Chile’s National Lithium Strategy Unveiled

Chile’s President Gabriel Boric announced the National Lithium Strategy, a major part of which includes the creation of a state-owned enterprise to take control of the booming industry. Codelco, the world’s largest copper producer, will lead negotiations with SQM and Albemarle, the two companies operating in the Salar de Atacama.

The Five Pillars of the National Lithium Strategy

The strategy involves five key pillars, including the creation of a National Lithium Company, which will be 100% state-owned and will be responsible for exploiting the salt flats under a public-private partnership with the state as the controlling entity.

Another pillar of the strategy is the establishment of a Public Lithium and New Technologies Institute in the second half of this year. This institute aims to allocate resources to foster a future of continuous innovation, investing in science, technology, and knowledge.

In recent months, several companies have expressed interest in participating, and while the exact model for the partnership has not been defined, the goal is to diversify the market by allowing new players to enter. The strategy will be implemented in two phases: before and after the creation of the state-owned enterprise.

Environmental Impact and New Extraction Methods

One concern for the government is the environmental impact of lithium production. They aim to transition the Chilean lithium industry towards increased production with less environmental impact than current methods. This involves investing in new, more environmentally friendly extraction methods, such as direct extraction, which is not yet available on a large scale and may take two or three years to reach those levels.

Salt Flats and Codelco’s Role in Negotiations

Currently, Chile has 45 salt flats, one of which is Maricunga, where Codelco holds a Special Lithium Operations Contract (CEOL), and Salar Blanco and Simbalik also have ongoing extraction projects. In addition, there are two concessions in force: Salar de Atacama (SQM and Albemarle) and Pedernales (Codelco). This leaves 42 salt flats available for exploitation, with 15 of them already in some phase of exploration.

Codelco will negotiate with SQM and Albemarle, primarily concerning the Salar de Atacama, known as the “crown jewel.” The government seeks early state participation in the property, so Codelco will be tasked with initiating discussions to reach an agreement with both parties. The guiding principle will be the same as with other salt flats: the state will be the majority shareholder. If no satisfactory agreement is reached, the current contract will run its course, after which the state may seek a new partner. SQM’s contract is set to expire in 2030, and Albemarle’s in 2043.

Impact on Electric Vehicle Manufacturers & A Shift in Future Investment

The nationalization of Chile’s lithium industry poses a challenge to electric vehicle (EV) manufacturers, who are scrambling to secure battery materials. As more countries look to protect their natural resources, securing battery materials becomes more difficult. Mexico nationalized its lithium deposits last year, and Indonesia banned exports of nickel ore, a key battery material, in 2020.

Analysts predict that the move will likely spur a shift in future investment in lithium to other mining friendly jurisdictions, such as Australia, the world’s largest producer. The Boric government plans to establish a lithium institute and promote downstream investments to capture more of the EV boom.