Thought leadership from our experts

Battery minerals. The case of lithium in Argentina

Lithium has become one of the minerals with increasing relevance and potential value, due to its use in manufacturing batteries.

As predictions raise on electric vehicles use and the lithium-ion batteries as energy storage systems, the evolution of this mineral is being closely monitored by the mining industry.

World lithium resources are concentrated in specific areas of the globe; countries such as Argentina, Bolivia and Chile (the lithium triangle) have gained the attention of the world as they represent a major share of these resources.

Lithium cannot be found as a pure element; rather, it needs to be extracted from other minerals and brines. Lithium carbonate is not traded on international stock exchange markets, and therefore its price is dependent on direct negotiations between producers and end-users. In the past decade, its average value has increased fivefold, with a particularly significant increase between 2016 and 2017. However, there remain many areas of uncertainty and ongoing research around this mineral and its applications.

Argentina is one of the few countries in a position to consolidate major reserves of lithium, with two projects already in production in the Olaroz salar and in the Salar del Hombre Muerto, plus a relevant number of exploration projects with potential for development in the next few years. These vary in size, technical conditions, etc, and it remains to be seen how many could become productive in reality, and to what extent.

Independent from the availability of resources, other factors also play a role in the competitive development of these projects. Such factors relate to technical expertise; methods of extraction; the infrastructure needed; and relations with the impacted communities, which may differ from province to province or even within the same province.

All over the world the mining industry have faced and will continue facing challenges to bring projects into production and the interaction among mining companies, governments and communities will be crucial. Therefore, it will be of the essence to work together on a joint policy for the long-term development of these resources in certain regions.

Regulatory aspects for the lithium market

Argentina lacks specific regulation for the development of lithium projects; however, provisions of the Mining Code and procedural provincial regulations apply to lithium and the granting of concessions as ruled by the Mining Code. Given the very particular nature of lithium in salars, there are many technical hydrogeological aspects related to its extraction which need to be considered in a specific way. As such, Argentina is anticipating discussions that will work towards regulation that can encompass all the aspects relevant to lithium and the extraction thereof. In such discussions, the following aspects will have to be considered.

Mining public policy and the role of provinces within a federal organisation

Argentina is a federal country and this plays a crucial role in any discussion of natural resources, since these are located within the countryʼs provinces. In terms of lithium, this is mainly found as brine salars in the provinces of Catamarca, Jujuy and Salta.

Provinces within a federal country usually have their own constitution and legislation (though in certain areas they would also be bound to federal law); these boundaries are sometimes unclear. The main impact on natural resources is the power to rule and decide on specific policies related to the mining industry, even within the scope of a federal or national resources policy.

As a federal country, and in order to develop the industry in a long-term, sustainable way, it is vital to consider the views and needs of the interested provinces, and the national legislation as it takes in local policies and interests.

This process will require specific technical knowledge from the government at all levels. It also anticipates, firstly, the interaction between future developments and current plans for infrastructure development; and the economic and production agendas of the provinces involved.

Also necessary for discussion is the role and scope of interaction to be played by public provincial mining companies and their participation in lithium projects – for example, in the case of Jujuy, lithium is considered a strategic mineral and this fact has several implications.

Provinces will also have relevant saying in terms of local procurement and the developement of the industry in a more local inclusive way.

Shared Resources and Water extraction

One aspect that will become more relevant as lithium projects evolve and make their way into production at a larger level, will be the case of resources within the boundaries of certain provinces. In this regard, the Provinces of Salta and Catamarca share lithium resources, as well as other minerals, in a certain area between the two provinces which is subject to a dispute regarding the border limits and exact demarcation.

Independent from this dispute, resources that would belong to more than one province and which due to its nature (brine salars) would transit naturally and phiscally notwithstanding any legal boundary, will require specific analysis and regulation.

Same situation will apply to water resources which extraction may also affect more than one province. Hydrogeological research to determine the acquifers capacity and the way they evolve (recharge, etc) will be critical to regulate this aspect also intimately liked to lithium extraction.

Shared resources by states (either at the international level and/or within a country) is one of the most sensitive areas of natural resources law and given the fact that lithim may act as a fluid, such fact adds another level of complexity. Regulation on these aspects will certainly require research and multiple skills of different legal areas.

Social licence

Environmental protection, water resources and access to economic benefits are at the top of the agenda when working in the mining sector, and lithium projects are no exception.

Community interests affected by the specific projects may differ substantially from province to province – or even project to project, when located within the same province.

Successful benefits – including improvements to the basic infrastructure, local procurement and, in general terms, the living conditions of communities impacted by mining projects – would eliminate, to a significant degree, much of the grounds for social unrest and potential conflict.

Climate Change and the new Environmental Agenda post COVID 19

The increasing trend on climate change concern will be also a relevant aspect to add within all the other issues to consider. As more countries adapt their legislations to include climate change considerations in several areas and industries, the interaction and impact on the extractives sector will become more evident.

However, COVID- 19 pandemia may change the intensity of this trend either accelerating such or the contrary in certain regions of the world. Africa and Latinamerica are regions where the impact of the post-pandemia could be devastating from an economic perspective with a very slow recovery and therefore, how these trends may apply will have to be closely monitored.

No matter the degree of intensity, the environmental agenda towards a low carbon future and therefore a transition in the energy matrix has made its way and will remain in force.

Lithium projects and future development of the elecetric vehicles market will be an essential piece within such agenda.

This article representes a very brief overview of the main issues and trends that would have to be considered for future regulation of the lithium sector in Argentina.

The best laws and regulations, when considering their application and enforcement, have proven to be those where consensus among all stakeholders is reached (or at least taken into account during the process).

It is to be expected that governments, communities and industry players work together effectively in order to develop certain general guidelines relating to the lithium sector. Within these guidelines as a general framework, specific protocols for each province and more specifically for each particular salar and its operation, could be developed. This could be a way to integrate general parameters with the situation of each project taking into consideration the relevant aspects and issues at stake.

The concepts and views described in this article belong exclusively to the author and do not represent the views of the firm or any client or company.