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A Fortune Underfoot

Can Bolivia develop its mineral wealth—and undermine Hugo Chávez?

Aug 23, 2010, Vol. 15, No. 46 • By VANESSA NEUMANN
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Morales treads a dangerous line between his moneyed foreigners and his poor indigenous supporters. But Bolivia cannot exploit its lithium without foreign investment and expertise, and its main competitors have the jump on it. Chile and Argentina (the other two legs of the Lithium Triangle) already account for more than half the world’s 27,400 metric tons of annual lithium production. Since lithium comes mainly from high-altitude deserts, Australia and China are also major producers—though China’s reserves are mainly in the western provinces of Qinghai and Tibet, where infrastructure is rudimentary at best. In the United States, Nevada’s Western Lithium Corporation is developing deposits in King’s Valley in hopes of being a major domestic supplier to the U.S. automotive industry. And now also Mexico, where the Cierro Prieto geothermal brines in Baja California are ramping up their production capacity to meet the rising demand for rechargeable lithium-ion batteries for the new electric cars being launched this summer. 

Then of course there’s Afghanistan and its much-touted $1 trillion in mineral reserves. According to the report released by the Pentagon and published by the New York Times, mining could finally bring peace and prosperity to Afghanistan. Besides copper, gold, and iron, Afghanistan’s Ghazni province allegedly has lithium reserves to rival Bolivia’s and make it “the Saudi Arabia of lithium,” according to the leaked Pentagon memo.

But not everyone is convinced. William Lamarque, a cofounder of Balor Capital, an adviser on risk management to the mining industry, says: “This is Pentagon spin to garner support for the war effort in Afghanistan. There’s no mining culture there.” Not only does Afghanistan lack the physical and institutional infrastructure to sustain large-scale industrial mining, minerals tend to be found in predictable and proven tracts, and there is little evidence of this yet in Afghanistan. Lamarque is not convinced the deposits are really as large as the Pentagon claims. “They’re based on aeromag surveys, airplane flyovers with equipment that records the magnetism of what lies beneath the surface. But to really know what’s there,” he says, “you have to go around drilling holes in the ground. It’s a very old-fashioned process and geologists are like explorers: a guy roaming the landscape alone with his pick.” Security in Afghanistan, moreover, is a concern. “You can’t protect an armored patrol in Afghanistan, never mind a poor fellow with a pick.”

Even if you could mine successfully there, getting the minerals out would be another obstacle. Afghanistan is a landlocked country. The most accessible deepwater ports are the Chinese-built port in Gwadar, Pakistan, and Chabahar, Iran. Both options likely to be unpalatable to Westerners, though not to the Chinese, whose state policy of political neutrality in their pursuit of natural resources makes it easier for them to do business in the region. “The only viable option, then, is to fly the minerals out. While that’s cost-effective for gold, platinum, and palladium, it isn’t for iron, coal, copper, or raw lithium: too much bulk, not enough value-added. Afghan mining could be important and profitable, but we’re a generation away,” says Lamarque. So he would rather mine in Bolivia? “Oh, God, yes! Bolivia, a thousand times Bolivia.” 

 

Bolivia’s greatest hope for the rapid development of its lithium reserves lies with the automotive industry. Carmakers are switching their hybrids from nickel-based batteries to lithium-ion batteries, which are essential in fully electric cars, such as the new batch of Beijing taxis made by BYD, a Chinese company that is one of the world’s leading manufacturers of rechargeable lithium-ion batteries and an emerging manufacturer of inexpensive electric cars. The average car battery consumes 30 times the lithium of a laptop computer battery, and Bolivia would be an attractive place to manufacture them. (The country stands to make $30-40 billion from the export of high value-added lithium-ion batteries, but only $5 billion if it merely exports the raw materials, says Quiroga.) While many foreign companies—including BYD—simply want to mine and export Bolivia’s lithium, as has been done with the country’s silver and copper, the Bolivians know money is pouring into the lithium-ion battery industry. 

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