Untapped lithium riches are in crosshairs of Bolivian candidate

The man vying to become Bolivia’s first elected right-wing president in two decades is promising to kick-start exploitation of the world’s joint-biggest lithium deposits after more than a decade of false starts.

If he wins an October 19 run-off, Jorge 'Tuto' Quiroga plans to ensure competitive bidding processes and loosen state control; set up free-trade zones to attract battery making; and coordinate with lithium neighbours Chile and Argentina. He even wants to grant citizens ownership rights in state companies. 

“It’s a dramatic transformation,” Quiroga, a 65-year-old industrial engineer who served as president in 2001-2002, said in an interview Monday.

Previous left-wing administrations in Bolivia have repeatedly tried and failed to exploit lithium at scale from the country’s highland salt flats, most prominently through a state-owned mining company. Even now, two contracts – one Russian and one Chinese – are stalled in Congress after a court ruling. As such, investors are likely to be sceptical that Quiroga can really turn things around.

At stake is a barely touched expanse of lithium locked beneath salt flats that could help power the world’s emerging fleet of electric vehicles. Domestically, success would provide much-needed hard currency in a country reeling from a foreign exchange crisis that has led to shortages of staple goods.

Quiroga’s approach to lithium is much more dramatic than his centrist opponent Rodrigo Paz, who has vowed to seek consensus with local communities and regions, while pushing for greater transparency in the industry.

If Quiroga manages to put his lithium plans into action, the global market – which is showing early signs of recovery from a years-long slump – could get a deluge of new supply. The US Geological Survey, or USGS, puts Bolivia’s resources at 23 million metric tons, on par with Argentina, the fifth-largest producer last year.

But as well intentioned as the investor-friendly candidate is, analysts say he’ll be fighting an uphill battle to turn Bolivia into a significant producer any time soon. The nation’s history of political and social unrest and rescinding contracts has hurt its reputation, which will take time to repair. 

“It will take years to gain the confidence of Western investors,” said Federico Gay, a lithium analyst at Benchmark Mineral Intelligence. “I don’t expect to see commercial production this decade.”

While the landlocked country has double the resources of neighboring Chile, they aren’t yet deemed economically viable by the USGS. Deposits suspended in brine under the remote Uyuni salt flat have high levels of magnesium, which make its lithium more expensive to produce, and the nearest port is more than 300 miles and a border crossing away. 

The current government bet on new direct extraction techniques to circumvent purity issues and shorten the path to production. Last year, state lithium company YLB signed up a unit of China’s Contemporary Amperex Technology Co Ltd. and Russia’s Uranium One to develop DLE projects – neither of which is close to commercial production and are now facing scrutiny by lawmakers. 

In 2019, the Bolivian government scrapped a lithium project with Germany’s ACISA amid community protests. In 1993, FMC Corp pulled out of contract to mine lithium after Congress changed the agreement it signed the previous year.

“There’s still a perception of asset expropriation that acts as sort of a dark cloud over the space in Bolivia,” said Chris Berry, president of House Mountain Partners. “Also those brines are very complex.”

Speaking from his home in La Paz, Quiroga acknowledged that it will take time to relaunch the lithium industry and develop downstream assets. But it all starts by introducing “competitive legislation,” with fair royalties and legal security for investors, including treaties and arbitration mechanisms, he said. 

Still, pushing Quiroga’s lithium changes through Congress may be a tough task amid simmering community opposition. To win the support of regional authorities he’ll have to offer a royalty of at least 11 percent versus three  percent currently, said lawmaker Jaime Flores. 

Even if he succeeds in implementing the conditions that investors demand, history shows there’s a risk his successors will change the terms once again.

“Bolivia has a history of imposing heavy conditions on lithium investments and not sticking to contractual terms,” said Joe Lowry, founder of advisory firm Global Lithium LLC. “I see nothing to suggest that is going to change.”