Lithium mining decisions must be in the public interest, Chile Economy Minister says

26th April 2023

By: Bloomberg


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Chile’s government gave the clearest sign yet that the state will play an active role in deciding how some of the world’s biggest lithium deposits will be developed in partnership with the private sector.

“The objective is control,” Economy Minister Nicolas Grau said in an interview Tuesday. Control being “that the different fundamental decisions the company makes respond to the interests that we have as a country.”

President Gabriel Boric unveiled a new model last week in which the state will take a controlling stake in future public-private partnerships in the biggest brine deposits. But his administration left state copper giant Codelco in charge of negotiating terms on a case-by-case basis, including with the two incumbent producers, SQM and Albemarle. That left analysts wondering if companies could maintain operational control under the new design.

While negotiations between Codelco and prospective partners will determine the new contracts, at the end of the day, companies’ strategic decisions must be aligned with national interests, Grau said from his office in downtown Santiago.

The government is engaged in a delicate dance of seeking a bigger role for the state while attempting to attract more private capital, defend the environment and move further down the value chain. There’s a lot at stake given Chile has the biggest reserves of a metal that’s critical to the clean-energy transition.

To be sure, the government understands that for the new model to work, the private sector has to be motivated to invest, Grau said. So far, the industry’s reaction has been “rather positive,” he said.

In a statement Monday, SQM, whose contract expires in 2030, said it expects to reach an agreement to continue producing the battery metal under the new model. Albemarle, however, said it would negotiate with Chile closer to the end of its contract in 2043. The two firms can either keep full control of the operation for the rest of the contract and then risk losing it or let the state take a majority stake with the understanding it could keep operating longer.

While Codelco will be the state’s representative in new contracts, in the future that role will be played by a dedicated lithium enterprise. The government plans to present a bill to create a national lithium company later this year, Grau said.

Officials will have to negotiate with lawmakers to secure the bill’s approval, although the administration will propose that the state firm participates in downstream operations such as cathode processing.

“We are going to propose that the national lithium company plays a role in the entire value chain,” Grau said.

Edited by Bloomberg



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