The lithium sector has been hit with two battles in so many days as countries take positions to control supply.
Suddenly, it seems the playing field is undergoing significant changes that will soon have end users — and particularly the automakers revving up their electric vehicle output — with increasing concerns about supplies.
However, Australia may be a beneficiary – already a significant source of lithium supply, with many more projects in the pipeline, this country could soon be seen as one of the decreasing sources that are not subject to political and geopolitical interference.
Last week’s events should also be seen as just one more spoke in the de-globalising process as competing blocs begin to vie for economic dominance – in particular China versus the United States, and the increasing threats to the greenback as the world’s reserve currency.
Chile, China make their moves
First, Chilean President Gabriel Boric announced the nationalisation of the country’s lithium sector. Anyone who wants to develop a lithium project will have to do so with the government as their partner.
Second, and probably more concerning, there came a report that an unnamed Chinese company had offered the Taliban US$10 billion in infrastructure projects in return for access to Afghanistan’s lithium resources.
Already, five Chinese companies are reported as having representative offices in Kabul and at least 20 have made enquiries about exploring in Afghanistan.
In Chile’s case, the government is planning to establish a national lithium company which will be in charge for signing up company partners for projects.
SQM and Albemarle, both listed on the New York Stock Exchange, will be allowed to continue as independent entities until their present licences expire, in 2030 and 2043, respectively.
President Boric said future lithium licences will be issued only as public-private partnerships with state control.
Lithium cartel being explored in Latin America
Last year, Mexico took a similar step in relationship to its own lithium potential.
Now, however, it is reported that Mexico has proposed joining with Argentina, Bolivia and Chile in creating a bloc that would control more than 65% of the world’s known lithium deposits.
The cartel, as has been discussed between the proposed partners, would encourage downstream processing and getting into the battery business themselves.
Taliban controls one of world’s largest lithium resources
The Afghanistan situation is critical because the country is estimated to contain the world’s second largest lithium resource (after Bolivia — along with 2.3 billion tonnes of iron ore, 30 million tonnes of copper, 1.4Mt of rare earths, according to the Washington-based Brookings Institution).
China’s approach on the subject was made, according to reports, on 13 April in the office of Sheikh Hadith Shahabuddin Delawar, the Taliban’s acting minister of mines and petroleum.
In fact, that ministry put out a press release saying that development of the country’s lithium resources would create 1 million jobs, including indirect ones.
So, with his sudden pull-out of Afghanistan, US President Joe Biden handed the Taliban billions of dollars’ worth of military equipment, but also handed the Chinese a chance to deny the West any of the country’s mineral supply.
Afghanistan’s ‘stunning potential’ as lithium producer
Back in 2010, an internal memo was leaked from the Pentagon which dealt with a study the US had been undertaking on Afghanistan’s mineral resources.
The details were published around the world, mostly in relatively brief form, but the New York Times gave it massive treatment, quoting the then head of US Central Command General David Petraeus saying that the work showed “stunning potential” for mineral development.
The paper added that Pentagon officials saw Afghanistan as a future major world producer of iron ore and copper, and that the country could become the “Saudi Arabia of lithium”.
In all, the country could become a “major mining centre of the world,” the paper said at the time.
The US Geological Survey had estimated known deposits in Afghanistan could hold US$421 billion worth of iron ore although the preciseness of that sort of estimate should not be taken too seriously — several other media reports talked in terms of the overall mineral endowment as being worth between US$1 trillion and US$3 trillion, which is a fairly elastic estimate.
The USGS estimated the Helmand province, alone, could contain up to 1.4Mt of rare earth elements, which would dwarf what Australia could potentially supply to the world. China’s control of those resources, as well as their downstream processing capabilities, would enable Beijing to maintain its stranglehold on those vital critical metals.
There was plenty of niobium, too, in Afghanistan — along with impressive amounts of cobalt, gold, molybdenum, rare earths (estimate: US$7.4 billion), silver, potash, bauxite and graphite.
‘Rich salt lakes’ with lithium
Surveys carried by the US in the western region of Afghanistan had, the report said, located dry salt lakes so rich in lithium that they could be on a par with those of Bolivia.
However, it would be many years before any mines would be developed, even if the Chinese bring their can-do attitude to the task.
China has also said previously it wishes to help the “reconstruction and development” of Afghanistan.
Afghan minerals harnessed to Belt and Road
Clearly, Beijing plans to draw Afghanistan into its Belt and Road Initiative (BRI). It is a telling detail that the 76km-long border between the two countries includes a pass that was a route on the old Silk Road, the template for the new BRI. Expect to see a highway and rail line this time rather than horses and camels.
China may be able to achieve what others have failed to do: make Afghanistan a vassal state. In that case, they will have under their control Afghanistan’s mineral wealth.
The British Raj failed to subdue the Afghans — it’s famous retreat from Kabul in 1842 ended with the entire 16,000-man army dying or being killed.
Then the Soviet invasion came a cropper in more recent years.
And two years ago, the Americans were humiliated.