Background and Relevance
Chile, a South American nation known for its vast copper reserves and being the world’s second-largest lithium producer, aims to regain its global leadership in lithium production. The country lost this position in 2016, and now seeks to reclaim its standing through strategic partnerships.
The New Public-Private Partnership
Chile’s state-owned company, Codelco, and private mining firm SQM, backed by Chinese capital, have announced the formation of a massive joint venture called “Nova Andino Litio SpA.” This partnership will focus on lithium exploration, extraction, production, and commercialization in the Salar de Atacama until 2060.
The agreement has been approved by over 20 national and international regulatory bodies, including those from China, Brazil, Saudi Arabia, and the European Union.
Production Goals
Nova Andino Litio SpA aims to boost annual lithium production by approximately 300,000 tonnes in the Salar de Atacama, located in northern Chile. In 2022, Chile produced 243,100 tonnes of lithium, also known as “white gold.”
SQM’s Role and Ownership
Ricardo Ramos, General Manager of Sociedad Química y Minera (SQM), stated that this joint venture will facilitate the development of Salar de Atacama for global markets. SQM, one of the world’s leading lithium producers, holds 22% ownership by Chinese company Tianqi.
National Lithium Strategy
The Nova Andino Litio SpA partnership is part of Chile’s National Lithium Strategy, announced in 2023 by President Gabriel Boric’s government. The strategy aims to help Chile regain its global leadership in lithium production, which it lost in 2016. Lithium accounted for 3% of Chile’s exports in 2024.
Partnership Structure
In this alliance between Codelco and SQM, the state-owned company will initially hold 51% of shares plus one vote, while the private mining firm will have a larger voting share in the board during the early years. Codelco will gain majority control of the board starting in 2031 and manage the business.
The left-wing government of Boric chose a direct, confidential agreement with SQM instead of an international bidding process to capitalize on the rising global lithium demand.
Controversy and Historical Context
The partnership has sparked controversy. SQM was privatized during Augusto Pinochet’s dictatorship (1973-1990), and its control eventually fell to Pinochet’s son-in-law, Julio Ponce Lerou. After Chile returned to democracy, SQM faced sanctions for irregular political campaign financing.
The recently signed agreement prevents the former Pinochet associate from joining Nova Andino Litio SpA’s board.
Key Questions and Answers
- What is the purpose of this new partnership? The joint venture, Nova Andino Litio SpA, aims to increase lithium production in Chile’s Salar de Atacama and help the country regain its global leadership in lithium production.
- Who are the main players involved? Codelco, Chile’s state-owned mining company, and SQM, a private Chilean mining firm with Chinese backing, are the primary partners.
- What is Chile’s historical context regarding lithium production? Chile was once the world’s leading lithium producer but lost its position in 2016. The new partnership is part of a national strategy to regain global leadership.
- Why did Chile choose this partnership structure? The left-wing government of President Gabriel Boric opted for a direct agreement with SQM to capitalize on rising global lithium demand, rather than an international bidding process.
- What are the concerns surrounding this partnership? Critics point to SQM’s historical ties to Augusto Pinochet’s dictatorship and its subsequent sanctions for irregular political campaign financing.
