The “South American lithium triangle” region has become an important objective for Chinese Communist Party investment in recent years. It has the world’s richest high-quality lithium resources. However, due to factors including consumption of water resources, environmental pollution, and local opposition to mineral privatization, Chinese companies have encountered challenges and setbacks in developing lithium sources in this area.
With the rapid growth of electric vehicles in the world, the demand for lithium-ion batteries is increasing exponentially due to their light weight, long life, large storage capacity, and ease of recharging. Upstream lithium resources have also become a strategic resource that countries are competing for.
Argentina, Bolivia, and Chile constitute the “South American Lithium Triangle.” Lithium mines in this area have high-quality lithium resources in brine lakes (saline groundwater rich in lithium deposits), with high lithium content and low mining costs.
According to a report by the U.S. Geological Survey, in 2021, the world’s proven lithium source is 89 million tons, and the South American lithium triangle accounts for 56%, that is 21 million tons in Bolivia, 19 million tons in Argentina, and 9.8 million tons in Chile. Other countries with lithium sources include Australia with 7.3 million tons and China with 5.1 million tons.
In terms of lithium production, by 2021, Australia accounted for 55% of global lithium production; followed by Chile with 26%; China is 14%; and Argentina at 6%.
According to China’s “Energy Events” channel, in recent years, China’s two largest lithium-ion battery manufacturers, CATL (Zhi De Era) and BYD (Bi Ya Di), as well as Chinese mining giants Ganfeng Lithium and Zijin Mining, have come to the “lithium triangle” area to mine lithium, extending control over the upstream raw materials for industrial-scale production of electric vehicle.
The fall in Chile
However, BYD has recently encountered setbacks in Chile. The company’s contract to mine 80,000 tons of lithium ore in the region was canceled earlier this year by the Supreme Court of Chile.
Chile’s mining industry minister said in June that Chile’s Supreme Court had canceled two metal battery mining contracts due to objections from local communities. In its decision, the Supreme Court stated that because the bid did not specify where the lithium project would be developed, consultations with local communities, as required by law, could not go ahead.
BYD and a Chilean company won a contract to mine 80,000 tons of lithium in January. But the announcement sparked protests on Chilean social media, as well as nationwide protests against the privatization of lithium mines.
In December 2021, Chile’s leftist candidate Gabriel Boric was elected as the new president of Chile. Since coming to power, Boric has supported tax hikes on minerals as well as proposals to nationalization of copper, lithium, gold, and mining operations that are currently run by privately owned firms.
The new government planned to revoke mining rights near glaciers and indigenous settlements, and companies that lose their rights might not be compensated.
If the proposal goes through, China’s lithium giant Tianqi Lithium could be severely affected, as it took a 23.77% stake in SQM, the Chilean lithium mining giant, in May 2018 for $4.2 billion.
Another tax increase bill, which included the tax increases on copper and lithium mining, was underway in the Chilean Senate in January. If the proposed tax increase is finally approved, Chile will become the country with the highest tax imposed on copper mining, according to a report by FTI, one of the world’s largest financial consulting firm. At copper’s current price, the company’s profit margin would drop by more than 50%.
Argentina-based project faced local opposition
In Argentina, a lithium salt lake project by the Chinese company Zijin Mining also faced opposition from locals.
According to a July report by Climate Change News, disagreements over lithium development are intensifying among communities in the South American lithium triangle. Due to the impact of mining activities on local water and land resources, a number of indigenous peoples, farmers, and scientists have raised legal challenges, opposing the mining activities, blocked roads, and organized protests against the lithium project.
In October last year, Zijin Mining acquired a 100% stake in Canada’s Neo Lithium for 5 billion yuan ($729 million) for the 3Q lithium salt lake project in Atacama province, Argentina. But the project was met with resistance from the local community, and a group of women in the community launched a door-to-door petition for signatures.
Marcelo Sticco, a geologist at the University of Buenos Aires who studies lithium mining in northern Argentina, said that the risk lies in the extraction method. The use of evaporating brine to obtain lithium would be most serious threat. This method, he said, turns fresh water in crevices beneath the salt flats into salt water.
In addition, Sticco said that a large amount of heavy metals left over from the mining process can pollute water sources if not treated properly. But the Argentine government has adopted a double standard, requiring only the oil industry to handle hazardous waste, not lithium mining companies.
Mining in Bolivia encountered opposition
Salar de Uyuni in Bolivia is believed to be the largest deposit of lithium in the world. Currently, four Chinese companies are vying for mining rights in this area.
On June 8, the Bolivian energy minister announced that the number of foreign companies vying for the right to exploit the country’s vast lithium resources had narrowed from 8 to 6, including 4 Chinese companies—CATL, Fusion Enertech, TBEA and CITIC Guoan Group. Two other competitors are from Russia and the United States.
However, according to The Epoch Times, opposition to mining is strongest in the Potosi region, where the Uyuni salt lake is located. Potosi is one of the poorest regions in Bolivia. Local communities do not trust the government to handle lithium.
Bolivia is currently struggling to mine lithium commercially. The Bolivian government has tried both market-oriented and fixed strategies, but none of their attempts were successful.
Juan Carlos Zuleta, a lithium economy analyst, told the Wilson Center in February that Bolivia needs competitive lithium mining technology. He said that, unlike the salt lakes in Argentina and Chile, the Uyuni region receives heavy rainfall, so the solar evaporation method to mine lithium is less efficient than in Bolivia; and the country’s direct lithium mining technology is not available, making lithium mining complicated.
Among the companies currently vying for mining rights, Zuleta said none have experience of using direct mining technology for industrial-scale production of lithium.