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HomeMiningChile's Codelco must kick-start lithium industry while reviving copper output

Chile’s Codelco must kick-start lithium industry while reviving copper output

Chilean President Gabriel Boric, seeking to expand the country’s long-stalled lithium industry, has tasked state-owned Codelco, the world’s largest copper producer, to lead the charge of developing the white metal needed for electric vehicle batteries.

Chile is already the world’s No. 2 producer of lithium after Australia. But demand is exploding worldwide as automakers gear up to churn out electric vehicles to cut greenhouse gas emissions. The country sits on top of the world’s largest known deposits of lithium and Boric’s announcement in April gave Codelco responsibility for negotiating deals with new companies as well as current lithium miners Albemarle (ALB.N) and SQM (SQMA.SN).

The goal is to get the companies to enter voluntary state-controlled partnership before their existing contracts expire. At the same time, Codelco wants to boost its output of copper which has slumped to its lowest in a quarter-century.

Some analysts have questioned whether the copper company with no experience as a lithium miner can tackle both challenges at once. But industry insiders told Reuters Codelco will probably focus its own resources on copper while negotiating contracts for lithium operations and letting other miners do the work.

“It could be Codelco only contributes capital,” said one of the sources with knowledge of executive decision making, a strategy which could see the state firm hold a majority stake in future projects but leave operations to private partners.

Chile could end up recreating the model Indonesia used with Freeport-McMoRan, where the firm gave up majority control to the state but remained the operator, a former Codelco senior executive said.

“Codelco can resolve the lithium issue with relatively few people,” added the person, who asked not to be named due to the sensitivity of the ongoing talks. “Codelco may have 51% but I don’t think it will be the operator.”

Lithium, evaporated from brine ponds in Chile’s high-altitude salt flats, is coveted by Tesla (TSLA.O), BMW (BMWG.DE) and every other global car maker. It is also sought by governments from Berlin to Beijing, that need it to power the shift to renewable energy.

Two Codelco sources with knowledge of resource planning and strategy said the lithium units were being run by compact teams and there was no plan for major hiring as talks with SQM and Albemarle moved forward.


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