Chilean President Gabriel Boric, seeking to expand the country's long-stagnating lithium industry, has tasked Codelco, the world's largest state-owned copper producer, to lead the development of the white metal needed for electric car batteries.
Chile is already number one in the world. The world's second largest lithium producer after Australia. But global demand for electric vehicles is surging as automakers step up production to reduce greenhouse gas emissions. The country has the world's largest known lithium reserves, and Boric's announcement in April put Codelco in charge of negotiating deals with the new company as well as existing lithium miners Albemarle and SQM.
The goal is for both companies to voluntarily join the state-controlled partnership before the current contract expires. Codelco, meanwhile, wants to boost its copper production, which has fallen to its lowest level in 25 years.
Some analysts question whether the copper company, which has no experience in lithium mining, can tackle both challenges. But industry sources have told Reuters that Codelco is likely to focus its own resources on copper while negotiating contracts for the lithium business and letting other miners do the work.
"It could be that Codelco only provides capital," said one source with knowledge of senior decision-making. Under this strategy, Codelco could take a majority stake in future projects but hand over operations to a private partner.
A former Codelco executive said Chile could end up repeating the model used by Indonesia on the Freeport-McMoran project, in which the company gave majority control to the government but remained the operator.
"Codelco can solve the lithium mine problem with relatively few people," the person added. The person spoke on condition of anonymity because of the sensitivity of the negotiations. Codelco may own 51 percent, but I don't think it will be an operator."
Lithium, which evaporates from pools of salt water in Chile's high-altitude salt flats, is coveted by Tesla, BMW and every other global automaker. Governments from Berlin to Beijing are also seeking this, and they need it to drive the shift to renewable energy.
Two Codelco sources with knowledge of resource planning and strategy said the lithium unit is run by compact teams and there are no major hiring plans as talks with SQM and Albemarle continue.
The Lithium strategy is being led by executives including new business development manager Jaime San Martin, known to some inside Codelco as the "Lithium Man", the sources said. Vice President of Finance Alejandro Rivera is also closely involved.
Balance copper and lithium
Codelco Chairman Maximo Pacheco told Reuters that while the company had already set up two lithium mining subsidiaries, Salares de Chile and Minera Tarar, it would see how talks progressed before making any hires.
"Based on this and on the progress of the negotiations, we have to create these public-private alliances and we will identify the organisation of human and capital resources," he said on the sidelines of an event near the capital Santiago.
Codelco has already started talks with SQM, whose existing lithium contract expires in 2030. Albemarle has said it will wait until 2043, when its contract expires, to begin negotiations.
Pacheco and other executives say the lithium plan will not weigh on copper, but outside experts are skeptical.
Juan Carlos Guajardo, director of Plusmining, a consultancy, said that developing Codelco's lithium expertise from almost nothing would nonetheless tie up resources.
"These agreements require a high level of high-level management involvement because they are strategic decisions," Guajardo said. "But I think lithium is a great opportunity for Codelco to get them through a very difficult copper situation."
Codelco must also revive copper production, which has fallen to a 25-year low. On Tuesday, CEO Andre Sogaray abruptly resigned, citing a "complex situation" within the company.
