Lithium Economics

Is the Mixed Company of Bolivian Lithium Deposits with Germany "Submissive" and Illegal? (Part I)

Feb 08, 2019

This is the first of a series of contributions on the joint venture between Bolivian Lithium Deposits and ACI Systems from Germany to extract lithium hydroxide from Salar de Uyuni. It is aimed at describing at length what I have called Bolivia’s worst economic business in national history. In addition, it highlights the contrasting views of the two partners in terms of vision and scope of the new association. At last, it also shows a number of contradictions identified in their respective press releases with respect to Supreme Decree No. 3738 that officially establishes the new joint venture.

Introduction

Since its foundation, which occurred on December 12, 2018 in Berlin, Germany, amid a marked secrecy and a huge lack of transparency, the joint venture formed by Bolivian Lithium Deposits (henceforth called YLB) and ACI Systems Germany GmbH (henceforth denominated ACISA) seems to present different perspectives from the two partners in terms of vision and scope of the new association. At the same time, both companies would have agreed in their respective press releases not to take into account or distort some points of crucial importance for the country included in Supreme Decree No. 3738 about the creation of the public company YLB-ACISA enacted on December 7 that reveal the true character of the venture. In what follows and as an introduction to the substantive issues of this contribution, I break down each of these issues to give my readers a semblance as close as possible to reality of what I have come to call "the worst economic business of national history."

Indeed, while YLB talks about the "constitution of the YLB-ACISA joint venture for the lithium industrialization in Bolivia", ACISA points out that "the objective of the joint venture is the sustainable use and industrialization of lithium and other raw materials of the Salar de Uyuni." It goes without saying that by emphasizing the industrialization of lithium, the state-owned lithium company tries to make the country and the world believe that Bolivia is steadily moving towards the desired transformation of one of our most important strategic natural resources, while when distinguishing between exploitation and industrialization, the German company shows a high degree of caution with which it hopes to advance in the new association. Other than that, the aforementioned legal instrument only refers to this issue in its introductory section, when it speaks of "Phase III of industrialization of the residual brine at Salar de Uyuni" and in Part I of the Annex when it mentions that a part of the hydroxide to be produced will be offered under market conditions to the joint venture of cathode materials in Bolivia and that once the new subsidiary company for the production of lithium hydroxide is officially and legally constituted, ACISA will guarantee the start of "preliminary activities" to form the joint venture of cathode material and batteries.

Based on these two ways of seeing things, each party explains the scope of the agreement in its own way. For YLB, for example, its link with ACISA implies the creation of a mixed company of lithium hydroxide and magnesium hydroxide approved on December 12, 2018 and another of cathode materials and batteries to be established "in 2019". On the other hand, in ACISA's opinion, the only thing that governs the new company at this time is the newly created lithium hydroxide production company, clarifying that only in the next few years will it be possible to create another joint venture for the production of cathode material and batteries in Bolivia and Germany. It should also be noted that, regarding magnesium hydroxide, in Supreme Decree 3738 it is maintained that the two partners of the joint venture only commit to carry out the necessary studies to determine "the feasibility of industrializing" the compound.

Additionally, YLB establishes that all the plants will be built simultaneously so that between the end of 2021 and 2022 the new company will start exporting lithium hydroxide (LiOH) and lithium batteries, for which purpose "a total investment of $ 1.3 billion is foreseen", which will result in" gross income of approximately US $ 2,200 million per year." On the contrary, ACISA suggests that the plants will be built sequentially, so for now and on the basis of a feasibility study, investments amount to about 300 million Euros for the LiOH plant and has nothing to say about the expected gross income of the entire project. For its part, being the legal instrument that establishes the creation of the subsidiary company that will only produce lithium hydroxide from residual brine, the Supreme Decree 3738 only talks about an investment of 300 million dollars (instead of 300 million Euros) without providing investment data or gross total revenues mentioned in the YLB press release.

Likewise, YLB refers to a production capacity of only 30,000 tons of LiOH by 2021, foreseeing a production capacity of 10 GWh in the battery plant that would start in 2022 to power around 350,000 electric vehicles. In contrast, ACISA expects to reach an annual production of 35,000 to 40,000 tons of LiOH in 2022, although it does not say anything about the production capacity of the battery plant. Regarding the capacity of the battery plant and the number of electric vehicles to be energized, YLB modifies again its position with respect to the target market of the joint venture, possibly, based on previous observations of mine, to point to the potential demand for electric vehicles (with lithium-ion batteries with an average energy capacity of 30 kWh) that the Chinese firm BAIC plans to market in Paraguay and possibly in other South American countries. However, it is important to clarify that, in the above mentioned Supreme Decree, ACISA only guarantees a minimum of 30,000 tons per year of lithium hydroxide production, which is not exactly what it says in its press release and the joint venture is committed to deliver approximately 5,200 annual tons of LiOH to the cathode material company in Bolivia, which is far from the required amount (~ 8,400 tons of LiOH per year) to reach the battery production capacity defined in the YLB press release.

Finally, YLB reports that the raw material constitutes only "the residual brine derived from the evaporation process", which "does not include extraction of brine from the Salar de Uyuni", without indicating what technology will be used to obtain the lithium and magnesium salts. In contrast, ACISA argues that it has developed with its partners, in particular, K-UTEC Ag Salt Technologies, a unique process for this purpose, which also reduces water consumption by more than half compared to other technologies. It is worth mentioning here two very important points. The first is that this is the first time that ACISA specifically points out that K-UTEC is its partner, which would close the cycle of return of favors to which I referred in the article mentioned in the previous paragraph. And, the second, that it has not been able to demonstrate until now the existence of that insuperable technology that ACISA and YLB have been talking about with a great deal of enthusiasm for several months.

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