Home » Chile Seals Landmark Lithium Deal with Codelco Taking Control

Chile Seals Landmark Lithium Deal with Codelco Taking Control

Overcoming Transparency Hurdles to Become a Lithium Leader

by Victor Adetimilehin

Chile struck a major deal to secure its lithium future, awarding state-owned copper giant Codelco majority control of a joint venture with SQM, the world’s second-largest lithium producer.

This agreement, a key part of President Gabriel Boric’s strategy to boost government control over lithium production, is expected to significantly increase lithium output from the Salar de Atacama salt flat. Lithium is a critical ingredient in electric vehicle batteries.

Codelco Gains Upper Hand in Lithium Rush

The new deal grants Codelco a controlling stake in the partnership, replacing a previous agreement between SQM and Chile’s development agency Corfo set to expire in 2030. The joint venture will take over lithium extraction operations in the Salar de Atacama, with Codelco assuming full control of general management by 2031. The partnership is expected to run through 2060 and produce up to 300,000 tonnes of lithium per year.

While the agreement strengthens Codelco’s position in the lithium industry, critics argue it bypasses the national mining company Enami. Opponents also raise concerns about potential conflicts of interest, as SQM’s second-largest shareholder, Tianqi Lithium of China, was excluded from key negotiations. Tianqi Lithium had advocated for a decision by shareholder vote, claiming a lack of transparency from SQM.

Overcoming Hurdles: Transparency and Environmental Concerns

SQM has addressed accusations of a non-transparent process by highlighting a clause that prohibits individuals who served on the boards of either company in the past decade from holding positions in the new venture. This effectively bars SQM’s controlling shareholder, Julio Ponce Lerou, who has faced past controversies, from involvement.

Environmental concerns also surround lithium extraction, particularly the use of evaporation ponds which can lead to water scarcity. Both Codelco and SQM have launched a website to explain their environmental practices and commitment to responsible mining. Additionally, Chile is exploring new extraction methods, like direct lithium extraction (DLE), which could reduce water usage and accelerate production.

Chile Poised to be a Lithium Leader

Chile is actively positioning itself as a major player in the global lithium market. This landmark deal with Codelco, combined with efforts to open new lithium mining areas and explore innovative extraction methods, signifies Chile’s ambition to become a leader in lithium production.

The agreement is a significant development for both Codelco and Chile. Codelco gains a strategic foothold in the booming lithium industry, diversifying its revenue stream beyond copper. Chile takes a major step towards diversifying its economy and profiting from the clean energy transition. However, the deal faces challenges, including potential legal action from Tianqi Lithium and ongoing scrutiny over environmental impact.

Indigenous groups in the area have also criticized Codelco and SQM for their communication regarding their plans. Both companies will need to address these concerns and ensure transparency throughout the project’s lifecycle.

Source: Mining.com

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