not batteries. However, the latter view does not seem to have much grip. While it would be absurd to rule out the possibility that at the startup of production of lithium carbonate on an industrial scale, the country contemplates the option of allocating a part of its production to the industries of glass and ceramics, precisely because of the relatively low purity of its preliminary products, this does not mean that Bolivia should be condemned to produce this kind of lithium carbonate for many years, because a strategy of this nature would only postpone indefinitely the process of industrialization of lithium. And here comes my biggest disagreement with Mr. Hashimoto.

Based on all the research I've done in the past three years, I am able to state conclusively that although at present the industries of glass and ceramics are in greatest demand for lithium (31% vs. 23% in batteries, according to the latest report on lithium from the United States Geological Survey), this does not mean that the prevalence of such industries will be maintained in the following years. Indeed, according to one fo the most conservative forecasts of demand for lithium for the next 20 years by Patricio de Solminihac, Chief Operating Officer and Executive Vicepresident of the Sociedad Quimica de Minerales (SQM) in Chile, the main producer of lithium in the world, included in his presentation to a seminar held in June 2010 in Chile, the demand for lithium carbonate destined to batteries would exceed that of ceramics and glass beginning 2012, tripling it by 2030. Therefore, Mr. Hashimoto is completely wrong when he says that the future consumption of lithium carbonate is related to the glass industry.

Finally, at the close of the interview the representative of Japan's government puts forward two provocative forecasts in relation to time (5 years and between 30 and 40, respectively) that Bolivia needs to enter the markets of lithium carbonate and lithium batteries. It should be noted that with his first forecast Mr. Hashimoto does nothing but confirm something I've been repeating for some time in several of my articles, namely that over the past three years, the country only lost time and financial resources in the pilot adventure. Also, with his second forecast, the foreign official reiterates Japan's position regarding the true industrialization of lithium in Bolivia. In this regard, I consider five years to enter the "technical grade" lithium carbonate market and 30 to 40 years to get a foothold in the market of advanced lithium batteries excessive time that would leave the country in a total disadvantageous position over its competitors and with little chance to become the world's energy center. In this sense, I believe there's still time to redirect the process and make an accurate change of direction that allows us to substantially shorten these times. However, the question remains: Will the government of Bolivia have the political will to do it?

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