Chile’s government sneaked in a last-minute New Year’s gift for the coming generation of electric-vehicle owners around the world: a public-private partnership to extend the life of the world’s cheapest lithium basin by 30 years.
That would be the Atacama salt flats in the high Andean desert, where local miner Sociedad Química y Minera and U.S.-based Albemarle produce a quarter of the global supply of the essential mineral for EV batteries. SQM’s concession was set to expire in 2030. That will now move to 2060, as the firm enters a 50-50 joint venture with state copper giant Codelco.
The deal marks a pragmatic tilt for Gabriel Boric, the 37-year-old ex-student activist who became Chile’s president in 2022, vowing extensive progressive reforms. He’s making common cause with SQM’s dominant shareholder, Julio Ponce Lerou, a son-in-law of late dictator Augusto Pinochet who was fined in a stock manipulation scandal 10 years ago. “For the government, Ponce has been considered a sort of devil,” says Juan Carlos Guajardo, founder of the Plusmining consultancy in Santiago.
Chile will need a lot more compromise to fulfill its lithium destiny. The nation of 20 million sits on the world’s largest proven reserves. But exploration has been constrained by a Pinochet-era law designating lithium a strategic metal, for its presumed importance to nuclear energy. Moves to scrap that statute have been stymied by divisions between statists and free marketers in Congress, says Francisco Acuna, a Santiago-based consultant with raw-materials specialist CRU. “There’s a political paralysis around lithium,” he says.
Australia has taken advantage to power past Chile in production of the now-strategic metal. Neighboring Argentina should surpass it by 2028, shrinking Chile’s global market share to 15%, CRU projects.
Plenty remains unresolved on the Atacama deal itself, which is still in memorandum-of-understanding, or MOU, stage. The current extraction method there—sucking lithium brine to the surface and then letting the liquid evaporate over a few months—could exhaust water resources over the next 35 years. Sustainable exploitation depends on so-far unproved improvements like reinjecting brine or “direct extraction” of metal from underground deposits. “There’s guidance in the MOU on ‘moving toward new technologies,’ but it’s very vague,” Acuña says.
Albemarle’s concession, in a different section of Atacama, stretches until 2043. So, it isn’t a primary concern for now. SQM and Codelco will pool resources at a greenfield deposit called Maricunga. Production there is years away, at best.
Argentina’s lithium prospects benefit from that country’s federal structure, which has given mining-friendly governors in two northern provinces a free hand to nurture investment. An obstacle, Acuña notes, is the national government’s tangle of currency controls, which can keep foreign investors from repatriating profit. Just-elected pro-business President Javier Milei may lack the political strength to untangle them. “It will take a bit more time to see if Milei can change course,” Acuña says.
Consultant Guajardo, for his part, is opening an office in Melbourne. “It looks like Australia will do the right thing in the current mining boom, while Latin American countries struggle,” he says.
Chile’s cost advantage may grow increasingly important as the lithium market matures, though. Prices plunged 80% last year to below $10,000 a ton. Guajardo sees them settling at $20,000 to $25,000 over the next decade. “Lithium is not a scarce mineral, and that’s starting to be evident on the supply side,” he says.
More good news for EV manufacturers and drivers.
Source: Barron’s