On June 16, 2023, the Government released - as a complement to what was announced on April 21, 2023 in the document "Lithium, a Historic Opportunity for a Developed Chile" - the main details of the so-called "National Lithium Strategy" (the "Strategy"), in a document entitled "Estrategia Nacional del Litio. For Chile and its People". Below, we comment on the most relevant content:
Sustainable Development of Production Potential: One of the objectives of the Strategy is to increase lithium production while ensuring a minimum environmental impact (incorporating as a requirement the application of direct extraction and reinjection techniques) and the participation of communities and indigenous peoples in the relevant areas of each operation. To this end, it is proposed to generate conditions to increase production in the Salar de Atacama, as well as to establish the conditions for the development of extraction projects in other salt flats, starting with exploration in those for which there is already preliminary knowledge. With respect to the development of new projects in other salt flats, the Government estimates that these will take an average of 6 to 8 years to begin production, considering a rigorous study of their environmental impacts and the participation of both regional governments and potentially affected communities.
Productive linkage: Another of the Government's proposals is to achieve a productive linkage, both upstream and downstream, with local companies, aimed at preventing the lithium industry from being limited to mere extraction. An upstream production chain involves promoting, in addition to the exploration and extraction work itself, the development of biotechnological know-how, environmental impact mitigation, water treatment and increased use of renewable energies. A downstream production chain involves promoting refining processes and obtaining lithium chemicals, developing battery elements, promoting the mining of other substances necessary for battery production and lithium recycling.
Fiscal Sustainability: Based on the assumption that State revenues from lithium extraction have a clearly transitory component, it is proposed to adjust their treatment, incorporating a new rule by virtue of which lithium revenues above a threshold defined as the average of the previous 4 years cannot be spent. The savings from the application of this rule will be directed to ensure the financing of social, scientific-technological and productive investments.
Diversification of ActorsThe aim is to promote the growth of public-private partnerships through joint-venturesto stimulate a more competitive market, with greater financing for knowledge and productive development and alliances with various companies in global markets. The aim is to achieve a better distribution of risks within the framework of public-private alliances, with appropriate geopolitical balances. As already mentioned in the initial announcement of the Strategy, these partnerships are also intended to ensure the State's involvement in the entire lithium production cycle.
Current status of salt flats with pre-1979 tenements and salt flats without tenementsReiterates the Government's commitment to unrestricted respect for current contracts and its intention to reach early agreements with the companies that are currently developing projects in the Salar de Atacama with pre-1979 belongings, i.e. SQM Salar and Albemarle S.A., which are operating under lease contracts valid until 2030 and 2043, respectively. The objective is to achieve sustainable continuity, increased production, and the entry of the State into the lithium production cycle as soon as possible, with a majority participation of the State. The new lease contracts will be based on the current conditions of the existing contracts, considering the income obtained today by the State, the benefits of regional governments, local governments and communities around the salt flats, contributions for research and development, the quotas reserved at a preferential price for the development of value-added projects in Chile, and new socio-environmental standards will be established. In the case of the Salar de Pedernales, a subsidiary of Codelco could develop a project directly or form a public-private joint-venture for the exploration and exploitation of this salar.
In the case of salt flats with no belongings, Codelco or Enami will be required to execute Special Lithium Operating Contracts ("CEOL") for exploration with private companies through public, transparent and informed bids. In this sense, CEOLs for exploration and exploitation will be granted to Codelco and Enami in those salt flats where they already have projects with different stages of development, where they will be able to decide whether or not to partner with a private company. In addition, it is intended to initiate bids for exploration CEOLs to private parties in those salt flats registered by SERNAGEOMIN and that are considered susceptible to exploitation. The holder of an exploration CEOL will have the preferential option to partner with a State company for the exploitation stage, and the State must have a majority participation in those salt flats that are defined as strategic. The Strategy does not contemplate the possibility of opening bids for the granting of exploitation CEOLs to private companies.
In this regard, and in relation to the prospecting of other salt flats, it is essential to highlight that the Strategy establishes that for all projects the conditions and benefits for the State and the communities that are currently established in the leases of the Salar de Atacama will be considered as a floor, in addition to environmental and technological requirements, quotas for value-added projects, among others.
To achieve the proposed goals, the Government has presented a timetable for the implementation of the Strategy, with the main actions and milestones to be carried out during the period 2023-2024. These are:
