Chile awards new lithium contracts despite political storm

14th January 2022 By: Bloomberg

Chile’s government pushed ahead with contracts to tap more of the world’s biggest lithium reserves despite calls from President-elect Gabriel Boric to delay the bidding process.

The country awarded two of five contracts on offer -- one to Chinese electric vehicle maker BYD Co. Ltd. and another to local firm Servicios y Operaciones Mineras del Norte, according to an emailed statement from the Mining Ministry.

The outgoing government of center-right President Sebastian Pinera is looking to reverse a decline in the country’s share of the global lithium market at a time of surging prices as suppliers battle to meet demand in an electric-vehicle boom.

But the timing of the auction has drawn criticism from opposition groups, including the incoming left-wing government and parliamentarians who allege authorities are bypassing proper community consultation to complete the process before the March 11 change of government. Boric also wants to ensure that the state participates in lithium production and some of his advisers met with the government with suggestions on how to improve the process.

The awarding of contracts comes as Chile reassesses its stance on natural resources in a process to draft a new constitution. While pumping up brine from under Chilean salt flats and letting it evaporate is cleaner than hard-rock mining as practiced in Australia, there is growing concern over the impact on fragile desert ecosystems.

BYD offered $61 million and Servicios y Operaciones bid $60-million for quotas to produce 80 000 metric tons of lithium over 20 years. Together, the contracts represent about 1.8% of Chile’s known lithium reserves. Winners will still have to undertake exploration work and go through all the usual permitting before they can develop projects.

Soc. Quimica y Minera de Chile SA and Albemarle Corp. are the only two producers in Chile currently. Last year, the nation churned out about 18,000 metric tons of lithium last year.

Both SQM and Albemarle, as well as Cosayach Caliche SA, presented offers, which authorities said were well below the winning bids.