There are better places than Afghanistan to mine for lithium.

Who's winning, who's losing, and why.
June 21 2010 5:42 PM

Buried Treasure Everywhere

There are better places than Afghanistan to mine for lithium.

Lithium.
Lithium

For years, the mining industry has known that there are vast supplies of lithium, an element that is crucial to the technology business, sitting untapped under one of the world's most impoverished countries. Optimistic reports rave that its resources are so abundant that the country could become "the Saudi Arabia of lithium." But there are some serious problems—like an unpredictable political situation and deplorable infrastructure—that are keeping potential investors at bay. And with the world's lithium supplies in solid shape, for now, that lithium will be staying put.

That country is not Afghanistan. It is Bolivia. And as is the case in Bolivia, there won't be any lithium coming out of Afghanistan anytime soon.

Much of the coverage that followed this New York Times story about Afghanistan's mineral reserves has been preoccupied with predicting whether Afghanistan's wealth will lead to an even more precarious political situation in the country. But that question presumes that there will be foreign interest in Afghanistan's mineral deposits. Afghanistan has been failing to cash in on its mineral wealth for years. Foreign investment has been shunning Afghanistan for about as long as geologists have been reporting on its riches.

Bolivia—which, unlike Afghanistan, hasn't been at war for decades—is a prime example of why even enormous mineral wealth doesn't guarantee a mining industry. Lawrence Wright details all of the biggest obstacles to mining there in this March 2010 New Yorker feature about Bolivia's unlikely bid to become—yes—"the Saudi Arabia of lithium." Its infrastructure is pathetic, and its erratic president, Evo Morales, who has a fondness for nationalizing industries without warning, makes the political situation less than encouraging. (He has demanded, for example, that companies that mine the lithium in Bolivia also make the batteries there.)

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And yet, from an investor's standpoint, Bolivia is a sure thing compared with Afghanistan. Afghanistan's mineral deposits are in one of the most dangerous regions of a country locked in a severely destabilizing war. To guard even a small mining operation in Afghanistan, says Jon Evans, a division manager for FMC Lithium, one of the world's top producers of lithium, "you'd need to hire a private army, supported by coalition troops." And Afghanistan, like Bolivia, is landlocked and lacks a reliable route to the sea.

The deeper problem is that lithium, while valuable, isn't all that rare. There are plenty of lithium-rich areas that are much safer to mine than Afghanistan (or less of a headache to mine than Bolivia), including Finland, Australia, Serbia, Argentina, Chile, Canada, and the United States. As Brian Jaskula of the United States Geological Survey told Michael Reilly of Discovery News, "We'll be extracting lithium from the ocean before we'll be extracting it from Afghanistan." As a bonus, many of these places don't require immense infrastructure support. The high level of both risk and investment that would be required to mine in Afghanistan—is there any region of the country that doesn't suffer from rolling blackouts?—is enough to give pause to any investor eying Afghanistan's reserves, especially since those other reserves aren't running out any time soon. R. Keith Evans, a geologist who has worked in the lithium industry since the 1970s, estimated in 2009 that the world's known supply of lithium was more than enough to cover the world's demand.

Of course, demand could spike. For the last decade there has been no shortage of predictions that Bolivia has a lucrative future in lithium once electric cars gain a larger share of the automotive market. But the industries that would make Bolivia's—and now Afghanistan's—lithium supplies essential haven't exactly taken off yet. The technology to make a lithium ion battery for a car that isn't bulky, heavy, expensive, and slower than a gasoline-powered car, notes Wright, is at least a few years away. By then, lithium could be discovered in vast supplies in other, safer areas. And Evans points out that very little is now known about the makeup of the lithium supplies in Afghanistan: Is it mixed with elements that will make it costly to extract, like Bolivia's magnesium-laced supplies? How widely dispersed is it? It's possible that geologists could find that Afghanistan's lithium troves are not as abundant as predicted, or in a form that will be expensive to mine.

Still, even if one accepts the most optimistic predictions about the formation of an Afghanistan mining industry, worries about the prospect for violent infighting over Afghanistan's mineral riches—or lesser fears voiced by U.S. officials that China will edge out a nascent U.S. lithium mining interest in the region—are hugely premature. If and when a lithium mining industry exists in Afghanistan, investors and U.S. officials can worry about where the wealth goes, and those investors may well be Chinese. China has shown itself willing to invest in a risky area and run a copper mine in Afghanistan—but that mine, which is heavily guarded by coalition troops, doesn't pose the kind of security costs that would come with a new lithium mine and all of its infrastructure.

In short, there are a lot of other what-ifs to worry about before anyone begins to fret that China is going to take something that the United States wants, or that lithium will make Afghanistan the Nigeria of lithium rather than the Saudi Arabia. It remains to be seen if Afghanistan's lithium can be extracted cheaply enough to be worth the enormous risk—to investors, to the country's politics, and, not incidentally, to the miners themselves.

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