This chapter is taken from Lexology GTDT’s Practice Guide to Mining, examining key themes topical to the international mining community.
This chapter on battery minerals focuses on lithium. It will cover the lithium industry, and also address battery production and the challenges ahead. Initiatives such as the Global Battery Alliance (GBA), and others of the sort, will play a role.
The purpose of this chapter is to address the market trends and legal aspects related to battery minerals, which comprise a new category of minerals that can potentially change the mining industry and life in modern and future times. This being intimately linked to the evolution of the electric vehicle (EV) industry, this chapter covers an evolving topic that will see many updates. We are dealing with an unknown and unpredictable market, especially considering that new technologies or discoveries can play a crucial role in the development of EV innovation.
Legal aspects related to regulation on the extraction of these minerals and the development of these projects will need to be carefully addressed, and much will depend on the kind of deposit that is dealt with: either hard rock or brine in the case of lithium projects.
Equally essential, the issues associated with social licence and sustainable development will have a critical impact, since much of the foreseeable regulation will be related to environmental care and water use.
As an example of current trends, in September 2017, the GBA was launched by businesses, international organisations and non-governmental organisations as parties joining efforts to ‘end child labour, hazardous working conditions, pollution and the environmental damage behind the booming trade in batteries for smartphones, gadgets, electric vehicles and renewable energy storage systems in households and cities.’2
Initiatives of this sort that address the traceability of the product will also play a relevant role in completing the picture of this industry.
What’s in a lithium-ion battery?
Lithium appears as a first choice in battery production, for being the lightest metal and an excellent conductor of electricity and heat. There are a number of alternatives to lithium-ion (li-ion) technologies, such as the use of hydrogen fuel cells. Still, those are in a very early stage of development for being economically viable. Owing to this, the battery of the near future will be a type of li-ion battery technology – what may differ will be the use of different blends of raw minerals. However, analysts insist that lithium will remain a constant.
Batteries come in all shapes and sizes, and depending on the type of battery, the minerals that compose them are mainly lithium, cobalt, graphite, nickel and manganese. Currently, a li-ion battery consists of an anode electrode (negative charge), a cathode electrode (positive charge), a separator and liquid electrolyte. The assembly of such four components constitutes a cell, and a collection of one or more cells constitutes a battery. When a battery discharges, electric energy is released through the movement of electrons from negative to positive, and lithium ions move from the anode to the cathode. When it charges, the process is the inverse. In the case of EVs, a certain number of batteries are assembled into a module and, subsequently, a certain number of modules are then assembled into a battery pack. In 2017, demand from batteries production for lithium accounted for 46 per cent of the global demand for lithium, in comparison with 7 per cent from 1992.3
Cathode composition is the main differentiating factor between li-ion batteries. There are currently five li-ion battery technologies fighting to be the main choice for battery makers. Each of these technologies uses different combinations of raw materials, lithium being the only common denominator mineral between them all. Additionally, all of these types of battery chemistry utilise lithium ions as charge carriers between the anode and the cathode – graphite generally being the choice for the anode. Solid-state batteries, such as the solid-state li-ion battery, where the electrolyte is solid rather than liquid, appears as another feasible future technology.
The following cathode chemistry ratios are the basis for every producer’s cathode ‘recipe’ or ‘formulations’:
- lithium cobalt oxide: used extensively in portable electronics. However, it is not used in EV applications;
- lithium nickel manganese cobalt (NMC): this chemistry takes several forms, such as NMC 111 (the simplest, based on an equal amount of the three elements’ atoms), NMC 532/622 typically used by most car makers in EVs, and the most recent and advanced NMC 811 (with the highest theoretical performance still thought to be many years away);
- lithium nickel cobalt aluminium: it has a good energy density and an affordable price, making it ideal for EVs and portable electronics;
- lithium iron phosphate: intrinsically safer than other cathode chemistries. Its high-power density makes it an ideal candidate for electric tools and e-buses, and a good option for EVs; and
- lithium manganese oxide (LMO): used in the first EVs, such as the Nissan Leaf, because of its high reliability and relatively low cost. LMO’s downside is a low cell durability compared to other competing technologies.
Therefore, in most batteries, the critical metals include lithium, graphite, cobalt and nickel. Lithium has been the focus in recent years; however, these other commodities are also integral to the battery’s composition, and its development will also be key in the EVs market trends.
The rise of EVs
In Paris, on 12 December 2015, as part of the 21st Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change, and further to the Kyoto Protocol, all major nations undertook the commitment to fight against climate change through combined efforts and execution of domestic actions for the mitigation of greenhouse gases. The objective was, and still is, to hold the increase in the global average temperature to well below 2°C above pre-industrial levels, and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels. As a result of the general consensus regarding climate change as a common concern of humankind, countries and individuals are increasingly demanding greenhouse emission-free products and services, ultimately leading the way to the rise of electro-mobility.
As the Fourth Industrial Revolution4 builds, the energy storage revolution has rapidly started to take off. Rechargeable batteries appear as the backbone or ‘holy grail’ towards a clean energy and low-carbon emission economy. EVs, energy storage systems (ESS), smartphones and home ESS have been exponentially increasing battery demand for the past few years. That notwithstanding, the biggest demand for batteries comes from EVs. The EV revolution has been fostered by different governmental incentives such as China’s vehicle subsidy programme, or the widespread ban on internal combustion engine vehicles (ICEVs). In this regard, countries such as France, India, China, Ireland, the Netherlands, Slovenia, Sweden, the United Kingdom and Norway have in place EV deployment targets, and have pledged their intention to end sales or registrations of new ICEVs by 2030 to 2040.
According to analysts, the li-ion market faces two types of disruptions: (i) how many EVs will be sold and when the market penetration will take place; and (ii) what battery chemistry will be used for the production of its batteries. By 2030, 28 per cent of all new car sales, and 33 per cent of the global fleet will be electric.5 Nowadays, EVs account for less than 2 per cent of the global car fleet.6 While lithium forecast analysts discuss whether the demand for lithium will increase by triple, quadruple or sextuple in the proximate future, the demand will reach unprecedented levels. The EV demand has already led to sizeable changes in the spot prices of lithium and cobalt over the past two years; as of January 2018, a 250 per cent increase for cobalt, and a 400 per cent increase for lithium since January 2015.7 As a reference, a Tesla Model 3 uses about 38 kilogrammes of lithium,8 which is enough to power approximately 5,000 smartphone batteries. There is uncertainty, however, as to whether the lithium market will be able to meet the demand in the short term, considering the current investment and the time it takes to install and operate a production plant.
Notwithstanding the uncertainties that could still exist and that these figures and trends are a moving target, as of today, with the emergence of electrification in the generation, storage and usage of energy, EVs and energy storage are key market drivers for lithium – and the role of China in these market drivers will be of the essence.9
In addition, and to complete the picture, global car manufacturers continue to expand on their EV strategies with significant levels of committed investments in building capacity.10
With the chemical symbol Li and an atomic number of 3, lithium is the first metal in the periodic table. With a specific gravity of 0.534, it is about half as dense as water and the lightest of all metals. In its pure elemental form, it is a soft and silvery-white metal. It was first recognised as an element by Swedish chemist Johan August Arfwedson in 1817, though it was only in the early 1970s that English scientist Michael Stanley Whittingham began to study its use in batteries. Mr Whittingham, then hired by ExxonMobil, invented a rechargeable battery that could be used, but did not become commercially available. Later, American physicist John Goodenough contributed to Sony’s introduction of the first rechargeable lithium battery in 1991. Around 2007 the use of li-ion batteries became mainstream.
Different chemical compounds derive from the lithium mineral, the main ones for battery use being lithium carbonate, lithium hydroxide and chloride (generally obtained from the first), and metallic lithium. Lithium carbonate is usually the first step to the rest of the chemical compounds. Nowadays, lithium producers sell mainly lithium carbonate; however, this is shifting towards lithium hydroxide as it is expected that it will outpace lithium carbonate in terms of demand growth.
Traditionally, lithium carbonate can derive from two processes: (i) hard-rock mining extraction where lithium is extracted form granitic pegmatites that contain minerals such as spodumene, which have the largest concentrations of lithium found in igneous rocks; and (ii) extraction from brine, by pumping lithium rich brines to the surface, followed by concentration by evaporation in a series of solar evaporation ponds. The first process is found in Australian11 projects, whereas the second takes place mainly in Chile and Argentina, and countries such as Bolivia, China, Russia and the US state of Nevada.
Pegmatite is extracted from open pit systems using traditional mining techniques. The crushed ore is further milled to produce a finer product. The various other minerals, including quartz, feldspar and micas, are then removed. This process results in the formation of a spodumene concentrate, which can be chemically processed to create lithium carbonate or lithium hydroxide.
As a general rule, extraction from brine remains the easier and most cost-effective process to obtain lithium carbonate. The majority of global lithium production comes from lithium brine deposits in the south Andean region. The ‘lithium triangle’ or ‘Saudi Arabia of lithium’, as it is commonly referred to, comprises a region of the Andes mountains – the Puna region – that includes parts of Argentina, Chile and Bolivia.
A salar is a natural deposit of different types of salts and sediments that has originated under extreme conditions of aridity. Owing to their location and geological, climatic and environmental characteristics, salars hold extremely fragile and dynamic ecosystems. The brine extraction process must meet specific conservation methodologies to avoid the alteration or corruption of the hydrological and geochemistry environment and ecosystem altogether.
Environmental and socially responsible practices are needed to earn more than just a formal approval from the authorities and regulators. Transparent and responsible practices are also required to earn and maintain community support and approval – the social licence to operate. In this regard, indigenous communities’ consultation is a relevant part of the approval process for any lithium project in the salars of the Puna region. In Argentina, indigenous communities are largely present in the surroundings of many salars and represent one of the main stakeholders when obtaining the social licence to operate.
Hydrological and geochemistry balance
The use of water is a critical feature for the development and operation of lithium projects. The extraction of lithium requires considerable amounts of water, specifically brine, which is drained from the surface and underground in order to fill the evaporation ponds where the mineral remains. Still, research and analysis on water reserves and the hydrogeology of the salars must take place and continue to be developed by governmental authorities in the region. South American brine-bearing states have only recently started to understand and measure the implication that brine extraction has on water. In this regard, lack of data and management models are the first concern. Chile, as a mining-driven country, in the knowledge of the importance of resource conservation, has recently announced12 its intention to enact water regulations that will have a significant impact on the Atacama Salar where Albemarle and Sociedad Química y Minera (SQM) operate. Furthermore, new technologies for lithium extraction from brine are also being researched and developed. Certain companies claim to have developed different processes in which lithium is directly extracted from the brine without the need for evaporation ponds. None of these technologies are yet in place at the production stage, and are not likely to be in the near future; however, if proven to be successful and if deployed in good time, it could substantially lower the environmental impact.
Most of the salars in Chile and Argentina currently behave like a closed basin, where the scarce supply of surface and underground water has no outlet but through evaporation.
Salinity grade is defined by the combination of freshwaters that recharge the aquifer zone of a salar and its discharge, which occurs mainly through evaporation. The preservation of this type of environment is impacted by human activity. Consequently, it becomes essential to study, understand and measure the hydrology, hydrogeology and geochemistry of each salar and its aquifers, especially the source of the waters that recharge such, and the rate at which this occurs. This understanding will help to set any adequate brine extraction rates in order to achieve a sustainable exploitation of these ecosystems.
In order to adequately manage the water resources of salar ecosystems, it is important to have a detailed understanding of their hydrology, hydrogeology and geochemistry. In particular, it is important to determine the origins of the waters that feed these ecosystems. This will permit the delineation of environmental protection zones, definition of maximum freshwater and brine extraction rates, and the establishment of thresholds to proactively trigger defensive actions to maintain these ecosystems.13 Environmental authorities require the submission of the water extraction volumes for each lithium project, informing about its implication on the hydrological balance. This notwithstanding, the hydrological and geochemistry balance in Andean salars is extremely complex, data is relatively low and studies have not yet been thoroughly conducted. Numerous studies must take place to have a certain idea of the implication of the brine extraction process in the region.
Additionally, in many areas, a number of lagoons are located in the salars near the boundary of the peripheral zone. Usually, these ecosystems have a high ecological value and should also be encompassed within the studies and understanding of the hydrology of each salar.14
The Ramsar Convention
The Ramsar Convention (the Convention), adopted in 1971 and in force as of 1975, was negotiated during the 1960s by countries and non-governmental organisations concerned about the degradation and maintenance of wetlands ecosystems originally for waterbirds. It is the oldest of the modern global intergovernmental environmental agreements.
The Convention today counts over 160 countries as contracting parties, and deals with the management of wetlands as a global matter. The definition of wetlands as used by the Convention is very broad and includes all lakes, rivers, underground aquifers, swamps and marshes, wet grasslands, peatlands, oases, estuaries, deltas and tidal flats, mangroves, coastal areas, coral reefs and all human-made sites such as fish ponds, rice fields, reservoirs and salt pans.
The interaction of these protected areas or sites – which relate to many countries with economic development and, in particular, with extractive industries development – is another challenge to be faced by the projects.
Argentina ratified the Convention in 1991 and it came into force in 1992. At the moment, there are 23 Ramsar sites identified by Argentina as internationally relevant wetlands. There are currently more wetlands in unforeseen areas being identified to be included in Argentina’s list. Mining authorities, both at national and local level, would be jointly working in connection with this matter in order to harmonise current and potential mining activities in the Ramsar sites to achieve the goals of the Convention and entail the development of mining projects.
Consequently, and also from the perspective of companies, the implication of the Convention with mining activities in salars is something that should not go unnoticed in the future. Many salars are located within wetlands declared to be of international importance under said Convention. The main goal of the Convention is to establish the List of Wetlands of International Importance (the List) and implement mechanisms to ensure their protection. Wetlands in these sites harbour fauna of great importance such as vicuñas, guanacos, flamingos, taguas and chinchillas, some of them being or having been endangered species.
All lithium triangle states have ratified the Convention. This notwithstanding, such an instrument is quite vague and lax when setting forth commitments to the state towards the protection of wetlands, and does not include specific prohibitions such as draining or pumping in listed wetlands. Some salar-located sites are qualified in the List as a highly vulnerable and fragile ecosystems threatened ‘by overgrazing, unregulated tourism, mining prospecting and flamingo egg collection’.
There are currently no provisions arising from the Convention that would prohibit mining activities. However, a specific and case-by-case analysis of each salar in which the Convention may apply needs to take place.
Indigenous peoples’ rights have become a matter of agenda in many countries in the world. Specifically in Latin America there has been an interesting evolution of legal concepts related to this matter as of the 1980s.
It has been mainly owing to the United Nations approach and conferences that the issues related to indigenous peoples and rights started to gain a place in the agenda of many countries. The first real issues around the protection of these rights were related to three main areas: acknowledgement and access to land, traditional knowledge and intellectual property issues, and participation in the extraction of natural resources.
One of the main pieces of international legislation ruling the rights of indigenous peoples and communities is the Convention concerning Indigenous and Tribal Peoples in Independent Countries (ILO 169) adopted in 1989, in force in 1991 and ratified by 20 countries, including Bolivia (1991), Colombia (1991), Paraguay (1993), Peru (1994), Ecuador (1998), Argentina (2000), Brazil (2002), Venezuela (2002) and Chile (2008). Canada and the United States have not ratified ILO 169.
Article 6 of ILO 169 expressly establishes the following:
1. In applying the provisions of this Convention, governments shall:
(i) consult the peoples concerned, through appropriate procedures and in particular through their representative institutions, whenever consideration is being given to legislative or administrative measures which may affect them directly;
(ii) establish means by which these peoples can freely participate, to at least the same extent as other sectors of the population, at all levels of decision-making in elective institutions and administrative and other bodies responsible for policies and programmes which concern them; and
(iii) establish means for the full development of these peoples’ own institutions and initiatives, and in appropriate cases provide the resources necessary for this purpose.
2. The consultations carried out in application of this Convention shall be undertaken, in good faith and in a form appropriate to the circumstances, with the objective of achieving agreement or consent to the proposed measures.
Intimately related to the above is the concept of free, prior and informed consent (FPIC), which makes its way in Latin American legislation and trends through ILO 169, and is now part of the relevant topics considered by stakeholders in the mining, and oil and gas sectors. However, there is no agreed or unanimous consensus on the term and scope of FIPC, or the mechanism for its implementation – the concept of ‘consent’ being the most controversial. The real question is whether the need for consent leads to the indigenous peoples’ right to veto the development of a project. In other words, whether consent is construed by means of a procedure and consultation process, or as a right with the power to issue a decision that may also include the veto to the project. This right would derive from the self-determination substantive right granted to indigenous peoples in several international instruments.
In this regard, the extraction of natural resources in Latin America has been challenged in recent years by indigenous communities’ rights and consultation procedures, or, to be more precise, by the lack of regulation that would allow for the principles of the Convention to take place.
In the Puna region in the north of Chile and Argentina, where lithium is extracted, specifically in the provinces of Salta and Jujuy of Argentina, indigenous representatives expressed concern about the amount of water consumed by mining companies, and the fear that this could have a disastrous effect on water levels in the area. Another major concern is the pollution caused by mining or oil exploration activities, which in past decades have been carried out without proper environmental controls.
‘We don’t eat batteries. Without water there is no life,’ is a frequent claim made by indigenous communities heard on and surrounding salars.
Relevant to this quote is the case of Comunidad Aborigen de Santuario Tres Pozos y otros v Jujuy, Provincia de y otros s/ amparo, which relates to this specific matter. On 20 November 2010, 33 communities brought a lawsuit before the National Supreme Court of Argentina (CSJN) in order to correct the omissions incurred by the provinces of Jujuy and Salta, and the national government, by ordering them to take measures to ensure that indigenous communities could exercise their rights of participation and consultation, and therefore express their FPIC on programmes for the exploration or exploitation of natural resources in their territories.
Indigenous communities sought to enforce their rights in every administrative proceeding under which permits for exploration and exploitation of lithium and borates in the areas of Salinas Grandes and Guayatayoc lagoon were granted, owing to the lack of prior consultation and participation of the communities. They also requested the issuance of an injunction, ordering the authorities to refrain from granting any administrative permit in the area, as well as the suspension of those permits already granted.
The CSJN rejected the claim on 18 December 2012, based on formal arguments, but did not rule on the merits of the case. The indigenous communities indicated that they would continue pursuing their claim before the Inter-American Court of Human Rights; to the best of our knowledge this has not yet taken place.
Another aspect to consider in connection with indigenous peoples’ involvement with lithium projects is related to the protection of archaeological and palaeontological heritage. In this regard, the lithium project owned by the Chinese company Ganfeng in the vicinity of the Llullaillaco archaeological site is relevant.
As in other countries with mining operations (eg, Australia and Canada), the interaction with indigenous communities will have to be further considered in the Puna region with the development of lithium projects, since such communities are one of the main stakeholders involved in the social licence process. It is expected that, with all the more comprehensive sustainable policies that mining companies have nowadays, this interaction will become the norm, and the interests of communities and companies can be aligned and developed.
The lithium triangle
According to the US Geological Survey (USGS),15 Chile holds the largest worldwide reserve of lithium with 7.5 million tons, and the third-biggest resource with 8.4 million tons. There are two type of salars in the South American region: Andean and pre-Andean. The latter have the highest lithium concentration levels, the most important ones in Chile being Atacama, Punta Negra, Pedernales and Maricunga. Currently, the Atacama Salar is the only one in operation, being by far the most important, with most of the Chilean lithium reserves located there.
Since 1976, lithium has been considered a ‘strategic resource’ for being a mineral of nuclear importance. Since then, no mining concessions have been (and are) granted for the exploitation of lithium, with the exception of those mining concessions constituted prior to the corresponding declaration of non-concession, or of importance for national security. Such is the case of Production Development Corporation (CORFO), whose concession is located in the Atacama Salar and Corporación Nacional del Cobre de Chile in the salars of Pedernales and Maricunga.
In accordance with article 19, subsection 24 of the Constitution of Chile, and article 8 of the Mining Code, the exploration or exploitation, or both, of substances qualified as non-susceptible to mining concessions can only be executed directly by the state or by its companies, or by means of administrative concessions or special operating contracts. In public-private partnerships the state plays the part of the controller under the conditions that the President of Chile establishes by decree. Such is the case with CORFO.
In 1984, CORFO invited bids for the development of a portion of the Atacama Salar. After Amax’s successful bidding and further withdrawal, it was acquired by SQM, a major lithium producer. SQM came into production at the salar in 1997. Nowadays, two companies are in production in said salar after entering into agreements with CORFO: SQM and Albamarle (formerly Rockwood).
Said agreements, as amended, were criticised for putting in place weak environmental requirements and insufficient monitoring standards, and for creating a virtual lithium monopoly for SQM. Under such, SQM was to retain lithium extraction rights until 2022. In 2013, President Piñera’s administration filed a lawsuit against SQM for serious breach of contract, which led to a long arbitration process that ended in 2018 with the execution of an amendment agreement entered into by and between CORFO, SQM and Albamarle. The amended agreement raises SQM’s lithium extraction quota to 350,000 tons, to be in force until 2030,16 establishing higher standards of compliance with environmental obligations, and higher royalties and contributions. It now remains to be seen how this amended agreement will evolve, which has already received much criticism.
In line with the above, lithium exploitation in Chile has brought up serious environmental concerns. SQM, being the only mining chemical company operating in salars for many years, has needed to substantially update and improve the environmental controls and standards in recent years in order to comply with current sustainable practices.
At the end of January of 2017, SQM submitted an environmental compliance plan, in which it proposed to execute works valued at US$18 million, within the framework of a proceeding initiated against the company.
Special consideration should also be given to the recent 24 per cent holding purchase in SQM by Tianqi Lithium. Such stake was sold by Canadian fertiliser producer Nutrien, obliged by Chinese and Indian regulators after a prior merger. The deal led to an agreement between Chilean antitrust authorities and Tianqi, which established certain conditions in relation to the appointment of SQM authorities and access to sensitive information. SQM’s controlling shareholders opposed said agreement, filing an appeal before the Constitutional Court of Chile, which was ultimately denied. It remains to be seen how Tianqi’s entrance into one of the biggest lithium projects will unfold in the future, and its implications for the lithium market.
Regarding indigenous peoples in Chile, the current exploitation in the Atacama Salar is in the Atacama La Grande Indigenous Development Area. This territory has been claimed as its own by the Atacameño people, who say they have always occupied and inhabited the salar and its basin.
Chile definitively has a key role in the global lithium industry development, and SQM is one of the very few companies – together with FMC and Albermarle – that has the technical knowledge to operate brine projects. Now consolidating more operations in Australia with new project acquisitions, the role of this country as a leader in the sector is secured.
According to USGS,17 Argentina’s lithium resources could be the largest worldwide with 9.8 million tons, and with 2 million tons in reserves. Salars in Argentina are distributed in the provinces of Salta, Jujuy and Catamarca. Currently, there are only two salars in production: Salar de Olaroz (Jujuy) and Salar del Hombre Muerto (Salta and Catamarca).18
Any individual or legal entity with the capacity to legally purchase and own a real estate property may purchase and own a mine. The ownership of a mine is acquired through a legal concession granted for an unlimited time and subject to the compliance of certain maintenance conditions (mainly related to the payment of mining fees and the implementation of an investment plan).
The availability of resources has led to a boom of junior exploration companies, which have acquired large extensions of mining properties with potential feasibility. Regarding the future, the question about how many lithium projects can take place in a given region arises.
Junior exploration companies have intended to penetrate the sector as ‘real estate’ players, and actually lithium projects depend substantially more on energy supply and infrastructure rather than just holding mining licences on properties in salars. In the next few years, the situation in Argentina will probably change dramatically as some companies will not be in a position to sustain the mining concessions they own (owing to canon payment and investments plan compliance), and mining companies with the capacity to operate projects will dominate the scene. This, of course, will just apply to the few feasible lithium projects that could start operation.
Argentina lacks a specific regulation for the development of lithium projects, though provisions of the Mining Code and procedural provincial regulations apply to this mineral and concession granting.
Given the specific features of lithium in salars and brines, Argentina is facing a stage of discussing and working towards a regulation that may encompass all the aspects relevant for this mineral and its extraction, especially considering that in certain salars there will be more than just one operator and this will undoubtedly require certain parameters or guidelines to operate (eg, demarcation zones, unitisation or other alternatives).
In such discussions, that the country has a federal organisation and that resources belong to the provinces is crucial. In this sense, and apart from specific legal considerations, the main impact on natural resources is the power to rule and decide on the specific policies related to the mining industry, even within the scope of a federal or national resources policy.
Likewise, and in the context of a federal country, Argentina will have to address the future regulation of the lithium sector considering the views and needs of the interested provinces, and the national policy articulating the local policies and interests, to develop the industry in a long-term sustainable way.
Another aspect to consider and integrate in the discussions will be the role and scope of interaction of the public provincial mining companies, and their potential and current participation in lithium projects (eg, in the case of Jujuy, lithium is considered a strategic mineral and this fact has several implications).
Environmental protection, reserve and natural reserve areas protection, water resources, and access to economic benefits stand as the highest in the agenda of all communities when perceiving the mining sector, and lithium projects are not an exception.
Bolivia has two major lithium reserves located in the Salar de Uyuni and Salar de Coipasa. Since 2009, the Constitution of Bolivia regards natural resources from salars and brine as strategic resources,19 thus reserving to the country its exploitation, industrialisation and commercialisation. Since such legislation was enacted, there have been several efforts to advance onto the management of such resources.
In 2008, by means of Decree No. 29496, the state-owned Mining Corporation of Bolivia (COMIBOL) was entrusted with the creation, within its institutional structure, of a body responsible for the industrialisation of the evaporitic resources of the Salar de Uyuni. In compliance with such mandate, by means of Resoultion 3801/2018, the COMIBOL created the National Directorate of Evaporitic Resources, which later changed its name to the National Agency of Evaporitic resources (GNRE). In 2017, the agency was replaced by the Yacimientos Litíferos Bolivianos Corporation,20 which will control the exploitation of lithium throughout the value chain.
In 2015, two agreements were executed: a contract for the construction, assembly and commissioning of the potassium salts industrial plant to be implemented in the Salar de Uyuni was entered into by and between GNRE and the Chinese company Camc Engineering Co Ltd Bolivia Branch; and a contract for the final design project of the industrial plant of lithium carbonate was entered into by and between GNRE and German K-Utec.
It is a widespread notion that one of the main reasons for the apparent failure of Salar de Uyuni exploitation relates to the absence of clear governmental policies, poor infrastructure and a lack of qualified manpower. Additionally, the extraction process in said salar is much more intricate that the one in Argentine and Chilean salars, as these are located in much lower altitudes and a drier climate, which helps the evaporation process. The lower presence of magnesium and potassium makes it easier as well. Until now, Bolivia has only been able to produce a few tons of industrial-grade lithium.21
Whether the country will be open to investors in a general way and therefore start operations in these salars, remains a question. Should that be the case in the near future, another big international player may arise and have an impact on the supply of lithium.
In comparison with other minerals and commodities, lithium is not listed in the stock exchange, so the price is the result of the agreements between buyer and seller. Prices are referenced based on such purchase agreements, and importation and exportation prices. The result is high price fluctuation and market uncertainty. Reference prices are based on the lithium carbonate equivalent as it is the most commercialised chemical.
The London Metal Exchange has announced it is working on the launch, towards the start of 2019, of new futures contracts covering one, some or all of the following battery minerals:
- graphite; and
This would especially impact the lithium and cobalt industry as it would bring more certainty, and further price stabilisation and normalisation.
Lithium price assessments services include Argus Media, S&P Global Platts and Benchmark Mineral Intelligence – price data collection and assessment companies specialising in minerals, including the li-ion battery supply chain.
Whether the listing of this mineral will change the market trends in any way is still to be seen (it is unlikely) though it will certainly have an impact on junior companies playing in the sector.
Cobalt production is concentrated in sediment-hosted stratiform copper deposits in Kinshasa, the Democratic Republic of the Congo (DRC). It is the leading source of mined cobalt, supplying more than 50 per cent22 of the world’s cobalt mine production and holding at least half of the world’s reserves. There is almost a 100 per cent chance that your smartphone or EV contains cobalt that comes from child workers in artisanal mines, dug by hand in often risky conditions. Children as young as seven work in cobalt mines. Health and safety compliance is nonexistent and mines frequently collapse, burying people underground. Some have gone so far as saying cobalt is the ‘blood diamond of batteries’. A supply shortage is also a reality, with few producers having the supply control; the price has gone from US$20,000 per metric tonne in 2016 to US$80,000 per metric tonne in 2018.23
The DRC remains one of the poorest and most underdeveloped countries in the world, where over 80 per cent of the inhabitants do not have access to electrical energy. Governmental corruption and the lack of human rights law enforcement is also well known. In 2012, the Organisation for Economic Co-operation and Development (OECD) established guidelines for companies sourcing minerals from high-risk areas like the DRC. In accordance with these guidelines, car and battery makers should be able to disclose their supply chain assessments identifying and addressing human rights risks and abuses. In 2017, several companies joined efforts to create the ‘Responsible Cobalt Initiative’ to help the industry conduct due diligence in line with the OECD guidelines, and tackle the issue of child labour in the DRC. Companies include tech firms such as Apple, HP, Huawei, Sony and Samsung SDI, whose smelters purchase cobalt from artisanal mines. No member of this group is as yet a carmaker.
In accordance with the Dodd-Frank Act, the United States regulates the use of conflict minerals. China has also issued guidelines for the ethical sourcing of minerals.
In the United States, regulated conflict minerals are referred to as ‘3TG’, which are as follows:
- columbite-tantalite, also known as coltan (from which tantalum is derived);
- cassiterite (tin);
- wolframite (tungsten), or their derivatives; and
- any other mineral or its derivatives determined by the US Secretary of State to be financing conflict in the DRC or an adjoining country.
Currently, cobalt is not considered a conflict mineral; therefore, the disclosure obligation does not apply. In 2016, Apple expanded its responsible sourcing efforts beyond conflict minerals to include cobalt, being the first tech company to do so.24 In its last Conflict Minerals Report before the US Securities and Exchange Commission, the company admitted that it cannot say for sure whether materials produced during ‘incidents’ related to the financing of violent conflict ended up being used to make its gadgets.
Furthermore, it is worth noting that Tesla has also voluntarily included cobalt in its last Conflict Minerals Report submission, stating it has implemented due diligence procedures for cobalt sourcing so as to ensure it does not come from artisanal mining sites.
The above-mentioned tech and carmaker companies are working around the clock to find ways to use less of the metal, expecting to gradually move to batteries that use less cobalt such as NMC 811.
How the impact of cobalt supply and its unique place of origin will affect the industry is something to be continuously monitored.
Sustainable development and supply chain
Owing to the impact that sustainable trends have in this sector, summarised below are some of the international standards or initiatives that are relevant to the lithium sector.
The 17 Sustainable Development Goals (SDG), agreed by UN members in September 2015, set the global agenda for equitable, socially inclusive and environmentally sustainable economic development up to 2030. SDG No. 12 sets the goal to ‘ensure sustainable consumption and production patterns’ as a call to action to ensure efficient management of natural resources and the way pollutants are disposed of, and guarantee reliability in the areas of human rights, labour (including health and safety) and the environment. As outlined by the 2016 Atlas ‘Mining to the Sustainable Development Goals’ the mining industry has the opportunity and potential to positively contribute to all 17 SDGs. This notwithstanding, in battery minerals mining the following SGDs have a special implication:
- SDG No. 6 , ‘Ensure availability and sustainable management of water and sanitation for all’: lithium extracted from brine has special implications for the hydrological and geochemical balance of the region where it is sourced;
- SDG No. 15, ‘Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss by ensuring the conservation, restoration and sustainable use of terrestrial and inland freshwater ecosystems and their services, in particular forests, wetlands, mountains and dry lands, in line with obligations under international agreements’; and
- SDG No. 8, ‘Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all’: cobalt mining production comes from child workers in artisanal mines in the DRC and indigenous communities.
The analysis and impact of SDGs in the mining sector – especially in the lithium industry – entails a whole separate review, this being just an introductory comment to raise the issue.
Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act on conflict minerals paved the way towards the traceability standard. Originally aimed at stopping the funding of the national army and rebel groups in the DRC that illegally used profits obtained from minerals trade, it obliges US-listed companies to identify the origin of the minerals they use and disclose it if it falls within conflict minerals. None of the main battery minerals fall into such definition. However, perhaps the most important contribution of section 1502 was that it obliged companies to carry out a supply chain due diligence.
The Extractive Industries Transparency Initiative (EITI) aims to develop standards that can be voluntarily implemented by countries. The EITI Standard is overseen by the international EITI Board, with members from governments, companies and investors, and civil society, meaning it is a multi-stakeholder process. Alongside the publication of payment and revenue data, the Standard also provides for comprehensive transparency concerning production data and other aspects of the extractive industries: ‘A recent report by the Open Government Partnership noted that joining the EITI is the most frequent commitment countries make to improve transparency of revenue and related information around the “value chain” as described under this standard.’25
Battery minerals initiatives
The GBA was launched as a global public-private partnership to support the development of an inclusive, sustainable and innovative battery value chain, focusing primarily in lithium, cobalt and graphite. Three areas of work are identified: to support the development of a responsible, sustainable and stable supply of critical raw materials for batteries; to accelerate the move toward a circular economy for batteries; and to help inform sustainable social, environmental and product innovation along the value chain. Its main functions are generating, mapping and pooling information, fostering dialogue along the value chain and providing a systemic approach to local challenges. Regarding lithium and cobalt minerals, coalitions are being assessed to take action for a responsible, stable and sustainable supply of such minerals.
European Battery Alliance
With a commercial backbone, the European Battery Alliance presents itself as an initiative seeking to establish a competitive manufacturing value chain in Europe with sustainable battery cells at its core.
It is expected that demand for lithium, and other related battery minerals, will continue to grow, but to what extent and degree remains to be seen.
Battery minerals open a new sector in the mining industry, sharing some of the issues and challenges that mining has always had – though also interacting with new aspects such as technology and innovation – and intimately linked to the demand of EVs and their increase worldwide (mostly in China).
Hydrogeological aspects and technical expertise, as well as communities’ interests in connection with mining, and areas of influence of the specific projects, play a key role in the development of lithium projects.
As known in the mining industry, effective benefits, which include basic infrastructure and, in general terms, the improvement of the living conditions of the communities impacted by mining projects, could help to erase much of the grounds for potential conflict.
In this regard, and especially considering many technical aspects that relate to the operation of salars, in order to assure environmental protection and balance of hydrogeological conditions, as well as communities’ concerns, an integral analysis should be made.
Guidelines and parameters to operate in salars, mainly from an environmental perspective, should be analysed considering the features of each salar and project.
Sustainable initiatives to set the standards for battery minerals development will continue to evolve, and also show a way forward in the industry.