Chile bets to become world leader in lithium as demand increases | Mining News

Santiago, Chile – It’s white — not yellow — but like gold, lithium has quickly become one of the most sought-after precious metals on earth. Theoretically you can find it almost anywhere, but in practice lithium is best extracted from salt flats.

This explains why lithium fever is spreading in what is known as the lithium triangle, the salt flats of Chile and neighboring Bolivia and Argentina. According to the World Economic Forum, they represent around 60% of the world’s known lithium reserves. Of the three, Chile is currently the largest producer.

Driven by the global green energy transition, last year the price of the light salt-like metal used for electric vehicle and cell phone batteries rose from $14,000 a ton to over $80,000 in November. And while prices have fallen to less stratospheric levels, some estimates predict a 40-fold increase in lithium demand by 2040.

That’s why Chilean President Gabriel Boric sent shockwaves through the new energy metals sector when, in a primetime televised speech on April 20, he announced his much-anticipated national lithium program.

It calls for the creation of a state-run lithium company that will promote, develop and control the country’s industry. (Chile is already the world’s second largest producer after Australia.)

Chilean President Gabriel Boric examines lithium samples during his visit to the University of Antofagasta in the northern city of Antofagasta, Chile April 21, 2023 (Chilean Presidency/Ximena Navarro/Handout via Reuters).

“We want Chile to become the world’s largest producer of lithium, while protecting the biodiversity of the salt flats,” Boric said. “This is the best chance we have of moving to a sustainable and developed economy.”

Boric said the state will control 50.01% of the shares of joint ventures with private investors. Current contracts will be honored, but new ones will have to agree to terms that include the use of advanced technology to reduce or eliminate environmental damage, better conditions for workers, and consultation with local, mostly indigenous communities in the Atacama Desert so that they too can benefit from lithium mining.

“How is it possible that the people who live in the regions that produce the greatest wealth in the country are at the same time the poorest in the country? Boric asked.

The plan includes the creation of a national lithium institute to identify ways to identify and produce value-added derivatives.

For example, Chile “can already produce lithium carbonate and lithium hydroxide,” said Jose Miguel Benavente, vice president of CORFO, Chile’s economic development agency, referring to two compounds used to manufacture batteries for electric vehicles. But, he told Al Jazeera, further refining lithium can increase the element’s value: “After lithium chloride is mined, each additional process or product increases its value by about 15%, which is not nothing.”

Workers carry out maintenance work next to pools of brine slowly turning into lithium at the SQM mine in Chile’s Atacama Desert, April 18, 2023 (Rodrigo Abd/AP)

The Chilean government’s announcement drew mixed reviews, particularly in Chile, where conservative politicians have accused the leftist president of trying to return to the days of former socialist president Salvador Allende, who was overthrown in 1973 during of a military coup. . Allende nationalized the Chilean copper industry, today the largest in the world.

Immediately, global headlines announced that Boric was “nationalizing” Chilean lithium. But in fact, unlike copper, the constitution already defines lithium as a strategic and exclusively state mineral, due to its possible use in nuclear fusion.

Boric acknowledged that the private sector and many conservative economists might be wary of his plan.

“I could have left things as they were and done nothing, and thus avoided problems. But I don’t think that’s the best way to govern. We have a goal and that is to generate good to be for the people of Chile,” Boric said Monday at an international mining fair.

Boric’s ambitious social programs need funding, and lithium is clearly the new white gold.

For decades, the state has granted generous concessions to private companies, such as the world’s largest lithium producer, Albemarle Corporation, which operates in the giant Atacama salt flats in partnership with the second largest producer, the Sociedad Química y Minera de Chile (SQM). SQM’s contract expires in 2030. Shares of both companies fell on news that they will have to relinquish majority control, if and when they get their contracts renewed.

Commenting on Chile’s new policy, Tesla CEO Elon Musk tweeted: “Lithium ore is very common all over the Earth. What matters is refining capacity. He’s not wrong. Not all lithiums are created equal. Know-how and technology are important, but so is the source of the lithium.

Brine pools are slowly transformed into lithium at the Albemarle lithium mine in Chile’s Atacama Desert, April 17, 2023 (Rodrigo Abd/AP)

“You can extract lithium from the ocean, but it’s very, very expensive,” Benavente said. “We have a big advantage over Italy, the United States and Australia who produce lithium from rocks, because we can literally catch it. Of course, it’s more complex, but in relative terms, it’s much easier and much more profitable – and therefore profitable – to extract lithium from desert salt flats. You just spread it out and let it dry. Therefore, the profit margin here is much higher than in Australia, which currently produces more but at a much higher cost.

The government has announced that it will introduce the final bill to establish the national lithium company in the second half of this year. Upon its creation, CODELCO, the state-owned copper company that is now the world’s largest producer of copper, will be responsible for launching the business. Hundreds of foreign companies interested in investing in Chilean lithium are already showing interest, government sources told Al Jazeera.

Besides the Atacama Salt Flats, President Boric said Chile would open up opportunities for private companies to invest in at least a dozen smaller but still important lagoons and salars in other regions.

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