Growing the lithium supply base

Lithium is one of the most sought after commodities in the world today. It has become critical in the manufacture of glass, aluminum products and battery technology. As the transition to clean energy continues, demand for lithium-based technology will increase, with the World Bank predicting a 965% increase in lithium production by 2050.

As a result, leading electric vehicle and renewable technology manufacturers, as well as governments, are making a concerted effort to secure their lithium supply chains. Despite booming demand, however, lithium supplies continue to be served by a very small number of countries that dominate the market.

In 2021, Australia was the world leader in lithium production with an estimated output of 55,000 tonnes, with Chile in second place with 26,000 tonnes and China in third place with 14,000 tonnes. Currently, 98% of lithium production takes place in Australia, Latin America and China.

This narrow supply base puts increasing pressure on consumers to secure new supply chains. This led to more interest in potential suppliers who could fill the gap. Lithium is not a scarce material, with total global lithium resources recently revised to 78 million tonnes, offering growth potential in several new markets.

The areas offering the most growth are Bolivia, which has proven reserves of 21 million tonnes, Argentina with 19.3 million tonnes, Congo (Kinshasa) with 3 million tonnes, Mali with 700,000 tonnes and Zimbabwe with 500,000 tonnes.

However, there are many barriers to the expansion of these areas, namely concerns about environmental, social and governance (ESG) factors. Lithium mining, particularly in South America, has proven controversial in terms of its impact on the local environment and communities. In addition, numerous abuses by miners in local communities and environments have been observed in Africa.

As a result, many countries are reluctant to pursue it in the face of public opposition, making it critical to use a clear framework to ensure the industry adheres to strict ESG guidelines.

The lithium triangle

The Bolivia-Argentina-Chile “Lithium Triangle” accounts for 63% of the planet’s lithium reserves. Chile is already central to the supply of the metal, producing 26,000 tonnes in 2021, second only to Australia. However, Argentina and Bolivia remain underdeveloped, offering potential new supply chains.

In 2021, Argentina announced that it expects to receive a combined investment of $4.2 billion in its growing lithium market over the next five years, which will allow the country to double production by 2023 and expand to 175,000 tonnes in 2025

Argentina’s lithium portfolio currently includes 23 projects in various stages of development, including from Ganfeng Lithium and Lithium Americas. In March, Anglo-Australian miner Rio Tinto acquired the Rincon lithium project in Salta, which has reserves of 2 million tonnes of lithium carbonate equivalent.

Bolivia has been much slower to develop, but could be the bigger prize if it develops effectively. Bolivia has 21 million tons of lithium reserves in brine, according to the US Geological Survey.

However, these reservations proved to be a point of contention. In 2019, President Evo Morales announced that German company ACI Systems would invest nearly $1.3 billion to exploit a large portion of its lithium reserves. However, weeks after that announcement, a political crisis forced Morales to flee the country.

Social instability in South America

Community activism against the lithium trade is common in South America. In January, Chileans took to the streets on Friday to protest the government’s plan to sell a lithium mining contract under the slogan: “Let’s take back the resource.”

In Bolivia in 2019, demonstrators began a series of ongoing protests, demanding that the Bolivian government deliver more benefits from a large-scale lithium project with Germany’s private ACI Systems to local communities.

The protests demonstrate the potential for social instability if factors such as mineral recovery rates, environmental impact and community protection are not taken into account when planning and developing the industry, ensuring it benefits the wider population. and not just for the political elite.

As more and more miners show interest in investing in more challenging jurisdictions, the lithium industry must remain at the forefront of ESG concerns to prevent mining from negatively impacting local communities and the wider nation.

After Morales’ escape, Luis Arce, the new president, took a different approach. First, organizing a public event with eight foreign companies selected and allowed to pilot test the mining policy. A technical panel, independent and made up of field professionals, two women and two indigenous men, is then expected to decide on the contracts.

The rationale behind this decision, said Diego von Vacano, a professor at Texas A&M University, is to ensure that “Bolivia will not repeat the mistakes that have been made; for example the environmental damage seen in Chile”.


Another area with significant growth potential is Africa. Unlike South America, it has a relatively underdeveloped lithium mining sector, with little involvement in critical stages further down the supply chain, namely lithium mineral processing, lithium chemical refining and battery component manufacturing.

However, there is great potential for regional cooperation across Africa to establish a base for the refining and production of lithium chemicals for the global market. So far, several African countries have participated in the study, with Zimbabwe and Namibia achieving production. The central hurdle is scaling up stage three, the processing stage, where there are no facilities in Africa.

Final project feasibility studies have been completed in Zimbabwe, Namibia, DRC and Mali. However, in these cases the proposed plan is to produce lithium mineral concentrate domestically and then transport that concentrate to a refinery elsewhere in the world.

Decision makers must first consider a range of factors before making decisions. First, energy security, given that the processing of lithium mineral is highly energy intensive, secure energy supplies are essential for industrial engagement in the lithium supply chain. Many African countries currently have higher energy demand than available supply, meaning that countries must first secure the necessary supply before they can begin the development of lithium mining and processing.

Second, the impact on the environment. Life cycle assessments of the lithium industry show that the mineral processing stage has a much greater environmental impact than the extraction and transportation of high-grade resources. States must therefore ensure that sound environmental protection measures are used to reduce the impact of mineral processing.

Third, human rights and good governance. Good management of mineral mining and processing is essential to attract companies to invest in a country and to ensure that mining has a positive impact on communities. This is especially true in conflict-affected and high-risk countries in Africa that are affected by human rights issues.

Finally, skills and human resources. A cadre of well-trained, highly skilled local personnel will be essential to the development of the lithium industry in any African country. This will allow the industry to become self-sufficient and not rely on the expertise of other nations to support its success.

Achieving this will be particularly difficult given the limited infrastructure present on the continent, ongoing problems with stable energy supply and the lack of robust protection for workers and communities in the mine area.

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