Could ‘Turmoil in the Triangle’ impact global lithium supply?
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The so-called ‘Lithium Triangle’ in South America extends through Chile, Argentina and Bolivia and hosts over half the world’s lithium resources.
Yesterday, the Bolivian government reportedly pulled the pin on a huge lithium project JV with German government-backed firm ACISA.
The vertically integrated 21-million-tonne Salar de Uyuni project in Bolivia would have produced 40,000 tonnes of lithium hydroxide a year for 70 years. Production had been pencilled in for late 2022.
The project — which would’ve been the country’s first — had drawn the wrath of local protestors.
But according to DGWA chief exec Stefan Müller, experts had expressed their doubts about the feasibility of this complex project from the beginning.
“It is becoming increasingly obvious that the extraction and acquisition of raw materials is not only about the lowest price, but rather about the sustainability of the whole project – from the mine to the end product,” he says.
This follows news that protestors had blocked access to Chilean lithium operations in late October – all part of nationwide demonstrations over inequality. Chile has been in upheaval for three weeks as millions of people take to the streets.
SQM in Chile is one of the world’s largest producers. Ongoing unrest in Chile could have global implications for lithium supply.
Investors responded, with non-Chilean producers Pilbara Minerals (ASX:PLS), Galaxy Resources (ASX:GXY), and Orocobre (ASX:ORE) recording gains of 23 per cent, 17 per cent and 14 per cent respectively on the news.
But it hasn’t reached crisis levels just yet, says Alex Molyneux, chairman of Argentinean lithium play Argosy Minerals (ASX:AGY).
“[SQM] have continued to operate their mines, but their logistics may have been constrained by road blockades etc,” he told Stockhead.
“That’s what we’re hearing. In that regard it might be causing some limited short-term issues, but I don’t think in the overall scheme of global supply its material yet.”
In general, lithium has always been quite controversial in Chile, says Molyneux.
“SQM mines under licence from Chilean state company CORFO [who] have always had a strained relationship. They mine under quotas from CORFO, so every expansion requires a complex negotiation.”
Benchmark Mineral Intelligence senior analyst Jose Hofer is based in Santiago — Chile’s capital and largest city — and also used to work for SQM.
He says so far there has not been any disruption in production, not for Ablemarle nor for SQM.
“Today, and due to the recent social events, public opinion is more empowered,” Hofer told Stockhead.
“That´s true, [and] it’s not very easy to obtain permits for new projects.
“But the mining industry pays royalties that are higher than any other industry in Chile.”
Which means it probably isn’t going anywhere, anytime soon.
Still, Argentina looks to be the better bet right now. It’s where companies like Argosy, Galaxy Resources, Orocobre, Lake Resources (ASX:LKE), Strike Resources (ASX:STK), PepinNini Lithium (ASX:PNN), Dark Horse Resources (ASX:DHR) and Galan Lithium (ASX:GLN) have set up shop.
In general, Argentina has been much easier for establishing new supply, Argosy’s Molyneux says, with companies like Orocobre able to get to production “in a straightforward manner”.
“At Argosy we have also been able to fast track our project in Argentina, going straight to production through our brine ponds and pilot plant,” he says.
“I’ve found Argentina a relatively good jurisdiction so far.”
Argentina has just elected a left wing president, says Galan managing director JP Vargas de la Vega, which means the country should have less “social protest”, making it more stable on that front.
“The Chile issue is unprecedented,” JP told Stockhead.
“There is a general discontent with all political parties and is hard to tell how long it will go for.
“We are entering into new ground [and it] is hard to read where it will go.”