Lithium in Peru

January 1, 2020
Lithium is a white metal, plated, and smooth. It is considered the lighter of all metals, and it possesses a high degree of malleability. Today, lithium is a crucial component in the production of batteries for laptops, smartphones, and the growing market of electric cars. According to "The United States Geological Survey in recent years, the global demand of lithium has skyrocketed, and its production tripled from 2015 to 85,000 tons by 2018" (BBC, 2019). Also, in 2018, the global market price of this mineral per one metric ton was 17 000 USD on average (Statista, 2019).
 
Worldwide is estimated that 75% of the global lithium reserves are found in South America, mainly in the lithium triangle made up by Chile, Argentina, and Bolivia. However, in 2017 a significant discovery of an estimated 2.4 million tons of Lithium Carbonate Equivalent (LCE) was found in the southern region of Peru, close to Lake Titicaca by the company Macusani Yellowcake, a subsidiary of Plateau Energy Metals Inc. a Canadian based company.
 
To Alex Holmes, CEO of Plateau Energy Metals Inc, the finding was not expected since the leading company's goal was to explore uranium. To Holmes, the hard rock lithium found in Peru allows more effortless mining exploitation, and it is a big deal for Peru since it is the only lithium project in this country. In 2019, Plateaus Energy Metals Inc. informed that the project will expand to 4.7 million tons of LCE.
 
To the General Manager of Macusani Yellowcake, Ulises Solis in 2018, the lithium in Peru is 99.67 pure before any refining procedure, and the discovery has gained international repercussions. On the one hand, this finding was promising for European countries and transnational companies with high lithium demand because of their growing production of electric cars; however, for other consolidated lithium exporter countries such as Chile and Argentina, the discovery could be seen as a commercial threat. To Solis, the company expects to start the exploitation of lithium in Peru by 2022, with an initial investment of 800 million dollars.
 
Today, Chile, Argentina, and Bolivia have significant sources of lithium in South America. Also, "most of the world's lithium production is under the oligopoly named the Big Three formed by the producers Albermarle Corp. [ALB-NYSE], private Sociedad Quimica y Minera de Chile (SQM), and FMC Corp (Dickson, nd).
 
In 2018, Chile was the second-largest lithium exporter in the world and the first largest in South America. This country was considered one of the world's top producers of lithium, with a production of 16 000 metric tons. It was estimated that half of the revenue from the SQM company was extracted from El Salar de Atacama, a salt flat in Chile. Differently from the Peruvian lithium (hard rock), the lithium in Chile is in brine deposits (Investing News Network, 2019).
 
In 2018, Argentina was the fourth-largest global producer of lithium, and its production achieved 6 200 metric tons (Investing News Network, 2019). In this country, the metal is found in the provinces of Salta (41%), Jujuy (37%), and Catamarca (22%) (El Clarin, 2019). Although Bolivia does not appear in the top five global exporters of lithium, according to La Gestion (2019), the mineral is under the white mantle of the El Salar de Uyuni, and it is estimated 21 million tons of lithium as reported by the US company SRK. 
 
Globally the price of lithium has doubled in the last five years, and the prediction is that it will triple in the next ten years. Its demand is continuously growing as governmental policies started to put restrictions on internal combustion engines (Holmes, 2019). According to Plateau Energy Metals' executives in Peru, it is estimated that at the beginning of 2021, the exports could yield to $500 million per year (DW, 2018).
 
In this scenario, the exploitation of lithium in Peru seems to be a rentable economic endeavor, mainly due to the rise of market prices, a consequence of worldwide governmental restrictions on combustion engines, the global boom of electric cars, and the batteries needed in computing devices. However, the external environmental and social costs of this activity must be carefully considered, mainly to address ambiguities on the rules of stakeholders related to the exploitation of lithium.
 
The Peruvian lithium is found in Macusani town, one of the most deprived areas of Puno (a city in the south of Peru) alongside the Titicaca lake. Thus, the Peruvian government should have a strong presence and monitor the project since it can affect the health, water resources, and local agricultural production of this area, as stated by Narda Henriquez, a sociologist at the Catholic University of Peru to DW in 2018. 
 
According to Edmundo Caceres (the community leader of Corani in Macusani), the discovery of lithium in Peru by the company Macusani Yellowcake did not have any environmental certification from the Peruvian government, which means that any extraction of the mineral was made without the awareness and authorization from those that live near the lithium sources. To Caceres, this situation raised the community concern about the potential environmental damage that could be caused by the company. Also, he said that "We do not know if they damaged the groundwater" and pointed out his concern for the lack of respect for the rights of the rural communities surrounding the project (La Republica, 2019).
 
The general manager of the Macusani Yellowcake company did not deny the accusations and stated the following: "It is true that we do not have the approved environmental instrument, but that does not mean that we have not started it (February 2019), so as the speakers for the community ... We could not wait, because (the community) required us to work" (Raúl Solís to La República, 2019). Edmundo Caceres, also pointed out that the community does not oppose the mining operation if the company respects the regulations.
 
The social conflict associated with territorial disputes and the redistribution of gains between communities, government, and the private sector also should be addressed before lithium exploitation starts. The economic rentability of the exploitation of lithium ore in Peru looks promising, but the environmental and social cost of this massive initiative must be addressed. Macusani community leaders, the Peruvian government, and citizens should monitor this project closely, mainly to safeguard the health and well-being of the surrounded citizens as well as the Peruvian natural resources that play a vital role for all its citizens.

 

REFERENCES

  1. Dickson. (nd). "Lithium Triangle ". ResourceWorld Magazine.
  2. Statista. (2019). "Average lithium carbonate price from 2010 to 2018". Retrieved Friday, August 9, 2019.
  3. DW. (2018). "Peru’s vast lithium discovery: A risky economic boon?". https://www.dw.com/en/perus-vast-lithium-discovery-a-risky-economic-boon/a-44936017:

About Author(s)

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Marilu Nuñez Palomino
Marilu Nuñez is a graduate student of Public and International Affairs with a major in International Political Economy at the University of Pittsburgh. She has a Master's Degree in Accounting for the FEA-USP in Brazil. Currently, she is doing research on International Trade and Mental Health in the Americas.