ANALYSIS-Bolivia holds key to lithium, the battery car metal

Tue Apr 14, 2009 3:00pm BST

* Lithium demand to outstrip other battery metals

* Mining Bolivia's lithium wealth won't be easy

* Electric cars to fuel the increase in lithium

By Michael Taylor

LONDON, April 14 (Reuters) - Minor metal lithium is set to charge ahead to become the top material for batteries and vital for electric transport, but supplying any spike in demand could be fraught with difficulties.

Bolivia, a poor but resource-rich country governed for the past three years by leftist Evo Morales, has about 50 percent of the world's lithium deposits at about 5.4 million tonnes.

But Morales has an uneasy relationship with the United States and big business -- having already nationalized energy, mining and telecommunications companies.

"It's not open to investment," said Charles Kernot, a mining analyst at Evolution Securities. "If you can't get agreement from the Bolivian authorities, then no major mining company would be able to get in and develop the projects."

"I would be cautious ... the geology is pretty straight forward, it's just the politics of getting in to develop the asset."

Despite Morales' anti-capitalist rhetoric, some miners are already vying for control of Bolivia's mineral riches, with the amount produced currently in the country negligible.

Global lithium carbonate supply was approximately 100,000 tonnes in 2008, up 2,000 tonnes from 2007, while consumption was a little higher at 105,000 tonnes -- up 2 percent year-on-year.

"Some far-sighted companies are already attempting to secure the rights to mine lithium in Bolivia's Uyuni salt flats," said Carl Firman, an analyst at Virtual Metals, adding that the metal is mined as a by-product in clays, brines, salts or hard rock.

"This will be fraught by political complexities, as Bolivia will not simply allow its lithium to be mined and exported elsewhere for downstream processing and fabrication," he added.

The top priority of the government of President Morales is to maximize the benefits that Uyuni may bring to Bolivians.

The global auto industry is already seeing the potential of such a light, energy-efficient and quickly rechargeable metal, with future demand set to outstrip other battery metals such as lead, nickel and cobalt.

Demand for lithium-ion batteries, widely used in mobile phones, digital cameras and laptop PCs, is expected to continue rising due to its growing use in hybrid and electric vehicles.

"Lithium will continue to grow and has been growing over the last 30 years," said Tony Jeffery, managing director at AGM Batteries in Scotland. "It will replace lead and cadmium for obvious reasons -- because these materials are toxic."

"It is a hot topic at the moment and that is purely down to global warming and the fact that the Japanese car manufacturers are technologically ahead of their U.S. counterparts," said Virtual Metals' Firman.

"General Motors and Chrysler are trying to use more sustainable technologies and lithium is lighter, more durable and makes for longer lasting batteries."

Prices for lithium carbonate are currently $5.3/$5.7kg.

The amount of lithium used in hybrid vehicles varies depending on the technology, but a plug-in electric hybrid may contain 15-20kg of lithium and typical eight-cell laptop battery is made out of about 5 grams of lithium.

"There is a general opinion in the industry that lithium-ion will be the successor to nickel metal hydride (Ni-mh)," a spokesman at Toyota, the world's biggest car maker, said.

"Lithium-ion batteries have a greater energy density than Ni-mh so that more energy can be held and subsequent greater output from the same size of battery."

LITHIUM ON TOP

Among other metals, about 25 percent of cobalt refined production was used for batteries in 2007, while around 40 percent of lead is used in car replacement batteries and 6-7 percent of nickel production currently goes into hybrid vehicles.

"Electric bicycles is a market that has come out of nowhere in the last five years," said Stephen Briggs, analyst at RBS Global Banking & Markets. "It accounts for a significant tonnage of lead out of nowhere five years ago -- that may well be threatened."

As the lightest metal known, lithium weighs 0.5 grams per cubic centimeter (g/cm3), while nickel is 8.9g/cm3 and lead 11.3g/cm3.

"The other area under threat is traction-batteries where you power forklift trucks, golf carts and those that whizz around airports," RBS' Briggs added.

And last month (March 11), engineers at the Massachusetts Institute of Technology found a way to make lithium batteries that are smaller, lighter, longer lasting and capable of recharging in seconds.

Maker of lithium-ion batteries for the military, medial and industrial applications, AGM Batteries is currently working with Warwick University to supply lithium-based battery system for a moon-orbiting satellite due to be launched in 2012.

"There have been batteries using lithium for about 30 years," AGM's Jeffery said. "They are not very new (but) they are new in comparison with nickel, cadmium and lead."

(Reporting by Michael Taylor; editing by William Hardy)