South America

Chile and Lithium: Startups sitting on a gold mine but unable to dig into its riches

The modern world, viewed by many of us through a screen, is powered by lithium. A soft, white metal, the element is vital in consumer technology and the push – by both manufacturers and environmentally focused governments – to sell electronic vehicles on the mass market has seen prices soar.

Much of this increasingly precious resource is mined from football-field sized mines across Chile and Argentina, and a recent report from Goldman Sachs identified difficulty of access as a factor which has the potential to limit electric vehicles’ availability on global markets.

Data from the US Geological Survey 2016 shows that Chile holds over half (51%) of the world’s known lithium reserves, followed by China (22%), Argentina (13.8%) and Australia (11%); just 1.2% of reserves are thought to be elsewhere.

Yet startups in Chile, sitting on a metaphorical gold mine, appear to be blocked from drilling down into the potential – and expected reward – of the boom.

Part of this, according to a wide-ranging Bloomberg report, is the power of the Chilean Nuclear Energy Commission (CCHEN) to grant lithium extraction and production permits. The agency was granted this power four decades ago in line with the anachronistic view that the metal held strategic importance in nuclear processes. Despite a number of potential new entrants to the market, current rules mean that CCHEN has only ever granted permits for the two established players, Albermarle and Socquimica, and the state-run Codelco.

In contrast, Argentina’s pro-mining approach is luring investors to its considerably less-rich lands, despite placing significantly lower (117th to Chile’s 55th) on the World Bank’s Ease of Doing Business Index.

Of course land acquisition, machinery and technical experience means that resource extraction is always a game favouring an entrenched set of big players, but the lithium wave has a far wider reach.

The development of lithium batteries has led to a wide range of well-invested startups, working on solutions around recharging, extending a (still-short) lifespan, increasing energy density, improving packing, shortening charging times and alternating the chemical balance to improve safety.

However, even in these areas, it seems ‘on the ground’ businesses are finding it hard to get a foot in the door. In fact, 2017 research from Nanalyze found that by 2020 mass production of lithium-ion batteries will still be concentrated in just four countries: China, USA, South Korea and Poland.

It’s possible to blame the situation on a system-wide set of factors limiting growth in what arguably remains South America’s leanest and most efficient economy, which invested less than 0.5% of GDP in research and development in 2016. But, in the case of lithium, it seems that a new source of energy must be found to ensure that Chile’s startups aren’t left in the slow lane.

 

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