Chile’s Codelco to control new lithium venture with miner SQM

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Chile’s state-owned copper mining company Codelco has reached a deal with miner SQM to take a majority stake in a new partnership for future lithium projects in the country, fulfilling an order by leftist President Gabriel Boric for the government to assume control of the battery metal’s production.

Chile is the world’s second-largest lithium miner, accounting for 28 per cent of global output in 2022. But it has been losing market share as it failed to expand beyond two mining projects that are decades old and other countries have launched new projects. JPMorgan predicted earlier this year that Chile’s share could fall to 10 per cent by 2030.

The only two mines in operation are run by SQM and US-based Albemarle, both located in a salt flat in the northern Atacama Desert.

SQM sold 156,800 tonnes of lithium in 2022 which represented 20 per cent of the global market by sales volume, per company estimates.

The deal is the first step in Chile’s rollout of Boric’s national lithium strategy, unveiled in April, which mandates that all lithium projects shift to or begin as public-private partnerships. The president has argued that the policy will ensure Chileans reap the benefits of the rush for the metal in a global energy transition and will speed up government approval for new projects, though analysts have said it could deter investment.

The partnership is set to begin in January 2025, pending the fulfilment of certain conditions, with Codelco taking a 50 per cent stake plus one share, the state-owned company said. It will assume SQM’s contracts with Chile’s government mining agency Corfo until 2030, when they are due to expire. The partnership will then start fresh contracts lasting until 2060.

Under the deal, SQM will be able to increase its production quota in the Atacama, where Corfo owns the lithium assets, by up to 300,000 tonnes of lithium carbonate equivalent between now and 2031. It must split the profits for the final 135,000 tonnes, if they are produced, with Codelco.

Production after 2031 will be split between the companies according to their stake in the partnership.

By securing SQM’s long-term foothold in the strategically important Atacama, the deal provides some relief for a company whose shares have fallen by 24 per cent since Boric announced his strategy in April. US-listed shares of SQM climbed more than 6 per cent in after-hours trading after the deal was announced on Wednesday.

The agreement should also provide a blueprint for Chile to begin awarding contracts to other companies that want to develop its lithium resources via public-private partnerships, analysts said.