Yahoo Finance Why a Cold War is breaking out over Milei’s lithium ‘gold rush’
Javier Milei has started his libertarian economic experiment to transform Argentina. In a series of dispatches, The Telegraph’s World Economy Editor Ambrose Evans-Pritchard travels through what used to be one of the world’s richest nations to examine whether “shock therapy” can work.
The geopolitical struggle for clean-tech supremacy is being fought at 13,700 feet on the salt lakes of the Argentine Cordillera.
It is here, in the border regions that make up the Lithium Triangle of the high Andes, where China and the West are battling for control over 60pc of the world’s lithium reserves, the critical mineral for electric vehicles and the post-carbon economy.
The two sides are engaged in a strange mix of fierce competition and joint ventures, sharing much in character with the contradictions of the commercial Cold War.
The Salar del Hombre Muerto (dead man) has an austere spiritual beauty, but it is a hard place to earn a living. The crews do turns of 14 days on, and 14 days off, enduring the seven-hour journey in a convoy of buses along a dirt road, via a pass near 15,000 feet up, before plunging down into the sub-tropical 16th-century oasis of Salta where the wine flows again.
At Galan Lithium, the 150 staff and contractors are kept under close medical watch. So are visitors, thankfully, because I needed oxygen and a potent pill to control wild swings in blood pressure. I was monitored in the surgery until my SpO2 and heart rate levels had returned to safety. It was almost like team physios bringing on the magic spray to keep a fallen player going at football matches.
“The hardest thing about Hombre Muerto is the altitude, and the winds, and the snow. Even young workers come here and just can’t take it,” said Cristian Ordenes Moraga, the Chilean site manager, diplomatically.
The Argentine lithium belt is a 300-mile stretch of salt lakes and scattered herds of wild vicuña, with occasional arrays of solar panels shimmering on the horizon.
Solar is becoming de rigueur for remote lithium operations. It is ruinously expensive to truck in diesel, and you will not be able to export to Europe after 2026 without a lithium carbon passport. “Everyone is thinking about alternatives with solar as a Plan B,” said David Guerrero, an Argentine lithium entrepreneur.
The extraction of volcanic lithium brine is in itself elegantly simple. Galan has 15 ‘bombas’ that each pump the green liquid from 350 feet underground at a rate of eight litres a second. “It is exactly like pumping water from an aquifer, except it has a density 1.2 times higher,” said Ordenes Moraga.
The brine is evaporated in a series of ponds for 18 months, removing sodium, magnesium, and boron along the way, until it reaches the global benchmark concentration of 6pc lithium, or 32pc lithium carbonate equivalent (LCE). The sun does the heavy lifting.
Galan Lithium is an Australian-listed company, founded and run by Chileans, world leaders in brine extraction. It is building a plant at the site to convert the solution to lithium hydroxide, preferred for electric vehicle batteries because of a higher energy density than standard lithium carbonate.
The process has nothing in common with the extraction of lithium from spodumene rock in Australia or China, which has a carbon footprint seven times higher, according to Benchmark Mineral Intelligence.
“Spodumene is very dirty. It has to be cooked in ovens and takes a huge amount of energy. Getting lithium this way costs $9,000 (£7,200) a tonne and creates a huge amount of waste,” said Ernesto Calvo, Argentina’s ‘Mr Lithium’ and a professor at the National Council of Scientific and Technical Research. He estimates that lithium from the salt lakes has a break-even cost of $3,000-$3,500 a tonne.
Galan’s first tonne of commercial lithium will hit the market early next year, ratcheting up eventually to an annual target of 60,000 tonnes. Chinese companies have already requested samples. So has Tesla. Other businesses from Korea, France, Canada, the US, the United Arab Emirates, are angling to do the same in nearby salt lakes, though not all are so far advanced.
The brine is manna from heaven for Argentina, in the throes of economic crisis and almost entirely cut off from external funding. The country holds a fifth of global reserves, and Tesla’s Elon Musk is determined to get his hands on it before Chinese rivals lock up the lion’s share of future supply.
“He is extremely interested in our lithium and so is the government of the United States,” said President Javier Milei after a rapturous love-in with the technology tycoon and fellow libertarian last month at the Tesla headquarters in Texas. They met again this week to talk brass tacks at the Milken forum in Los Angeles.
The president’s circle has let it be known that Tesla may in return build a gigafactory and an EV manufacturing plant in Argentina’s central city of Cordoba as a base to export cars across South America’s Mercosur region. “We’ll welcome it with open arms,” said the Casa Rosada.
Musk has hinted that he may clinch the libertarian alliance by switching his regional X operations to Argentina from Brazil, where he is accused of letting Jair Bolsonaro’s hard-Right ‘digital militias’ run amok.
Mr Milei offered up boiler-plate climate denialism in Davos – “global warming is another socialist lie” – but he has also discovered that Argentina holds a trump card in the global scramble for green mineral supply. This gives him leverage beyond his country’s population size and GDP ranking, and far beyond the pure returns on lithium mining.
China also wants to get its hands on Argentina’s lithium supply of course. Chinese companies went in early and hard when the Peronists were in charge and the country was a no-go zone for all but the bravest Western investors. Ganfeng Lithium paid $960m for 24,000 hectares for a largely untested salt flat at the height of the lithium bubble in mid-2022.
“That area had not produced a single gram of lithium. The Chinese are prepared to pay what nobody else will pay because it is part of their global strategy,” said Calvo.
Ganfeng has five operations at various stages in Argentina’s corner of the Lithium Triangle. It is hard to gauge how much of this breakneck expansion has been happening on commercial terms, and how much has been driven by mercantilist politics and subsidised credit from state controlled banks.
Xi Jinping’s regime has been actively seeking to lock up global supplies for several years under his Made in China 2025 plan, using the long arm of the Communist Party inside every Chinese company to acquire control over 20 large projects since 2018.
Andrew Sady-Kennedy, a lithium expert at the US government’s Bureau of Energy Resources, says this neo-colonial strategy has let China mop up 58pc of the global lithium supply through off-take agreements. It has cornered 80pc of the total refining capacity of lithium hydroxide.
“As the lithium supply chain stands, the United States finds itself severely underprepared to meet the exponential increase in demand over the next decade and beyond,” warned the bureau in a strategy report.
It said China’s near dominant control gives it “foreign policy leverage” and could allow it “to dictate market prices on lithium processing, battery production, and electric vehicle (EV) sales”.
Beijing could at any time restrict exports of refined lithium as a pressure tactic, much as it has weaponised gallium nitride over the last year.
Washington is belatedly fighting back, designating Argentina as the central pillar of a new ‘ally-shoring’ lithium strategy. It aims to build supply chains from trusted countries that “share the same democratic values as the US”.
The bureau maps out a plan to beat China at its own game by mobilising the US Development Finance Corporation and the Export-Import Bank to fund lithium projects and processing plants in Argentina directly.
This could never have worked with the last Peronist government, anti-American to its core. It signed up to everything going in the Xi agenda, from the Belt and Road and the BRICS bloc, to weapons supplied by the People’s Liberation Army.
Milei’s 180 degree swing towards the US entirely changes the picture.
Calvo said Argentina has failed to make much of its lithium over the last 15 years. “We’ve been extremely slow and are still barely producing more than 45,000 tonnes,” he said.
“That is a ridiculous amount. We’re getting a pittance from the upstream because all the value added is going to China or Japan. Chile has been much more organised.”
The mood at Hombre Muerto is that Javier Milei’s free market upheaval is about to change everything and kickstart a massive expansion, while Chile is losing the plot with resource nationalism under leftist leader Gabriel Boric. Bolivia has the world’s largest reserves but has struggled to extract any under its neo-Marxist Movimiento al Socialismo.
“Argentina has until now been a suffocating place to do things. It’s so protectionist it takes three months to get a new pump that I could in three days anywhere else. You couldn’t fire anybody if they weren’t pulling their weight. All this is going to go with Milei,” said Ordenes Moraga of Galan.
“Chile was always way in front but I think Argentina is going to overtake and pull far ahead over the next five years.”
On the ground in the high Andes, the Cold War rivalry between China and the West is in reality blurred at the edges, though the lines are hardening.
Ganfeng has a joint venture with Canada’s American Lithium. France’s Eramet is developing a brine project with China’s Tsingshan. It will pioneer a new form of direct lithium extraction (DLE) using a sponge technology that cuts water use by 98pc.
As a rule of thumb, it takes 500,000 gallons of water to produce a tonne of lithium, a bone of contention with the Cacán and Quechua peoples that legally control the land. If DLE technology delivers on its promises – it has not done so yet – the lithium water controversy ceases to be a major issue.
The International Lithium Association says global demand was 270,000 tonnes (LCE) in 2018. It will reach 1.2m tonnes this year, and is on track for three million by 2030, almost all for EVs and storage batteries. Recycling levels above 95pc will eventually lead to market saturation but that is very far away.
“Argentina is just starting the walk. Is the drilling equipment up there at 4,000 metres? No it’s not. Is the energy there today? No it is not,” said Guerrero, the mining entrepreneur.
“But if Argentina stays the course, there is a very good possibility that it will become the world’s largest producer.”
The lithium spot price is not what it was at the height of the bubble in 2022 when it reached $84,000 on the Chinese market, but be careful of the press narrative that lithium prices have since collapsed by 80pc.
Rollercoaster spot prices never reflected industrial reality since most lithium is purchased on long-term supply contracts.
“Lithium hovering in a range of $15,000 a tonne today is a very good price,” said Joe Lowry, host of the Global Lithium Podcast, the hard-core feed for industry insiders.
Lithium revenues alone are never going to be enough to lift Argentina out of its economic depression but that is not the relevant yardstick. The mineral is so critical to the energy transition and the clean-tech arms race that it places the country at the centre of a geopolitical bidding contest.
Milei probably never imagined that the “socialist lie” of global warming would play so much to his advantage as president of Argentina.
