Wealth Minerals predicts new government to kick-start Chile lithium industry
Chile has been slipping behind Argentina in capturing foreign investment in its lithium industry, at a time when the industry expects a price surge.
That scenario is set to change, as the new government readies policies designed to meet a burst of new demand coming from electrical vehicles in the next ten years, Wealth Minerals Ltd. (TSXV: WML | OTCQB: WMLLF) President Tim McCutcheon told InvestorIntel.
Wealth Minerals’ strategy is to convince one of three state entities authorized to commercially exploit lithium resources in Chile to work in a partnership. The companies are state development agency Corfo that granted licenses to major producers SQM and Albemarle, state copper producer Codelco and state copper refiner Enami. The company hired Marcelo Awad, a seasoned former CEO for copper mining major Antofagasta Plc, to enhance the company’s relationship with the government.
“We’ve started a dialogue with all three of them,” McCutcheon said, referring to the effort to engage with the Chilean state companies. “It doesn’t take a lot of creativity to think of a structure to make everyone happy.”
Wealth Minerals holds 100,000 hectares (247,100 acres) of highly prospective lithium terrain, including several major fringe areas of the Atacama salt lake, home to two of the world’s biggest operations. Both Chile’s SQM and Albemarle Corp., the world’s two largest producers of lithium, produce most of their output from brines extracted from the Atacama. Unlike Chile’s copper mining industry, exporting lithium requires a specific license from the government or a partnership with a state-owned company.
The Atacama holds 15% of the world’s known lithium reserves. Wealth Minerals holds 45,000 hectares of its concessions in the salt lake. The concessions neighbor the operations of Albemarle and SQM, plus exploration concessions of BHP Billiton Ltd. and SLM NX. Lithium brine deposits tend to be uniform, meaning that the brine in the northern section of the salt lake where it holds the concessions will be similar to what Albemarle and SQM extract in the south.
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Chile is eager to increase production, as large amounts of new lithium are required in electrical vehicles. Corfo earlier this month settled a legal dispute with SQM over corporate governance. The agreement paves the way for SQM to apply for a license to increase output from the Atacama salt lake. SQM may also work with Codelco, the world’s largest copper producer, to develop other resources of lithium in the country. Albemarle, the world’s largest lithium producer, obtained license to expand output from the Atacama. The newly appointed government of Sebastian Pinera will officially take office on March 11 and has yet to officially reveal its policies towards developing the lithium sector.
While Chile has been slow to develop new sources of lithium, Argentina has seen a flurry of activity since pro-business President Mauricio Macri took office in December 2015. SQM teamed with Lithium Americas to develop the Cauchari-Olaroz project in northern Argentina while Orocobre is now operating the Olaroz mine in partnership with Toyota Tsusho Corp. FMC Corp. is expanding its Salar del Hombre Muerto mine through a $300 million investment, while International Lithium Corp. along with Chinese partner Ganfeng Lithium will advance on a feasibility study on the Mariana project.
McCutcheon said while the burst of lithium projects in the junior space will ensure ample supply in a 10-year time horizon, there will be shortages before then because users of the metal haven’t invested in a new supply pipeline.
“That’s the thing that people are waking up to with a sense of urgency that wasn’t apparent six months ago,” McCutcheon said. “Right now you can’t buy lithium carbonate on the open market for the life of you.”
Matt Craze has covered commodity markets for more than 20 years, working as a research at CRU International, and for over 10 years as a ... <Read more about Matt Craze>