There are several dozen companies around the world competing to negotiate lithium contracts under Chile’s new public-private model, in which the state takes a majority stake in strategic and sensitive operations while private companies retain control of non-essential projects.
“Chile’s lithium reserves represent an opportunity for economic development that probably will not be repeated in the short term, and it is the best opportunity we have to move towards a sustainable and developed economy. We can’t afford to waste it,” Gabriel Boric, the president of Chile, said.
Mining companies are rushing to negotiate lithium deals under Chile’s new government model, and to meet demand, Chilean authorities “are well advanced” in identifying new production areas and are compiling bidding rules for lithium exploration contracts and possible extraction, indicated the director of the public agency InvestChile, Karla Flores, according to Bloomberg.
Under Boric’s plan, the government will also negotiate with the national Chemical and Mining Society of Chile (SQM) and the US Albemarle Corp. (ALB)—two companies that dominate the Atacama, the largest salt flat in this South American country—to be supervised by state copper producer Codelco, a company tasked with creating a framework for forming a new public lithium company in the future.
“This doesn’t look very good for SQM and ALB, since Atacama now accounts for 30% of global lithium production, and the nationalization of the companies would encourage the renegotiation of these exploitation contracts,” Oilprice columnist Alex Kimani said.
If the president’s model is approved by the Chilean National Congress, private entities in the lithium industry will be able to participate, but only as minority partners in joint ventures with the state.
In addition, the plan proposes promoting the exploration of other salt flats other than the Atacama to diversify lithium sources and expand production, increasing the number of private entities that produce this metal from the current two.
Under these circumstances, more than fifty companies from around the world have expressed interest, with a tour held in Germany and France last July and another planned for Korea, Japan, and China in October, Bloomberg reported.
“SQM runs the greatest risk here since its contract to extract lithium in the Atacama expires in 2030, and the company’s shares reflect this reality, having plummeted almost 10% in the last four trading sessions,” Kimani said.
“According to the policy proposed by the government, it has only two options: allow the state to take a majority stake, on the understanding that it could continue to operate longer, or maintain full control of its exploitation for the rest of the current contract and risk losing it when it ends,” Kimani added.
“The ALB, in turn, is calmer and has told investors that the Chilean president’s plan has no material impact on its operations since its contract does not expire until 2043,” Kimani said.
Chile is the world’s second-largest producer and has the largest lithium reserves in the world, while around 60% of the world’s lithium reserves are located in the so-called lithium triangle, a region encompassing Chile, Argentina, and Bolivia.
