Chile Firms Up Lithium Nationalization Strategy with SQM, Codelco Partnership

SQM (NYSE:SQM) has entered into a partnership agreement with Codelco, Chile's stated-owned copper miner, through which the two will jointly exploit lithium and other products in the country's Salar de Atacama.

The joint venture is part of Chile's strategy to nationalize its lithium industry. Chile, which holds the world's largest lithium reserves and is a top producer of the battery metal, announced plans to nationalize its lithium industry in 2023.

Codelco will own the majority of the joint venture, as required by Chile's nationalization plans.

The partnership between SQM and Codelco will involve the merger of Codelco’s subsidiary, Minera Tarar, into SQM’s subsidiary SQM Salar. It will allow for increased lithium production through to 2060.

According to a press release from Codelco, the aim is to produce an additional 300,000 metric tons (MT) of lithium carbonate equivalent from 2025 to 2030, with output of 280,000 to 300,000 MT set for 2031 to 2060.

"This increase in lithium production will be achieved through improvements in process efficiency, the adoption of new technologies and the optimization of operations and does not entail increased brine extraction or use of continental waters," the company states. By 2031, Chile will receive 85 percent of the partnership's operating margin.

The public-private partnership is Codelco's first foray into lithium, and various conditions must be satisfied in order for it to proceed, including governmental approvals and consultations with Indigenous communities. SQM and Codelco expect the conditions to be fulfilled by the first half of 2025, although the earliest closing date is January 1, 2025.

The agreement also covers the transfer of SQM's properties in the Salar de Maricunga to Codelco, and the granting of SQM intellectual property licenses to Codelco and the joint venture.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.