We present the keys to understand the role of Empresa Nacional del Litio and the development of the industry in Chile.
On April 20, the “National Lithium Strategy” (ENL) was released. Chile has the largest lithium reserves in the world ready for exploitation (36% of such reserves) and is the second largest lithium producer in the world, with almost one third of global production.
The main elements to be considered of the ENL are:
- The State will have a participation in the entire production cycle, and a National Lithium Company will be created
In this respect, a bill will be sent to Congress during the second half of this year. This National Lithium Company will be a 100% state-owned company and will seek private partners for the development of new projects. The business model of this public-private partnership will have to be defined in the aforementioned bill.
The bill for the creation of a public company will have to face a divided Congress and overcome a qualified quorum. In principle, this quorum would be the absolute majority of deputies and senators in office, but the bill will have to be further reviewed in order to know if the Organic Constitutional Law on Mining Concessions (Law No. 18,097) and the current Constitution will also be modified, in which case the quorums would be higher. In addition to the above, in the next few months the draft of a new Constitution will be discussed, so it will be necessary to abide by the provisions of this proposal, in case it is approved.
- Prospecting of new salt flats and search for private partners for exploration, exploitation and adding value to the productive chain.
Until the National Lithium Company is created, CODELCO and ENAMI (and its subsidiaries) will be granted new exploration and exploitation contracts (“CEOL”) for the development of new projects in places where they already have a presence and may seek private investors to partner in such development.
In addition, international bids will be called for the exploration of the remaining salt flats with exploitation potential. If the results are positive, the successful bidders of exploration contracts will have the preferential right to exploit the salt flats in association with a state-owned company.
Chile currently has at least 45 salt flats and 18 salt ponds, many of them with exploitation potential.
- Salt flat protection system, with 30% of ecosystems protected by 2030.
In addition to safeguarding the sustainability of these complex ecosystems, it is proposed to implement technologies that minimize environmental impact, such as direct extraction with brine reinjection (DEL/R) and the reduction of fresh water consumption.
- Modernization of the institutional framework.
This part of the ENL is not yet defined in detail, but the objective will be the development and growth of the industry, safeguarding the impacts on the salt flats and giving coherence to the existing and new organizations.
Currently, the Chilean Nuclear Energy Commission (CCHEN), the Ministry of Mining, CODELCO, ENAMI, and the environmental authority, especially the Environmental Evaluation Service (SEA) and the Superintendency of the Environment (SMA), have a relevant participation in the lithium industry. In the future, it is expected that the National Lithium Company will play a fundamental role. The challenge for the NLE will be to make coherent the role that CCHEN currently has with respect to the granting of authorizations, of the participation of the Ministry of Mining, which currently grants the special operating contracts (“CEOL”), and the role that the current and new state-owned companies will have.
- Participatory policy with neighboring communities and relevant stakeholders.
The government has committed, as one of its first measures, to open a dialogue with communities located in the Salar de Atacama.
Likewise, a period of dialogue will be opened with different actors, including communities and indigenous peoples, regional governments, academia, companies, civil society, and public agencies. This dialogue process should be reflected in the definitions regarding the institutional modernization and the modeling of the National Lithium Company and the Public Technological and Research Institute of Lithium and Salt Flats.
- Generation of an innovation and development policy for the lithium industry.
A “Public Technological and Research Institute of Lithium and Salt Flats” will be created, which will ensure the generation of knowledge and technologies that allow the improvement of the processes of extraction, production, value addition, applications, and recycling, combining these capabilities with efforts in research and environmental protection.
- Incorporation of the State in the productive activity of the Salar de Atacama.
Currently, the companies SQM and Albermarle produce in the Salar de Atacama. SQM’s production represents 65% of Chile’s total production, and its contract with CORFO (the Chilean State entity that controls the mining property in the Salar de Atacama) ends in 2030. Albermarle represents the remaining 35% of total lithium production, and its contract with CORFO terminates in 2043.
The NLE establishes that CODELCO will lead the negotiations with SQM to agree on how the State will take over its operation after 2030. It also expressly states that the State will fully respect the provisions of the current contracts with SQM and Albemarle, so that any modification to them and the early entry of the State in the operation in the Salar de Atacama will be the result of an agreement between the parties involved.
For more information, please contact:
Antonio Rubilar | Director Public Law and Regulated Markets Group | arubilar@az.cl
Alejandro Montt | Director Energy and Natural Resources | amontt@az.cl
