SQM agrees to partner with state-owned company for future lithium production in Chile

Less than a year after Chile’s government announced a plan to take a stake in the country’s lithium operations, the Chilean chemical firm SQM has agreed to partner with a state-owned copper company to continue operating the nation’s largest lithium extraction site.

SQM and National Copper Corporation of Chile (Codelco) say they plan to form a joint venture in 2025 that will take over SQM’s lithium extraction operations in the Salar de Atacama. SQM will contribute mining infrastructure, employees, and knowledge of lithium production. Codelco will provide a lease permitting lithium mining through 2060 and the authorization to extract more lithium than SQM is currently permitted to produce.

The agreement provides clarity on how SQM will operate following Chilean president Gabriel Boric’s April 2023 announcement that he wants the government to take a majority stake in all operations that extract the battery raw material. If finalized, the deal will give Codelco control of just over 50% of the new company.

The deal will ensure SQM access to lithium brines for years to come. The firm leases lithium mining rights in the Salar de Atacama from Chilean Production Development Company (Corfo), the government’s economic development agency, but the lease is set to expire in 2030. SQM was gearing up to negotiate an extension when Boric announced the new policy. While drafting the agreement with SQM, Codelco worked with Corfo to offer a new, long-term leasing arrangement.

The SQM-Codelco partnership will also boost lithium production. Corfo’s existing agreement with SQM puts a cap on output, and the cap will be raised for the joint venture.

SQM says additional production will be achieved while also reducing the amount of lithium-containing brine it processes. Currently, SQM uses evaporation ponds to concentrate the brines, but the firm is moving toward direct lithium extraction techniques that more efficiently remove the metal.

Cameron Perks, a lithium analyst for the research firm Benchmark Mineral Intelligence, says the planned increase in production in the Salar de Atacama ensures that Chile will remain a major lithium player, even as neighboring Argentina moves to quickly expand lithium production. But handing over control to an inexperienced company does threaten the efficiency of the operation, Perks cautions.

Daniel Jimenez, a partner at the lithium advisory firm iLiMarkets, adds that the agreement provides a path forward for SQM, which likely couldn’t keep producing lithium past 2030 without partnering with the government. “SQM would be left with basically nothing,” he says. “Through this agreement . . . it gets an extension and owns basically half of the project for the coming 30 years.”

Jimenez says he doesn’t expect the government to reach similar deals with other companies. He says firms setting up new projects will likely look outside of Chile, and the only other lithium producer in the Salar de Atacama, Albemarle, has mining leases through 2040.