Deep within the vast, otherworldly expanse of Argentina’s high desert, beneath layers of time and brine, a seemingly ordinary mineral conceals a remarkable power. This unassuming substance, often mistaken for table salt, is the key to powering electric vehicles, cell phones, and the burgeoning green energy revolution. They call it “white gold” – lithium.
The Cauchari-Olaroz mine, nestled in Argentina’s Jujuy province, stands as a testament to the immense potential of this “white gold.” With the promise of producing 40,000 tons of lithium over the next 40 years, it has captivated attention. Yet, what is even more intriguing than the mineral itself is the unexpected corporate partnership extracting it. The mine is a joint venture between Canada’s Lithium Americas and China’s Ganfeng Lithium.
In a world marked by geopolitical rivalry between the United States and China, Western companies are actively seeking ways to “decouple” or “de-risk” from their once-strong Chinese counterparts. This ripple effect touches every sector, particularly those in pursuit of critical minerals. Amid this tempest, South America’s Lithium Triangle—encompassing Argentina, Bolivia, and Chile—emerges as an oasis of continued collaboration between China and the West. But in an age marked by strategic competition, how long can this harmonious dance last?
Collaborations Spanning Continents
Over the past five decades, Chinese mining companies like Ganfeng, Tianqi, and Zijin have secured partial or majority control over critical mineral mines across the globe. This includes CMOC’s 80 percent stake in the world’s largest cobalt mine in the Democratic Republic of Congo and significant Chinese investments in Indonesia’s nickel industry. Lithium is no exception; Chinese entities have acquired half of the world’s largest lithium mines offered since 2018.
Chinese businesses have also made daring investments in “junior mining companies,” adventurous entities that undertake the risks associated with uncovering nature’s hidden treasures. These junior miners, typically born in the mining hubs of Canada and Australia and nurtured on their respective stock exchanges, perpetually thirst for capital. Chinese financiers readily stepped in when Western investors were preoccupied with the latest tech ventures.
Another strategy is the formation of joint ventures with Western and local companies. In Australia, Tianqi holds a 51 percent stake in Greenbushes, the world’s largest lithium mine, while U.S.-based company Albemarle owns the remaining 49 percent. In Argentina, Ganfeng and Lithium Americas share ownership of the Cauchari-Olaroz lithium mine, and Ganfeng is the majority owner of Argentine Minera Exar, having recently purchased local Lithea Inc from Argentine oil company PlusPetrol for $962 million. Zijin is actively courting Argentina’s state-run firm YPF to establish a lithium battery cathode plant in Catamarca province and already owns the Tres Quebradas lithium mine. Chinese automakers Chery and Gotion are drawing up blueprints for a $400 million electric vehicle battery and car factory in Jujuy province.
The Great Decoupling Dilemma
The COVID-19 pandemic revealed the vulnerability of Western supply chains to China, prompting U.S. policymakers and their global counterparts to contemplate the process of “decoupling” or reducing risks associated with key supply chains tied to China. For several private companies, collaboration with Chinese counterparts in industries vital to national security has become increasingly precarious.
Canada is a prime example. On July 31, 2023, Lithium Americas chose to separate its North American and Argentine operations, likely to safeguard the North American division from involvement with Ganfeng in the Cauchari-Olaroz project. A year earlier, the Canadian government directed three Chinese entities to divest from Canadian junior mining companies, which included a Canadian-led lithium mining project in Chile. This action falls under the Investment Canada Act, which reviews foreign investments in sensitive industries, akin to the Committee on Foreign Investment in the United States.
Australia, on the other hand, is striving to reduce its dependence on China by enhancing its domestic capacity to refine lithium spodumene into lithium phosphate salt, destined for the United States and other markets. In February 2023, the Australian government thwarted the Yuxiao Fund’s attempt to double its stake in Australian mining company Northern Minerals, citing national security concerns.
Notable Omissions
In the intricate tapestry of the global lithium industry, one question stands out: Where are the European Union, Japan, and South Korea? While the Andean plateaus of South America teem with players from China, the United States, Canada, and Australia, these U.S. allies seem conspicuously absent.
Currently, the only European carmaker with ties to the South American lithium industry is BMW, which sealed a deal with Livent in March 2021. However, at a July 2023 summit with Latin American and Caribbean leaders in Brussels, EU president Ursula von der Leyen announced that the EU and Chile are working on a lithium memorandum of understanding.
The Asian front, on the other hand, remains an enigma. Japan, with its automotive expertise and historical connections to countries like Brazil and Peru, appears curiously absent. A decade ago, Toyota Tsusho entered into a lithium sourcing agreement with two Argentine companies for the Salar de Olaroz in Jujuy province, but little progress has been observed since. In 2021, Japan established the Battery Association for Supply Chain, yet there are no indications of BASC’s intentions to engage South America.
South Korea has made a more significant investment in the region. In 2018, Korean company POSCO acquired a substantial position within the Hombre Muerto salt lake and announced a $4 billion investment in a lithium mining project there in 2022.
This omission from the lithium race is not just a business oversight; it is a strategic error. These countries’ automotive industries have played a pivotal role in their economic development, innovation, and competitiveness. Their lack of substantial investment in South American lithium could place them at a strategic disadvantage, potentially allowing their Chinese competitors to surge ahead in the electric vehicle transition.
The Future of South American Lithium
As we stand at the intersection of economic ambition and geopolitical maneuvering, the path ahead for South America’s lithium landscape is already taking shape.
Local governments are increasingly pushing for companies to retain refining, processing, and battery production within their borders. In Chile’s recent national lithium strategy, the aim is to domestically refine and process lithium, creating jobs and adding value for the Chilean people. As Chinese automakers establish battery factories in South America, it is evident that Chinese companies are responding to local government requirements.
The global automotive giants will not remain mere spectators. They are on the brink of forging direct sourcing and investment deals with mining companies. GM and Ford have already initiated their moves, and it is only a matter of time before European and Asian giants such as BMW, Toyota, and Hyundai follow suit. Even tech giants like Sony, LG, and Samsung may soon join the lithium fervor.
Yet, the lithium stage is vast, and other players may emerge. In the United States, geologists have recently unearthed lithium deposits along the Nevada-Oregon border, potentially among the world’s largest. The Salton Lake in southern California, known as the “Lithium Valley,” and Nevada’s Thacker Pass hold great promise. In India’s Himalayan
