It is my intention to refute some claims that the state-owned lithium company (YLB) does not dare to defend publicly.
- Selling price. YLB says that the lithium carbonate produced by the plants located in the Salar de Uyuni will be sold at the international price, set by the Shanghai Metals Market (SMM).
In fact, the selling price will be that price minus Chinese customs duty (VAT=13%); so, if the SMM price was $10,000 per ton ($/t), YLB would only receive $8700/t.
In addition, mining royalties (3%) must be subtracted from that invoiced amount (SMM-VAT), so that the “available” income for the project would be, in the example, $8439/t, almost 84% of the international price. - Ownership of production. It is repeated that the Bolivian state owns all lithium carbonate production and that the companies will hand over 100% of the production to YLB.
This is a half-truth: the moment companies “deliver” production to YLB, they keep it and take it away to recoup the investment and production costs.
In addition, it is stated that YLB “delivers” the production to the plant, i.e. the Salar de Uyuni, when in fact YLB returns to CBC all the costs of exporting the production to Chinese territory (transport, loading, transport, insurance, tariffs, etc.). This is because YLB sells production, in the case of CBC, to the Hong Kong parent company (CBC-China). In short, YLB does not export (CBC-Bolivia does), but bears all the costs of exporting. - Conditional investments. YLB usually shows the investment data for the whole project (all phases), which would ensure an annual output of 25,000 t/y (tons/year) from each plant. It remains to be seen: the only phase that will eventually be carried out will be the first (10,000 t/y); This phase is also conditioned by its technical and economic feasibility. The next phase (of 25,000 t/y) depends on the feasibility of the first phase and the profits that the CBC expects to reinvest in the second phase.
- Utilities in the first (and perhaps only) phase. YLB claims that, according to the contract, it retains 51% of the project’s profits, to cover its own expenses.
However, the reality is that 51% of zero is zero, because, as YLB’s internal reports acknowledge, the plants do not generate profits with current and predictable lithium carbonate prices. - Contracts are drawn up in accordance with the law. YLB states that the contracts signed and awaiting ratification by the Plurinational Legislative Assembly comply with the Law.
This is not true: Article 73 of the Mining Act, incorporated into the YLB Creation Act, expressly states that the State (YLB) must manage 100% of the lithium carbonate (and hydroxide) production processes. - On environmental studies and the “posthumous” consultation. YLB intends to sign the contracts first and then carry out the environmental studies and social consultation.
The reason for this anomalous behavior seems to be the lack of liquidity on the part of YLB to carry out these studies and the “cunning” of commissioning them to contractors to carry them out with their own money. - The future increase in royalties. It has been stated that the 3% royalties are set by the mining law, but that this percentage may be increased in the future.
The reality is that there is a contractual clause to avoid increases in taxes and royalties, with the threat of termination of the contract if YLB intends to charge such increases to the project.
In short, let me borrow a good joke from analyst José Carlos Solón, to state that these contracts, more than “leonine”, seem to be “dragonian”.