Chinese Investors Vie for Lithium Mines in Argentina

Chinese Investors Vie for Lithium Mines in Argentina

By Juan Delgado/Diálogo
November 09, 2021

The Zijin Mining company, one of the largest copper and gold producers in China, will acquire in full the Canadian company Neo Lithium Corp., which exploits lithium in Tres Quebradas, in the Argentine province of Catamarca, for $770 million, both companies said in a mid-October statement. In September, two other Chinese companies announced that they had also reached agreements to buy two Canadian lithium mining companies that operate in Salta province, according to several media outlets, including Reuters and the financial newspaper Nikkei Asia.

“The Chinese interest [in Argentina] corresponds to the need to guarantee access to a strategic resource meant to satisfy the growing demand of its automotive industry, such as next-generation electric vehicles, which need to be powered by high-performance batteries,” Sergio Cesarín, coordinator of the Asia Pacific and India Studies Center at the National University of Tres de Febrero, in Argentina, told Diálogo.

Due to its high electrical conductivity, lithium is key for many rechargeable devices, such as mobile phones, laptops, and energy storage systems, as well as electric vehicles.

According to Jefferies, a U.S.-based investment bank, prices for lithium carbonate, a compound used to make lithium-ion batteries, have soared more than 230 percent in 2021, Nikkei Asia reported.

In February 2021, the Council of the Americas, a U.S. organization that seeks to promote democracy and free trade in the region, predicted that the global lithium market will increase fivefold in the next 35 years. This will have consequences in Argentina, Bolivia, and Chile — the so-called lithium triangle — where, according to the U.S. Geological Survey, 58 percent of the world’s lithium reserves are located.

“Argentina is the most promising case for the expansion of the lithium industry, as it is looking for opportunities to accelerate the recovery of its economy,” said Ryan C. Berg, a fellow at the Washington-based Center for Strategic and International Studies, in an August 2021 report.

“Chinese mining firms operating in our region are not a new issue; several mining projects in Bolivia, Chile, and in northern Argentina confirm that their most aggressive positioning is through mergers and/or acquisitions of local, European, Australian, or Canadian companies,” Cesarín said.

According to the Energy Research Institute, a Washington-based nongovernmental organization (NGO) conducting research on global energy markets, the lithium extraction process demands a lot of water — nearly 2 million liters per ton of lithium. Mining activities have a major impact on agriculture in the South American lithium triangle, one of the driest places on the planet, the NGO said, adding that there is also the possibility for toxic chemicals used during the process to leak into water sources.

For Cesarín governments should pay attention to the greater local added value, and not the mere sale of the unexploited resource. “For that [purpose], it is necessary to include contractual aspects on technology transfer; and second, [to ensure] that the project is eco-sustainable and does not destroy the local ecosystem,” he said.

For his part, Berg warned about China’s growing influence in South America. “Not only has China increased its investments in the lithium triangle countries, but it has also strengthened its bilateral relations through its [COVID-19] vaccine diplomacy,” he added.