BOLIVIA - MOVING FORWARD WITH LITHIUM PRODUCTION ON ITS OWN

C O N F I D E N T I A L LA PAZ 001599

SIPDIS

E.O. 12958: DECL: 2019/12/14
TAGS: ECON PREL PGOV BL EMIN EINV
SUBJECT: BOLIVIA - MOVING FORWARD WITH LITHIUM PRODUCTION ON ITS OWN

REF: 09 LA PAZ 267

CLASSIFIED BY: John S. Creamer, Charge D'Affaires, Department of
State, Embassy La Paz; REASON: 1.4(B),(D)


1. (C) SUMMARY. The Bolivian government is moving forward with its
ambitious plans to produce 100,000 tons a year of lithium carbonate
by 2013, starting with President Morales' inauguration of a pilot
lithium processing plant on October 30. The GOB has made it clear
it is not interested in international investment unless lithium
batteries and electric cars are produced in Bolivia. Despite
Bolivia's vast reserves and serious international investor
interest, the GOB's policies are discouraging investors and making
it unlikely Bolivia will become a major lithium carbonate or
lithium battery producer in the near future. END SUMMARY.

GOB MOVING FORWARD WITHOUT INTERNATIONAL INVESTORS




2. (U) Bolivia's Salars (salt flats) de Uyuni and Coipasa are
estimated to hold as much as half of the world's lithium reserves.
(The U.S. Geological Survey estimates there are 5.4 million tons of
lithium in Bolivia.) There was international and U.S. interest in
extracting the lithium during the 1980s and 1990s, with no results.
Still, interest has recently revived due to the growth in usage of
lithium batteries and electric vehicles. In March 2008 the GOB,
through the state mining company COMIBOL, began construction of a
pilot processing plant at the Salar de Uyuni to help determine the
quantity and quality of the lithium, as well as the best method for
extraction. The production of the first lithium carbonate by the
plant was celebrated by a visit from President Morales in October

2009. The plant is also capable of processing potassium.


3. (U) The GOB has invested $350 million in the pilot processing
plant, and hopes to produce 100,000 tons of lithium carbonate and
800,000 tons of potassium carbonate or potassium sulfide per year
when fully functional in 2013. With these estimates, the GOB hopes
to make $150 million a year from the sale of lithium carbonate and
$350 million a year from the sale of potassium carbonate and
sulfide. The GOB says the pilot plant will start by producing
30,000 tons of lithium carbonate a year in 2010, roughly 25% of
global supply.


4. (U) The GOB insists on producing the lithium carbonate without
the assistance or involvement of foreign investors. Saul Cabrera,
Director General of Science and Technology in the Ministry of
Planning and Development, told us "the GOB will solely own the
process until lithium carbonate is produced." Once the Bolivians
produce lithium carbonate on their own, they will welcome investors
to turn the lithium carbonate into batteries and to produce
electric cars in Bolivia, but only under conditions in which the
GOB would hold a majority share. Minister of Mining Luis Alberto
Echazu recently said, "The exploitation of these resources will be
in the control of the Bolivian state and its national
enterprises...Our policy is to have alliances with other countries
who have experience in this technology...and the Bolivian state has
to have a majority share...The world needs to know that Bolivia
cannot continue to export raw materials like over the past 500
years."

INTERNATIONAL INTEREST REMAINS




5. (U) The GOB held the "First International Forum of Science and
Technology for the Industrialization of Lithium and other
Evaporative Resources" at the end of October. Regional
(Argentina, Chile, Ecuador, and Brazil) and international (France,
China, and Japan) representatives gave technical presentations; two

large conference rooms were full with attendees. This, along with
frequent press reports and random inquiries to the Embassy,
underscore what great interest there is worldwide in Bolivia's
lithium reserve.


6. (SBU) There has been interest from a few international
companies in the exploitation of the lithium reserves, but almost
all have said that with the current GOB policy they are not
prepared to invest at this point. France, Korea, Japan, China, and
Iran have been asked by the GOB and are willing to be part of a
technical committee to further explore the best procedure to
extract and process the lithium. But, it appears that this
committee has formed in name only. Despite press reports to the
contrary, the Japanese Embassy told us that no meetings have been
held and they have not been asked for technical advice up to this
point.


7. (C) The French company Bollore; a Japanese consortium of
Mitsubishi, Sumitomo, and a state-run company JOGMEC; and the
Korean Resources Company (KORES) have expressed serious interest in
investing in this sector and have met with the GOB. All say that
any investments will need to be on market terms, however, and that
the GOB's current rules for investing in this sector make it not
worth pursuing at this time. Japanese Economic Officer told us the
GOB wants their proprietary technology on how to make batteries for
free, and the Japanese are not going to give it to them. The
Bollore President said they also "have a real interest in investing
in the extraction of lithium and the production of batteries in
Bolivia... but at the moment it has not moved beyond
conversations."

IS IT WORTH IT?




8. (SBU) With additional attention on Bolivia's lithium reserves,
more scientists have taken a closer look at the economic viability
of extraction. The U.S. Geological Survey and other industry
experts seem to agree that the reserves just across the border in
Chile have much better evaporative characteristics (evaporation is
an essential part of the extraction process). The reserves in
Bolivia are less concentrated and the conditions for evaporation
are worse. Some believe the processing needed to extract the
lithium and the lack of infrastructure near the reserves make it
not economically viable at this time, although the Japanese and
Koreans have told us these are not insurmountable obstacles.


9. (U) If the GOB does complete its processing plants on time for
2013 it could catch what the Japanese believe will be peak demand
in 2015. Still, industry experts believe lithium production from
existing operations is sufficient to meet the potential demand for
500,000 lithium-powered vehicles in 2015, and could even meet the
demand for 2 million electric or hybrid-electric vehicles in the
same period. Industry experts also suggest that current lithium
production facilities in Chile, Canada, and Asia could ramp up
production by 25% at a cost of $40-50 million, much less than the
$350 million being invested in the plant in Bolivia.


10. (U) In addition to the lithium, there is great interest in the
potassium found in the salt flats. With the potential for even
more potassium than lithium, Bolivian companies are eager to
capitalize on domestically produced potassium for a domestic market
and even create an international market for their product.
Potassium is a main ingredient in fertilizer and Bolivia has a
large and developing agricultural industry. Potassium is also used
in photography, medicine, soaps, and explosives. The salt flats
also contain boron (used in agriculture, ceramics, glass, soaps,

and detergents) and magnesium.

COMMENT




11. (C) Despite long odds, the Bolivian government maintains it
will go forward with its ambitious plans. The GOB's insistence on
controlling these resources reflects a desire not to repeat the
history of foreigners "stealing" its raw materials, but its
conditions required to date are a serious obstacle to private
investment. Foreign investor interest remains strong, but the GOB
will have to relax its restrictions on investment if it is to
convert its dream of exploiting lithium reserves in to a reality.
Creamer