mining companies push is being made to negotiate lithium deals under a new model from the government of Chile, a country that is home to the world’s largest reserves of the key component of electric vehicle batteries.
To meet the demand, the authorities are well advanced in working to identify new extraction areas and are compiling bidding documents for exploration and possibly exploitation contracts, he said in an interview. Karla Floresdirector of InvestChile, which is part of the Ministry of Economy.
More than 50 companies from all over the world have expressed interest in participating in the new public-private model in Chile. A roadshow was held in Germany and France last month, and another is planned for October that will cover Korea, Japan and China, Flores reported.
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Until now, Chilean lithium production has been limited to two companies that work in a single salt flat, and the country’s market share has decreased in recent years. The solution offered by President Gabriel Boric consists of a model that will give the state a majority stake in operations deemed strategically significant, while allowing private companies to maintain control of projects in non-strategic areas.
The Government affirms that its model is the best way to promote sustainable production in a nation that already classifies lithium as a state-controlled strategic resource. Opponents of the model believe that a state-run industry would erode competitiveness.
Flores maintains that Chile is catching up quickly, but also correctly, and that the initiative has a benefit for investors, since it offers them clarity and equal opportunities.
Bidding for the exploration contracts is scheduled for early next year. But devising selection criteria is not an easy task given the number and diversity of proposals, ranging from extraction to the manufacture of value-added products. The two state companies that will partner with private companies, Enami and Codelco, are still forming their teams and developing procedures to deal with the lithium contracts.
Flores explained that there is a line of interested in negotiating with Enami and Codelco, but first there has to be an objection mechanism, clear and equal to all.
Persistent misconceptions that the new approach is quasi-nationalization, added to the lack of definition on the ownership and operation model of the projects, have led to the caution of some investors despite the fact that the model has received support from the mining industry itself to the United Nations.
“This is one well-intentioned strategy that has been widely welcomed”said Max Vichniakov, founder of Northern Shoreline, which advises natural resource companies, including explorers in Chile. “But announcing it without details translates into more financial risk.”
Translated by Pauline Steffens.