The lithium market is doubtless one of the most vigorous and energetic markets at present – lithium being one of the minerals with the highest rising value in recent years, due to its use in manufacturing batteries.
With the predicted increase of electric vehicles and the use of lithium-ion batteries as energy storage systems, the global mining industry is closely watching this mineral evolution.
World lithium resources are concentrated in specific areas of the globe; countries such as Argentina, Bolivia and Chile (the lithium triangle) can certainly benefit from the fact that they have a major share.
The lithium market is still incipient, notwithstanding the fact that there has been a sizeable increase in its value. It is expected that demand will continue growing in order to supply the initial production of electric vehicles. (It is worth noting, at this point, that predictions for the development and use of electric vehicles are preliminary; as such, only a short-term forecast as to the evolution of lithium pricing can be made.)
Lithium cannot be found as a pure element; rather, it needs to be extracted from other minerals and brines. Lithium carbonate is not traded on international stock exchange markets, and therefore its price is dependent on direct negotiations between producers and end-users. In the past decade, its average value has increased fivefold, with a particularly significant increase between 2016 and 2017. However, there remain many areas of uncertainty and ongoing research around this mineral and its applications.
Argentina is one of the few countries in a position to consolidate major reserves of lithium, and to allow a high quality. According to recent estimations, lithium resources in Argentina could constitute up to 17 per cent of the total available lithium in the world.
Two projects are currently in production in the Argentinean puna: in the Salar de Olaroz, in Jujuy Province; and in the Salar del Hombre Muerto in Catamarca Province, the latter already being in operation for 20 years. The combined annual production of these two projects is approximately 40,000 tons.
In addition, there are a number of exploration projects with potential for development in the next few years. These vary in size, technical conditions, etc, and it remains to be seen how many could become productive in reality, and to what extent.
Quite apart from the availability of resources, there are many other factors playing a role in the competitive development of these projects. Such factors relate to technical expertise; methods of extraction; the infrastructure needed to bring the project to distribution stage; and relations with puna communities, which may differ from province to province or even within the same province.
The mining industry faces big challenges all over the world, and lithium projects are certainly no exception. With projects located in remote areas of the puna provinces, the interaction among mining companies, governments (including provincial or state-owned mining companies) and communities will be crucial.
There has been much advertising for, and promotion of, this opportunity for the country. Though the potential of this opportunity is considerable, companies and governments should be careful not to create unrealistic expectations among the public – especially communities – and should in fact work together on a joint policy for the long-term development of these resources in certain regions.
Argentina lacks specific regulation for the development of lithium projects; however, provisions of the Mining Code and procedural provincial regulations apply to lithium and the granting of concessions as ruled by the Mining Code. Given the very particular nature of lithium in salars, there are many technical hydrogeological aspects related to its extraction which need to be considered in a specific way. As such, Argentina is anticipating discussions that will work towards regulation that can encompass all the aspects relevant to lithium and the extraction thereof. In such discussions, the following aspects will have to be considered.
Argentina is a federal country and this plays a crucial role in any discussion of natural resources, since these are located within the country’s provinces. In terms of lithium, this is mainly found in the provinces of Catamarca, Jujuy and Salta.
Provinces within a federal country usually have their own constitution and legislation (though in certain areas they would also be bound to federal law); these boundaries are sometimes unclear. Excepting certain legal considerations, the main impact on natural resources is the power to rule and decide on specific policies related to the mining industry, even within the scope of a federal or national resources policy.
As a federal country, Argentina will have to address future regulation for the lithium sector. In order to develop the industry in a long-term, sustainable way, it is vital to consider the views and needs of the interested provinces, and the national legislation as it takes in local policies and interests.
This process will require specific technical knowledge from the government at all levels. It also anticipates, firstly, the interaction between future developments and current plans for infrastructure development; and the economic and production agendas of the provinces involved.
Also necessary for discussion is the role and scope of interaction to be played by public provincial mining companies and their participation in lithium projects – for example, in the case of Jujuy, lithium is considered a strategic mineral and this fact has several implications.
Environmental protection, water resources and access to economic benefits are at the top of the agenda when working in the mining sector, and lithium projects are no exception.
Community interests affected by the specific projects may differ substantially from province to province – or even project to project, when located in the same province.
Successful benefits – including improvements to the basic infrastructure and, in general terms, the living conditions of communities impacted by mining projects – would eliminate, to a significant degree, much of the grounds for social unrest and potential conflict.
This article is a very brief summary of the main issues that have to be considered for future regulation of the lithium sector in Argentina.
The best laws and regulations, when considering their application and enforcement, have proven to be those where consensus among all stakeholders is reached (or at least taken into account during the process).
In this regard – and especially considering the many technical aspects that relate to the operation of mines – in order to assure environmental protection and balance of the hydrogeological conditions, as well as community concerns, a thorough assessment should be made. Similar regimes, such as those in the USA and Chile, could be worth taking into account in terms of guidelines and comparative experience.
It is to be expected that governments, communities and industry players work together effectively in order to develop certain general guidelines relating to the lithium sector. Within these guidelines as a general framework, specific protocols for each province and more specifically for each particular salar and its operation, could be developed. This could be a way to integrate general parameters with the situation of each project taking into consideration the relevant aspects and issues at stake.The concepts and views described in this article belong exclusively to the author and do not represent the views of the firm or any client or company.