The lithium sector is poised for rapid growth as surging demand for electric vehicles puts pressure on miners to step up production. Investors are keen to finance projects in Latin America, but a 2018-20 plunge in the price of the metal is a cautionary tale.

When Bolivian President Luis Arce called on companies to develop the country’s vast lithium deposits in April, he said speed was of essence. “We have lost time and we must recover,” he said. “That recovery obliges us to improve the technology to get quicker results.”

Arce, who took office in November 2020, vowed to restart a clutch of projects suspended by the interim government during its year in power after former President Evo Morales was removed from office at the end of 2019.

Bolivia has the largest reserves of the silvery-white metal in the world, trailed by Argentina and Chile. The three countries make up the so-called lithium triangle in South America, a region now at the center of a lithium rush.

Miners are moving in to secure supplies to meet an expected surge in demand for its use in rechargeable batteries to run gadgets from laptops to cell phones and electric vehicles (EVs). Australia’s Orocobre and Galaxy Resources are planning a $3.1 billion tie-up to create the world’s fifth largest lithium producer, headquartered in Buenos Aires. Chilean chemical company SQM plans to raise $1.12 billion through a share sale to boost lithium output.

There is a sense of urgency not just to meet rising demand, but in case lithium is eventually replaced in batteries with alternative metals, said Alejandra Fernández, director of corporate ratings at Fitch Ratings in Chile. Battery technology, she said, “is evolving very, very fast [and] there is a possibility that in 15 years or so they won’t use lithium.”

In the meantime, lithium is all the rage. The average price of lithium – lithium, lithium hydroxide and lithium carbonate – shot up almost 42% in the first four months of 2021, according to London-based Benchmark Mineral Intelligence.

This is making financial institutions keen to bankroll the many projects in Latin America.

“There’s quite a lot of unexpected demand and therefore it’s a good opportunity for Latin America because all of a sudden lithium is no longer in a situation where there´s excessive supply,” said Ana Cabral-Gardner, a managing partner at A10 Investimentos, a São Paulo-based financial advisory firm that controls Sigma Lithium Resources, a Canadian miner in Brazil.

As lithium mining projects take several years to progress from the planning to the operational stage, the gap between supply and demand is expected to widen. Demand is forecast to reach 2.2 million metric tons in 2030, more than the 1.5 million tons of expected supply that same year, according to Benchmark Mineral Intelligence.


For Latin America’s nascent lithium producers, the prospect of sustained shortfalls in supply and buoyant prices could make even the technically complex projects bankable.

That bodes well for Bolivia. Compared with its peers in the lithium triangle, the brine from Bolivia’s Salar de Uyuni, the world’s largest salt flat, has a higher proportion of magnesium. This makes separating the lithium and processing it into battery-grade lithium carbonate far more complex and expensive than in Argentina and Chile, where the higher-grade brines are cheaper and easier to develop. The problem is that it’s hard to pick up acreage in Argentina and Chile. Many of the best spots are already in development.

In the triangle, Chile is expected to grow the fastest, with production due to surge 130% by 2030 thanks to the expansion of existing projects by SQM and US-based Albemarle, while production in Argentina is expected to roughly double over the same period as projects come into production, according to Roskill, a London-based minerals research and consultancy firm.

For further production growth, companies will eventually be forced to look beyond the low-hanging fruit already getting picked to more challenging projects inside and outside the lithium triangle.

That makes Bolivia attractive despite its challenges. “Bolivia currently does not have any commercial production of lithium, but the country has the largest lithium resources in the world and the long-term growth potential is substantial,” said Allan Pedersen, an Australia-based principal analyst at Roskill.

Outside the triangle, Sigma is developing a hard-rock lithium project in Brazil’s southeastern state of Minas Gerais, where it has operated a pilot plant since 2018. Sigma obtained a $45 million syndicated loan led by the French bank Société Générale to finance part of the first phase of the project and it aims to start producing large volumes in 2022. Demand has grown so much that the company has brought forward a second expansion phase originally scheduled for 2024 and is considering moving forward a third.

“The market is still small, so we have to manage how much we bring on stream. So, the question is, ‘How quickly do I develop my phases?’” said A10’s Cabral-Gardner, who doubles as Sigma’s co-chair and chief strategy officer. “Our debate is whether to go for phase three and have a 10- or 12-year mine, or do I have a 20-year mine with two [initial] phases?”

Image: Ana Cabral-Gardner


Sigma’s contemplation stems in a large part from the price and demand turbulence that rocked the sector between 2018 and 2020. The addition of new mines and increased production from existing facilities brought a glut of lithium to the market, driving down prices and pushing several mines into bankruptcy in 2019. At the same time, softening demand in China, the world’s largest EV market, caused lithium carbonate and lithium hydroxide prices to plunge 36% between January and December 2019, according to data compiled by Roskill.

“Just look at the last five years’ history. The price has been bouncing around all over the place,” said Tim Goldsmith, CEO at Australia-based Rincon, which runs a lithium mine in Argentina.

In early 2020, the sector suffered another blow as the COVID-19 pandemic slowed global demand for EVs and raised costs for producers.

Minera Exar in Argentina, for example, was forced to increase the capital expenditure of a new lithium brine project to fund COVID-19-related health and safety protocols. The company, a joint venture of China’s Ganfeng Lithium and Canada’s Lithium Americas, had originally budgeted $565 million for the Caucharí-Olaroz mine, but it was forced to raise this to $641 million to finance the new measures.

“The real increase [in production costs] was less than 10%, but when you add to that security measures and controls, it has been a significant increase,” said Ignacio Celorrio, head of Latin America at Lithium Americas.

While the disruptions have stung producers, they’re not expected to derail the long-term growth of the lithium sector in Latin America. EV production is growing faster than expected globally, fueled by efforts by the European Union to phase out fossil fuel vehicles and an increased focus on green investments by the US and other governments through COVID-19 relief bills.

“The primary growth driver will be the increasing demand for electric vehicles.” 

Allan Pedersen, Roskill

Roskill predicts that battery capacity demand will grow 23.6% per year until 2030, with 82% of the increase coming from the auto sector.

“The primary growth driver will be the increasing demand for electric vehicles,” said Roskill’s Pedersen. “The demand growth will be fuelled partly by consumer sentiment, financial incentives and government policy, but also by the decreasing cost of electric vehicles, which will make a switch from conventional cars more attractive.”


With the expected growth in demand and supply, the financing options are expanding for the sector.

Rincon plans to raise around $600 million for a brine project in Argentina. The proceeds will be used to scale up the project to commercial size, although a smaller plant could be built if less money is raised, said Goldsmith.

“We are looking at every source [of financing] available.” 

Tim Goldsmith, CEO, Rincon

The funds will also allow its controlling shareholder, the Cayman Islands-based private equity fund Sentient Equity Partners, to exit the project, he added.

“We are looking at every source [of financing] available and the sources available now are very different to what they were a year ago,” said Goldsmith. “We are open to joint ventures … [and we are] keeping our minds open to every alternative.”

Lithium Americas is also looking at financing options for its project in Argentina, and money could come from automakers keen to secure a reliable source of lithium, said Celorrio.

Another source could be sustainable financing, even though mining is traditionally criticized for pollution and negatively affecting local communities.

In February, Sigma raised CAD42 million ($33.1 million) in a private placement of shares that was 10-times oversubscribed and priced 10% above the top end of the price range. Cabral-Gardner attributes this to the project’s high environmental, social and corporate governance (ESG) standards.

“When you look at the opportunity for Latin America, we believe the real opportunity is for the region to produce the most environmentally sustainable lithium in the world,” she said.


Even with ample financing available, scaling up lithium production in Latin America likely will prove a challenge. Within a single country, large variations in the composition of the lithium brines means there is no one-size-fits-all technology that can be used to extract the metal across multiple sites.

In Bolivia, the lithium is in a solution that contains high concentrations of magnesium, as well as potassium, sodium, calcium and sulfates. This makes it costly to produce lithium there.

“Not all lithium is the same, so when people say there’s a lot of lithium in Bolivia, there probably always will be [unless] there is a technological breakthrough to clean up all those impurities to make that lithium battery grade,” said Sigma’s Cabral-Gardner.

For investors, another challenge is the rapid growth of sector itself. Following the sharp price fluctuations and disruptions between 2018 and 2020, it’s become harder for senior lenders to predict future demand and prices for lithium. This is deterring them from financing projects.

“Senior debt-type investors are finding it a little bit more difficult … because they want to know how long it will take to get there and what the demand curve will look like,” said Cynthia Urda Kassis, lead industry coordinator for metals and mining at Shearman & Stirling, a US law firm.

But for bolder investors, such as the venture capital types and those who are more comfortable with new technologies and have a stronger risk appetite, “they are seeing the writing on the wall [for conventional vehicles],” she added.

“In order to get the caliber of debt you need, you have to demonstrate your low cost.” 

Cynthia Urda Kassis, Shearman & Stirling

Indeed, Rincon’s Goldsmith said several commercial banks have been wary to lend to his company simply because lithium is not freely traded, which makes hedging hard. Sigma’s Cabral-Gardner said she has also found from her experience in raising funds on the Canadian bourse that the debt markets are more cautious than equity investors because of their reliance of fixed returns.

“The debt markets are more disciplined and tend to pay more attention to the whole commodity cycle,” she said. “In order to get the caliber of debt you need, you have to demonstrate your low cost.”

Another challenge for the sector may be posed by the growing role that ESG considerations are playing in domestic and foreign investments decisions.

Australian lithium’s “dirty” secret has long been that much of the rock mined in the country is sent to China to be processed by companies powered by a grid supplied by coal-fired power plants. With consumers increasingly demanding that EV components abide by strict ESG standards, some producers may find their reputations at risk from their association with companies or practices beyond their control.

Lithium Americas had to take that into account when partnering with China’s Ganfeng in its Minera Exar project in Argentina. Celorrio said that while Ganfeng’s previous activities were never a source of concern, both of the partners agreed to maintain high ESG standards at their joint project. The automakers US-based Tesla and Germany’s BMW, as well as South Korean chemical company LG Chemistry, are among Ganfeng’s largest global customers.

“Ganfeng serves a lot of companies in Europe and other companies with higher ESG concerns than many others I have seen. It has never been an issue and never been a concern,” he said.

With lithium demand and prices poised to rise for years to come, the market may be more than willing to develop creative ways to finance projects.

Shearman’s Kassis said even traditional commodities investors that rely on historical data to predict future prices and demand are learning to be more creative when dealing with the lithium sector.

“Historical data doesn’t help you here because the world is moving into a new paradigm,” she said.

This could bring cheer to Bolivia’s impatient president. It may just be a matter of time before the challenging Salar de Uyuni is dotted with mines.