Rare Earths: Another Bright Opportunity for Bolivia’s Mining Industry?

According to data from the Bolivian Mining and Metallurgy Ministry, since 2023 there has been a reduction in the exportation of traditional minerals from Bolivia – eg, zinc, cobalt and silver, among others. To overcome this shortfall, the Bolivian State has started to consider promoting the development, mass production and exportation of other minerals, such as lithium and, more recently, rare earth elements.

As stated in the Sectorial Plan for the Integral Development to Live Well and the Strategic Institutional Plan for the Mining Sector 2021–2025, one of the main objectives of the Mining and Metallurgy Ministry is to implement prospection and exploitation projects of rare earths and to prioritise the investigation of the so-called technological minerals.

The Mining and Metallurgy Ministry has publicly recognised the importance of these metals in the international market and is quite optimistic about Bolivia’s potential in developing these projects at a fast pace. However, this is not the first time that the Bolivian State has jumped the gun on the outcome of an industrialisation project before it starts.

As with lithium, it took several years for the government to finally decide on the way forward for the development of projects that would allow the precious material to be extracted. Although the government, through the lithium state-owned company YLB, has been pursuing the development of lithium projects, production is very small – it only exports a limited amount of refined lithium and potassium, and the promised added value or industrialisation projects are yet to take off.

President Luis Arce Catacora has recognised the pitfalls that Bolivia had with previous industrialisation projects, and has pointed out that the country cannot go through another long dark night with rare earths.

With that perspective, this article will provide a brief description and analysis of:

• Bolivia’s challenges in the international rare earths market;
• the development of domestic rare earths regulation:
• the Bolivian state strategy for industrialising and commercialising rare earths;
• the discovery of rare earth deposits in Bolivia; and
• how foreign investors may participate in the execution of rare earth projects in Bolivia.

Bolivia’s Challenges in the International Rare Earths Market

Over the last 15 years, rare earths have achieved significant relevance in the manufacturing of technologies and consumer products. The unique physicochemical properties of these elements make them necessary components of high-tech consumer products, such as cell phones, hard drives, electric and hybrid vehicles, and monitors, among others.

Most rare earths are difficult to find in large concentrations, which significantly hinders their extraction and refinement process. Added to this is the fact that their production is often associated with serious impacts on the environment, as the extraction and refining processes are highly toxic and generate large amounts of waste.

According to a report by the American Geosciences Institute in 1993 of the world’s rare earths production:

• China accounted for 38%;
• the United States accounted for 33%;
• Australia accounted for 12%; and
• Malaysia and India accounted for 5%.

However, in 2008, China accounted for more than 90% of world production, and in 2011 it accounted for 97% of world production.

Against this background, Bolivia’s incursion into the rare earths market represents a very important challenge for the country. Even with a very proactive policy from the Bolivian State, there are substantial challenges to overcome before Bolivia can successfully enter the international market and position itself as an important supplier of rare earths.

It should be noted that Bolivia is a country with a vast mining tradition; however, it has no experience and/or regulations dealing with rare earths aside from an outright prohibition regarding their exploitation by private companies. Bolivia may enact prompt regulation for the development of projects for the benefit of rare earths. However, the great challenge for the State is to promote attractive economic and mining policies for investors, and to ensure the competitiveness and sustainability of the investment projects concerning these metals.

Development of Domestic Rare Earths Regulation

Pursuant to the Bolivian Constitution, all natural resources are the property and exclusive domain of the Bolivian people. According to the Mining and Metallurgy Ministry, rare earths are a type of natural resource; thus, their administration will correspond to the State.

In this case, pursuant to the Mining and Metallurgy Law (Law No 535 of 28 May 2014) exploitation of rare earths by non-State productive actors is forbidden. Hence, if a mining private actor discovers rare earths in the areas over which it has mining rights, the finding must be reported to the Mining and Metallurgy Ministry and the Administrative Mining Authority (AJAM in Spanish), so that the corresponding measures may be adopted. Given this prohibition, mining contracts or licences that grant exploitation rights over rare earths or “technological minerals” will be null and void.

Moreover, the manipulation and use of rare earths must also be reported to the following authorities for them to co-ordinate their seizures:

• the Mining and Metallurgy Ministry;
• the Bolivian Nuclear Energy Agency (ABEN in Spanish); and
• the Mining Geological Service (SERGEOMIN in Spanish).

Bolivian State Strategy for Industrialising and Commercialising Rare Earths

Given the scarce regulation and restrictions, through 2014 to 2020, it seemed that the Bolivian State was not interested at all in developing its rare earth minerals. However, in 2021 the Mining and Metallurgy Ministry and the Bolivian Mining Corporation (COMIBOL in Spanish) established (among its strategic goals) including Bolivia in the international market of technological minerals.

In order to do so, a State strategy for industrialising rare earths was shared in the Sectorial Plan for the Integral Development to Live Well and the Strategic Institutional Plan for the Mining Sector 2021–2025. As stated before, these plans reveal the willingness of the public mining entities to develop prospects and exploration projects regarding rare earths.

Moreover, on 18 May 2022, by means of Supreme Decree No 4721, the Mining and Metallurgy Ministry structure was amended, and the Vice-Ministry of Technological Minerals, Mining and Metallurgy Productive Development was created. By means of the aforementioned Supreme Decree, the new division has the authority to propose the subscription of agreements with public or private entities for the development of rare earths.

Although contradictory to the current mining regulation mentioned in the previous point, this provision changes the dynamic and opens the window to many private actors. It seems that the Bolivian State has once again considered the importance of private foreign investment, and has recognised that the State requires the influx of technology and capital that the private sector can afford for the development of these projects.

Finally, by means of General Directory Resolution No 7161/2023 dated 23 March 2023, the Technological Minerals and Rare Earths Management was created and incorporated into the COMIBOL. This new management will mainly focus on prospection projects in Santa Cruz.

Discovery of Rare Earth Deposits in Bolivia

As mentioned previously, the Mining and Metallurgy Ministry alongside the COMIBOL and SERGEOMIN are currently executing prospection and exploration works to find rare earth deposits within the national territory. On 20 May 2022, the Mining and Metallurgy Minister published a Map of Prospective Areas and Strategic Mineral Deposits in Bolivia that showcased five regions of the country with rare earth deposits. Interestingly, certain regions in the country that have not traditionally been mining regions – ie, Santa Cruz de la Sierra – have been identified as very important regions.

According to the Manager of the Technological Minerals and Rare Earths Management of the COMIBOL, “Santa Cruz stands out as privileged region for the industrialisation of rare earths”. He also stated that the COMIBOL will specifically focus on prospection in the Manomó Hill and Rincón del Tigre region.

Upon the creation of the new Technological Minerals and Rare Earths Management in the COMIBOL, its Manager informed that they will:

• start negotiations with strategic indigenous regions;
• take 847 soil samples; and
• draft a regional geological map of 500 mining grids identifying rare earths.

On 14 June 2023, brigades of the SERGEOMIN started a prospection project in the Bolivian East, specifically in the Manomó Hill and Alcalina de Velasco Province of Santa Cruz de la Sierra.

On 2 January 2024, the Mining and Metallurgy Ministry informed that Bolivia has more than 17 varieties of rare earths. It also informed that these minerals could be found in:

• Independencia in Cochabamba;
• San Luis and Cotaje in Potosí; and
• San Javier and the Mutún Hill in Santa Cruz.

The Mining Minster also pointed out that after proper identification of 799 samples in the Manomó Hill, 18 kinds of rare earth minerals have been identified. Thus, the COMIBOL will join the SERGEOMIN in continuing to execute prospection plans.

Participating in Rare Earth Projects in Bolivia

The fact that Bolivia is developing regulations on rare earths does not mean that the doors to investment projects in this matter are closed. For the time being, however, it would seem to be in the COMIBOL’s hands to develop and create the possibility for Bolivia to begin venturing into this market.

The Bolivian State incorporated and fully owns the COMIBOL; as such, as a State-owned entity, the COMIBOL has been granted exclusivity over very large areas of mineral-rich lands for the development of all sorts of mining projects. However, many such areas are not currently being exploited by the COMIBOL. The COMIBOL does have substantial deposits of rare earths in the mining areas that have been reserved for it.

Under the Mining and Metallurgy Law, the COMIBOL is empowered to enter into:

• mining association contracts; or
• mining production contracts with domestic or foreign mining companies, in order to carry out activities in the mining production chain in its reserved areas.

The following are the main features of said contracts.

Mining association contract (MAC)

Under the MAC, the COMIBOL enters into a partnership with a mining operator for the purpose of carrying out mining activities, which may include one or more activities of the mining production chain (such as exploration, exploitation, processing/refinement or even smelting) in the COMIBOL’s reserved areas. The process for signing this type of agreement can be initiated by:

• a public bidding process;
• a direct invitation; or
• the request of the mining operator.

The MAC does not imply the incorporation of a new company that is independent from the COMIBOL and its counterparts. On the contrary, the Mining and Metallurgy Law provides that each party must take care of its obligations, with each having its own responsibility under the MAC.

The following general business terms must be included in the MAC.

• The participation in the profits of the mining operations may be negotiated between the parties, but in no case shall the participation of the State-owned company be less than 55% of the profits.
• The accounting of the MAC must be carried out by an entity independent of the parties.
• For the administration, supervision and control of operations, the parties shall form a board of directors with an odd number of members, greater than or equal to three established in the respective statutes, where the majority shall be representatives of the COMIBOL. The presidency shall be exercised by a representative of the COMIBOL. The MAC shall have a technical council with an equal number of members representing each party, for the purpose of providing advice to the board of directors.

Mining production contract (MPC)

Under the MPC, the mining operator may carry out its own activities of the mining production chain in the COMIBOL’s areas, without the need to associate with the COMIBOL.

The Mining and Metallurgy Law provides the general business terms that must be included in the MPC. The following are the most relevant terms to consider:

• the participation in the profits of mining operations will be determined by the COMIBOL based on the feasibility of the mining project, calculated on the gross sales value;
• the maximum term of the MPC is 15 years; and
• MPCs are subject to legislative approval.

In both scenarios, the other terms of the MAC and MPC can be negotiated by the parties, once the COMIBOL accepts the application submitted and declares the fulfilment of all the requirements provided by law for the conclusion of these contracts.

In that regard, investors interested in the extraction of rare earths found in the COMIBOL’s reserves could use one of these mechanisms to start their rare earth operations in Bolivia. Notably, it is possible that in the negotiation of these contracts the Mining and Metallurgy Ministry should be involved, to obtain the authorisation to work on these resources.

Currently, there are Chinese and Canadian companies in Bolivia that have chosen to follow this path by filing projects for the extraction of rare earths before the COMIBOL. The COMIBOL has not yet publicly responded to these proposals, but the conclusion of an agreement to pursue such a project will undoubtedly mark an important milestone for Bolivia’s movement into the rare earths industry.

Conclusions

As discussed above, Bolivia has declared that it has the strategic goal of entering the “technological minerals” market as a relevant producer. The Bolivian Mining Law, however, restricts the development of any project involving rare earths to the State. As a result, no development has occurred in this sector since the approval of the Mining Law nine years ago.

However, the current government has recognised the importance of rare earths and has adopted some policies to develop rare earths. Nonetheless, without foreign investment and high-quality technology, Bolivia will not be able to significantly move forward in the development of rare earths.

In order to actively attract, promote and finance investment in rare earth projects by private actors, Bolivia must propose a foreign investment plan with clear opportunities for investors to gain returns on their investments. Such a plan must allow flexibility for negotiating the terms of agreements, and provide foreign investment protection.