Lithium dream could super-charge Bolivia

The wind whips across a 10,100 sq km expanse of salt on a desert plateau in Bolivia's Andes Mountains.

Plastic washtubs filled with an emerald-coloured liquid rich in lithium dot the Uyuni Salt Flat, all the way to the volcanoes on the horizon.

Waist-high slabs of salt are piled around a pond that's shimmering in the sun.

Francisco Quisbert, an Indian peasant leader known as Comrade Lithium, sits inside a crumbling adobe building on the edge of the desert.

He's explaining how Bolivia, South America's second-poorest country, will supply the world with lithium, which will be used in batteries that power electric cars.

"We have this dream," Quisbert, 65, says. "Lithium could bring us prosperity."

The world's largest untapped lithium reserve - containing enough of the lightest metal to make batteries for more than 4.8 billion electric cars - sits just below Quisbert's feet, according to the US Geological Survey.

The automobile industry plans to introduce dozens of electric models with lithium batteries in the next three years.

Bolivian President Evo Morales says his country can become one of the world's biggest suppliers of lithium, making the nation of 10 million people a major player in the drive to cut the use of fossil fuels.

Even with its massive reserves, Bolivia has never built a lithium mine.

"Lithium is the hope not only for Bolivia but for all the people on the planet," says Morales, who has just been elected to a second term.

If Morales gets his way, he will upset a market now controlled by two publicly traded companies: New Jersey-based Rockwood Holdings, which is 29 per cent owned by Henry Kravis's KKR, and Santiago-based Sociedad Quimica y Minera de Chile, or Soquimich.

These two companies produce about 70 per cent of the world's low-cost lithium from a salt flat in Chile, just across the Andes from Bolivia.

Investors are wooing President Morales to be partners in building a Bolivian mine.

French billionaire Vincent Bollore - who owns a lithium battery plant in France and plans to build electric cars - South Korea's LG and Japan's Mitsubishi and Sumitomo have offered to join with Morales in the project. They're already helping the government at no cost to design the mine.

So far, Morales has rebuffed outside investment, saying he wants to keep lithium in government hands to provide local Indians with jobs.

Morales says he may change his mind if Bolivia can't raise the US$800 million ($1.1 billion) it would cost for construction of a mine and processing plants.

"If the Bolivian state had the money, it would invest it," he says. "If the state doesn't have cash, then we're going to look for investment."

Quisbert, the orphaned son of a llama herder, helped persuade Morales in 2007 to pledge US$6 million to start work on what could be the largest lithium mine in the world by 2014, says Saul Villegas of state-owned mining company Corporacion Minera de Bolivia.

Bolivia has 35 per cent of the world's lithium resources, according to the USGS.

"Bolivia could become like Saudi Arabia," says Gabriel Torres, an economist for Moody's Investors Service in New York. "It has a huge amount of the world's reserves."

Carmakers are betting that electric vehicles built to run on lithium batteries will help the industry recover from its worst crisis in three decades.

US President Barack Obama's Administration is providing US$11 billion in loans and grants to car and battery makers to reduce the country's dependence on foreign oil.

The world's car companies plan 42 new electric models by 2012. Instead of running on petrol, these vehicles will be powered by lithium batteries that are charged with electricity made in plants fuelled by coal, natural gas, nuclear power, solar power and wind.

By 2020, one in 10 cars manufactured - or more than six million vehicles - may be powered by lithium batteries, says Carlos Ghosn, chief executive of Nissan.

Car battery sales could jump to US$103 billion a year in the next two decades, up from US$100 million a year as of October 2009, according to a report by Credit Suisse.

About 75 per cent of commercial lithium is still used for other things: It helps make glass and ceramics heat-resistant, it's a lubricant and it's used in a drug to treat depression.

No other metal is better at holding a charge and dissipating heat with as little weight, making lithium the best ingredient known to make batteries for electric cars.

Companies such as Apple, Hewlett-Packard and Nokia started using rechargeable lithium ion batteries a decade ago, and today they are in millions of iPods, computers and mobile phones.

Still, electric cars are a gamble. No one knows how many people will buy them, and they're a long way from performing like petrol-powered vehicles.

GM's Volt, planned for production in 2010, can go only 40 miles (64.4km) before its battery is drained. Then, a petrol-powered generator kicks in. An owner can recharge the battery by plugging it into an electrical outlet at home.

Bolivia's desolate salt flats are at the centre of a global rush for lithium. Villegas, the state mining company executive, says a processing plant will start making lithium carbonate in 2010.

By 2014, the mine will produce 30,000 metric tonnes of lithium carbonate, more than Rockwood's mine in Chile, which is the world's second largest.

Bolivian scientists say there are about 95 million tonnes of lithium under the Uyuni Salt Flat, more than 12 times Chile's reserves.

Bolivia is up against big odds, says Eduardo Morales, manager of Rockwood's mine in Chile's Atacama Salt Flat. Bolivia's salt flat has few paved roads, and most communities don't have electricity.

The country is landlocked; the nearest port is across the Andes, hundreds of miles away in Chile. And Bolivia has no experience mining lithium.

"They will need outside investors," says Morales, a Chilean national unrelated to Bolivia's president.

On Chile's Atacama Salt Flat in the driest desert on Earth, Rockwood and Soquimich produce lithium from evaporating pools that stretch for miles across a sea of formations made of salt.

They create those ponds by pumping out lithium-rich water, and then wait 18 months for most of it to evaporate.

Then, they process the remaining liquid into powdered lithium carbonate. It costs about US$1 to produce a pound (454 grams), Rockwood's Morales says. Rockwood and Soquimich sell the powder for about US$3 a pound.

"This is a good business, and here's the money, right here," says Eduardo Morales, standing at a 300m pool filled with lithium-bearing water that looks and feels like olive oil at Rockwood's mine in Chile.

Rockwood and Soquimich have big sway over prices because they have few competitors.

"That's what this market is," says Brian Jaskula, a lithium specialist at the USGS in Reston, Virginia. "It's dominated by one or two big players."

Kravis's KKR created Rockwood in 2000 with the acquisition of UK-based Laporte's specialty chemical business, and four years later acquired the lithium mine by purchasing Chemetall.

Under CEO Seifi Ghasemi, Rockwood boosted annual revenue fourfold, to US$3.4 billion in 2008.

In 2009, lithium carbonate prices jumped to US$6500 a metric tonne, almost tripling 2006 values, because of surging demand for batteries, Jaskula says.

Swedish pharmaceutical researcher Johan August Arfvedson discovered lithium in 1817.

It wasn't until 1923 that German steelmaker Metallgesellschaft began producing lithium on an industrial scale.

Bolivia's government and USGS geologists discovered lithium beneath the Uyuni Salt Flat in 1976.

Quisbert inspired Bolivia to move to the centre stage of the market.

The orphan took off on his own at the age of 12 to dig minerals by hand from the salt flats of South America's Andes Mountains.

By the time he was in his 20s, in the 1960s, Quisbert was organising farmers to pressure for jobs and better living conditions.

Quisbert says he became convinced that Uyuni's lithium, if mined by the Government, would generate jobs and revenue that could bring prosperity to the impoverished Indian families who live in mud huts amid the desolation of the salt flat.

Quisbert envisions lithium bringing power to a place where electricity is a luxury.

"Roads and electricity come with a lithium mine," says Quisbert, whose face is tanned and wrinkled from a life in the intense sun of Uyuni.

"We still live with candles, with oil lamps."

PRECIOUS METAL
* Lithium, a lightweight metal, is the best ingredient to make batteries for electric cars.
* The batteries use a derivative called lithium carbonate to hold electricity they accumulate when plugged into an outlet to be charged.
* Lithium is also used to help make glass and ceramics heat resistant, as a lubricant and as a drug to treat depression.
* Bolivia is believed to hold the world's largest untapped lithium reserve - containing enough to make batteries for more than 4.8 billion electric cars

- BLOOMBERG