It is indisputable that Bolivia has missed several trains of the industrial development of lithium from salt pans. This blameworthy delay is due to two reasons: the amateurism of those in charge of conducting this process in the government of Evo Morales and the straitjackets of the Constitution and the mining and YLB laws. Ruling party governments are learning the hard way that trust and legal certainty are essential to attracting investment. With the current government there has been an attempt to change things, correcting previous mistakes and misconducts, but it seems that desperation and dull ideology are not good advisors.
The contract for Yacimientos de Litio Bolivianos (YLB) with the Russian company Uranium One Group (UOG) deserved a precise analysis by the Milenio Foundation and the timely observations of the mine experts which I recommend reading.
In the context of these analyses, what the contract between YLB and UOG pursues is, in summary:
- That YLB will obtain a 9,000-ton Direct Lithium Extraction (DLE) plant (phases I and II, the only ones that can be performed with certainty).
- That UOG will finance it (~US$700 million), build it and hand over its property to YLB within 18 months (estimated until July 2026) and then, through another contract, continue to operate it for 20 years; service paid by YLB.
- That UOG’s investment and operating expenses are paid for by YLB with the production of the plant.
A superficial reading of the contract reveals more doubts than certainties: the one for UOG is for the Accidental Association, while the one for the Chinese consortium is, as one would expect, for services. The difference may be that, if there were profits, in the first case 51% would be distributed to YLB and 49% to UOG. But what profits can there be for the construction and delivery of an industrial plant in the 18 months of existence of the Accidental Association?
Also, will there be profits at some point? Current and future lithium carbonate (Li2CO3) prices do not reach $20,000 per ton ($/ton), but the contract with the UOG estimates prices above 30,000 $/ton.
Of course, UOG’s goal is not to make a profit from the investment, but to ensure the supply to Russia of the plant’s product, through which YLB will repay all project costs. If the price of Li2CO3 falls, UOG will receive more tons of product and, if it were to increase, UOG would recoup its investment more quickly. In short, UOG never loses, unlike YLB which will pay taxes and royalties from the production it will formally receive.
Environmental issues are critical: the 350 cubic meters per hour of water will be extracted from wells, the recharge speed of which has not yet been quantified, which will affect environmental and social consultation; electricity (35 MW between solar and hydroelectric) will be supplied by ENDE, but it is not said from where; The chemical waste from the plant has not been quantified, nor has its management been planned.
Finally, the destination of the by-products of the DLE process (potassium, boron, sodium, magnesium, among others) is not indicated, nor is the dream that has been sold to us of the “industrialization of the energy of the future” through cathodes and batteries come true.
“The hasty cat gave birth to blind kittens”, my wise grandmother used to say. Lithium contracts deserve detailed analysis and better socialization and it is not appropriate for them to be signed by a government already on the way out, with more pain than glory.
In short, the YLB-UOG contract is a belated attempt by Bolivia to enter the lithium business by ceding production to Russia, in exchange for the construction and operation of an EDL plant, without guaranteeing YLB’s profits or participation in the lithium value chain.