In the first part of my article I reviewed and extended my discussion about the influence of oil prices on adoption of lithium batteries including a brief analysis of oil ETFs as possible investment options during the transition of the global automotive industry to electric propulsion. In the second part, I took a new look at technological development in lithium batteries to identify some major trends in chemistries that are being introduced, as well as cathode and anode material and resource use. Now I explore a new avenue of resistance to change as applied to Bolivia, the country with the most identified lithium resources on earth. The question is taken up from the perspective of the country's strategic allies (Venezuela, Iran and Cuba) to enquire about the extent to which they might be influencing on the current slow pace of development of lithium resources in the country. Lastly, the contribution closes with a brief discussion about Bolivia's lithium (and other evaporite resources) perspectives.
Acceptance of/resistance to change
As I mentioned in my presentation at the second LS&M conference last year, my original concept of resistance to change (i.e. "actions by governments, companies and individuals with vested interests to prevent the emergence of lithium battery technologies mainly because this will put at serious risk their current or future privileges or advantages") was extended so as to include acceptance of change (i.e. "activities performed by the same players to promote adoption of such advanced energy storage systems in their plausible search for national energy independence or security, sustainable development or just more efficient forms of transportation") as well.
Here I will restrict my discussion to the role governments play. In the presentation referred to above, I argued that there is always a possibility that some oil producing countries would be interested in the failure of lithium. This argument could be easily extended to nickel producing countries to the degree that lithium would be just about to kill nickel for use in advanced batteries.
In this connection, it seems a little odd that the most important strategic partners of Bolivia today: Iran, Venezuela and Cuba, are probably the most inadequate ones, at least insofar as lithium is concerned. For one thing, it all appears to indicate that lithium may be the main possible substitute of oil in the world, which is likely to trouble Iran and Venezuela simply because their economies heavily depend on oil exports. For another, Cuba couldn't care less about lithium because it possesses a sizeable part of the world's nickel reserves and nowadays its economy also depends to a great extent on nickel exports. The question remains as to whether Bolivia's strategic allies have anything to do with the current slow pace of development of lithium resources in the country.
Although I do not yet have a definitive answer to this question, there are some aspects as to the relation of Bolivia with Venezuela that requires a more detailed analysis. First, Venezuela currently completely finances a popular assistance program which allows the president of Bolivia to provide municipalities and local communities with important sums of donated money for sports and other kinds of infrastructural projects with almost no red-tape or bureaucratic control, which has become a fundamental basis for political support to the government.
Second, Venezuela has already signed a broad agreement for development of lithium and other evaporite resources with Bolivia and has since rushed to submit a proposal (which, by the way, nobody knows because it hasn't been published anywhere) to industrialize these resources. Moreover, on April 01, 2011, after a meeting with Hugo Chavez, Evo Morales, Bolivia's president, declared that "Venezuela was the first country that offered to work scientifically with Bolivia to produce batteries." The following day, a high-ranked officer from the Bolivian Ministry of External Relations said that, "the only serious proposal for industrialization of lithium in Bolivia was that submitted by Venezuela." In a blog published two days later in Bolivia, I questioned: What makes the government think that Venezuela has suddenly become the technological center of the planet so that "with Venezuela there is the possibility to make a step further, a technological leap, for Bolivia to become an important nucleus of production of lithium batteries," as another government official indicated?
Third, on May 9, 2011, the president was again on the news to emphatically state that "of all the proposals (from different countries) that have been submitted to us, the most advantageous one is that of China, but the participation of Finland is not discarded." Last year, China, through Citic Group, one of the largest companies in the world, submitted a comprehensive proposal for the development of evaporite resources in the Salar de Uyuni, which – I thought - was overlooked by the government. And in fact, it was. But to understand this rather complex situation, we must go back to April 6, when the national manager of Evaporite Resources indicated that South Korea and China had submitted the most serious proposals for the industrialization of lithium.
So China was then for the first time on the spot and no government official said anything else about Venezuela? What happened? In mid-March, Venezuela and Citic Group, the very company that has submitted a proposal for the industrialization of lithium in Bolivia, signed a series of memorandums of undesrtanding to develop and finance a number of projects in the areas of hydrocarbons, mining, finance and house construction in the South American country for more than US$ 4 billion. So Citic Group and Venezuela became strong partners. I wonder whether this may have anything to do with Bolivia's new "decision" to substitute Venezuela for China as a strategic partner for the lithium project.
But is Citic Group an appropriate partner for industrialization of the Bolivian lithium? Let me first define industrialization. If industrialization means transforming inputs and raw materials (e.g. lithium, manganese, tin) into different intermediate (e.g. Li-ion batteries) or end-products (e.g. electric vehicles), then the so-called first two industrialization phases of lithium in the government proposal -- namely the completion of the pilot effort to begin producing 40 metric tons (MT) of lithium carbonate and 1,000 MT of potassium chloride a month (first phase of industrialization) and the "industrial" production of 30,000 MT a year of lithium carbonate and 700,000 MT a year of potassium chloride (second phase of industrialization) -- cannot really be called industrialization. But regardless of this semantic discussion, the government has consistently argued that these two phases will be 100% state-owned and accomplished by the Bolivian state alone, and it will only take recourse to foreign specialized companies to establish strategic alliances for its third phase of industrialization -- namely for the production of lithium batteries in Bolivia. True, by the time Bolivia is in the third phase of industrialization, it would also be producing 50,000 MT of lithium carbonate and 1.5 million MT of potassium chloride a year, although this wouldn't be part of the deal with the foreign partner.
So if Citic Group is finally selected as a strategic partner, its main objective will be to develop and produce lithium batteries in the country. And here we might confront a problem: Citic Group may not indeed be the best strategic ally for producing lithium batteries because their battery technology is not yet fully developed to compete with other companies from Japan and South Korea. Somewhat paradoxically, Citic Group would probably be better suited for the first and second phases of industrialization, but these will be completely run by the government. Did the government realize this? Apparently, it did. That is probably why they decided not to discard Nokia (NOK) from Finland as a possible partner for industrialization of lithium. However, I wonder whether Nokia, a company essentially specialized in production of mobile phones, would be the best bet for Bolivia to industrialize its lithium. I also wonder whether all these intricacies are simply contributing to delaying the development of the most important lithium resources on earth.
This brings us to a brief discussion about Bolivia.
Bolivia's lithium (and other evaporite resources) perspectives
As I have long argued in many articles published in Bolivia, doubts persist about the real progress of the so-called lithium pilot plant in Bolivia. In a recent presentation in Bolivia, I indicated that: (i) progress in infrastructure is irrelevant because it will be insufficient for the new capacity of production of potassium cloride; (ii) the new Bolivian process to extract lithium is essentially an emulation of the process utilised for decades in Chile so that Bolivia already spent more than 10 million dollars "to reinvent the wheel"; (iii) low evaporation rates conspire against a more agile production of lithium carbonate in Salar de Uyuni.
These arguments add nothing new to the discussion about the technical hurdles facing Bolivia to make its lithium available to the world since January 2010. Yet there are at least two reasons for Bolivia to be more optimistic. First, brine composition in Salar de Uyuni may be an advantage rather than an obstacle for an integral extraction of evaporite resources from that part of the world. Bolivia possesses not only the most lithium resources on earth, but also the most magnesium and sodium in the planet. So if the above mentioned trends of energy mineral utilisation for tomorrow's advanced batteries are found to be correct, Bolivia may in fact become the energy center of the world in 10 to 20 years from now. Second, of course, this will depend on how fast Bolivia manages to introduce itself into the markets of these three strategic energy resources. However, this will only be possible if it utilizes alternative methods to extract its evaporite resources that are most likely to go beyond the use of solar evaporation. And here Bolivia may have an additional advantage. Unlike its neighbor competitors (Chile and Argentina), it does have considerable natural gas reserves that could eventually shift to this new promising application.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
