Codelco-SQM to Form a Public-Private Lithium Partnership

Chilean lithium producer Sociedad Quimica Chilena (SQM) announced it entered a joint venture with the state-owned copper producer Codelco to extract the lithium in the Atacama salt deposit. The move is part of leftist president Gabriel Boric to gain more control over the battery metal. 

Chilean President Boric has revealed a public-private lithium partnership between SQM and Codelco to harness lithium from the Atacama salt deposit. Boric stated that Codelco would hold a majority stake under this partnership, owning 50% plus one share of the newly formed company. “This is an unprecedented event in the history of the Chilean mining industry and it paves the way toward a fair and sustainable growth that all of us seek,” said the Chilean president during a televised speech. 

The association is part of Boric’s national lithium strategy announced in April 2023 aimed to generate broader benefits for Chilean people and harness the increasing lithium demand for the production of batteries to support the energy transition. Similarly, Boric's announcement aligns with the memorandum of understanding (MoU) signed by Codelco and SQM on the same day, Dec. 27, 2023.

According to the MoU, both parties agreed to establish a company focused on investing in technologies facilitating the efficient production of lithium carbonate and lithium hydroxide. The company will be created in 2025 and will produce lithium derivatives at the properties SQM currently leases from the Chilean Production Development Company (Corfo) in the Atacama salt deposit. 

The partnership will allow an efficient transition between SQM’s lease contracts with Corfo, which will expire in 2030, and Codelco’s lease contracts which will start in 2031 and will expire in 2060. “This will help avoid interruption of production during the first two years of Codelco’s lease contracts and could have a positive effect on maintaining global lithium market participation,” reads SQM’s press release.  

The MoU establishes that SQM will provide fixed assets, knowledge, and employees from its lithium business, while Codelco will contribute the lease and an additional production and sales quota. In this sense, Codelco will grant sales authorization for an extra 165,000t of lithium carbonate equivalent (LCE) by 2031. Additionally, Codelco will authorize an initial 135,000t of LCE for the new public-private entity, subject to increased production as outlined in the SQM statement. “There is significant work to be done on this great project and we are deeply committed to making it happen. This is a significant milestone in public-private partnerships in Chile. We believe that the development of the Salar Futuro project will make the Atacama salt deposit the most sustainable lithium operation in the world,” said Ricardo Ramos, CEO, SQM. 

Public-private partnerships could play an important alternative in unlocking Latin American countries’ potential regarding lithium production in the context of resource-nationalist governments. 

In Mexico, the relationship between the government and the private sector has been complicated. Initially, the Mexican government asserted its reluctance to involve the private sector in the lithium industry. However, due to the government's limited resources, expertise, and technology, LitioMX acknowledged the possibility of forming partnerships with private companies. However, any private entities engaging in these partnerships would be required to cede majority participation to the government.  "There is no doubt that the Mexican government should have control in a strategic association with private companies," said Pablo Taddei, CEO, LitioMx, adding that the percentage that the government wants to own of each project will depend on each deposit, as reported by MBN.