Rich veins, but rocky terrain: Bolivia's mining dilemmas

Bolivia has very significant mining resources, including major lithium deposits, but it has struggled to develop them, despite the importance of the sector to the economy.

President Luis Arce's government is currently attempting to develop the lithium industry to make the country a big global supplier, but has run into problems, including legislative obstacles that prohibit state-owned miner YLB from associating with private companies to process brines from its extensive salt flats and extract the white metal.

Although more than 50% of Bolivia's exports come from the mining industry, there is a lack of exploration, no new deposits have been discovered and there has been a dearth of foreign investment in the sector, which is plagued by social problems.

BNamericas speaks with Héctor Córdova, former deputy minister of mining and metallurgical productive development and now a private consultant, about the current state of the mining sector in Bolivia and the challenges it must overcome to achieve development.

BNamericas: What is the current situation in the mining sector in Bolivia?

Córdova: Bolivia mainly produces gold, silver, tin, lead and zinc, which account for more than 90% of production, but there are several secondary minerals such as antimony, bismuth, tungsten, iron, copper, cadmium, potassium and magnesium, among others.

In Bolivia we have three active mining players: cooperatives, private companies and state companies. Most of the mineral production in Bolivia comes from private companies, which account for 58%, followed by cooperatives with 40% and the rest from state-owned Comibol.

For some years now, the big private companies that were working in Bolivia have gone and left junior companies in their place, with much smaller investments. Among those that left are Glencore and Sumitomo.

At the moment, the main companies operating in Bolivia include Minera Santa Cruz, Minera San Cristóbal, which was established in Bolivia to buy the shares of Sumitomo, and New Pacific, which operates near Potosí, in Colavi, and it has already made an important investment in zinc, lead, silver and tin exploration. The company also explores in Oruro, in Tarangas, where it found a good gold deposit.

BNamericas: With Bolivia's great mining wealth, why has the activity failed to take off and why have important companies left the country?

Córdova: Mining went into lethargy in 1985 when there was a drop in prices in the international market, although it recovered a little in 2005.

For four years, it has been the main economic sector in Bolivia. More than half of exports come from the mining sector and more than half of those exports are gold. In the last two years, mining exports have broken records.

Unfortunately, the country doesn't attract foreign investment, even more so if we compare ourselves with countries like Chile, Peru, Argentina, because in our country there is legal uncertainty.

In Bolivia there are lots of regulations, but the behavior of authorities, communities and cooperatives leaves much to be desired, which is why investors don't dare to come. Investors don't feel confident that they will recover their investment or that it will be respected because there have been actions that prevent the arrival of private capital.

BNamericas: Where is private investment currently most needed to guarantee the sustainability of mining?

Córdova: Basically in the first stage, which is exploration to guarantee the sustainability of mining operations.

At this stage the State cannot replace private companies and we have a great weakness there because the deposits that are being exploited will be exhausted and we won't be able to maintain our mining activity in the future.

That's a weak point. The government has to guarantee stability to the private sector.

BNamericas: What paths are there in the medium and long term to improve legal security and offer stability to investors?

Córdova: It's quite a complicated situation because there are lots of actors. There are communities that conduct extortion, they demand many things from private companies; cooperatives that don't have capital to invest take over mines to operate them; and the unions have become significantly empowered in the last 20 years and have great strength and can push anyone around.

Finally, there is the attitude of the governments in the last 20 years, although now there is a clearer attitude, because in previous years every May 1 there was an announcement of what was going to be nationalized and that made everyone run.

In recent years, only the Mallku Khota silver deposit, operated by the Canadian company South American Silver, was nationalized [in 2012, by the government of then-president Evo Morales], but the announcements of nationalizations, even when they eventually didn't happen, created fear and insecurity.

BNamericas: What is the situation with lithium now?

Córdova: We're mired in great uncertainty.

The project that was the responsibility of YLB and which was underway until 2019 was interrupted due to the pandemic and the changes in government we had, and the current government has tried to change to DLE, direct lithium extraction technology, thinking that it would advance quickly, which meant abandoning the previous project that used evaporation ponds.

Due to this abandonment, there isn't enough raw material for either the potassium chloride plant or the lithium carbonate plant.

The direct extraction method is proven in the laboratory, but it hasn't even been done in pilot plants.

The government created expectations that it would greatly improve the process. Based on that hope, it abandoned the old project, which worked, albeit not in the most efficient manner.

The government sought partners and Chinese companies and a Russian firm arrived to bring DLE technology, but since Bolivian legislation prohibits YLB from associating with private companies to process brine and obtain the raw for lithium carbonate, the agreements can't be translated into contracts. We are paralyzed as long as the law isn't amended.

BNamericas: Is there any possibility of amending the law?

Córdova: It won't be easy to amend the law because it's a kind of code of honor for the governing party. We're stuck on that.

The government now says that only pilot tests will be carried out and agreements have been made with companies to build pilot plants and define the technology, but taking these plants to the industrial level takes years and the government should've kept the old project with the ponds alive in the meantime.

The lithium project is in limbo at the moment.

BNamericas: So there's no clear solution for that at present?

Córdova: Unfortunately not. I propose that the old project be restarted to obtain potassium chloride and lithium carbonate, which will generate the resources required.