Lithium Power International Ltd (fka LTHHF)

[Dr_Vonschellan]

Everything_YOU wanted_to know_about Atacama, Maricunga,_CORFO,
SQM, Albemarle SIMCO in Spanish.
Or, in English (also see below)
https://www-latercera-com.translate.goog/pulso/noticia/los-dilemas-del-gobierno-en-el-salar-de-atacama-la-joya-del-litio-chileno/VP5ZWSCCCBFHNEYYWJ4EY3VN6Q/?_x_tr_sl=es&_x_tr_tl=en&_x_tr_hl=en-US&_x_tr_pto=wapp

Our persevering enduring and yet full-of-hope Maricunga story begins in paragraph 10.

The Doctor

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The dilemmas of the Government in the Salar de Atacama, the Jewel of Chilean lithium
by Victor Cofre

There are no negotiations, but there is a lot of debate about how to further take advantage of the global lithium price boom. Future projects take 7 to 10 years and the new lithium policy is 12 months of mystery. A short-term path points to SQM and Albemarle, which exploit the world's largest brine field. One formula is to extend quotas and terms in exchange for raising the lease rates, today at a maximum of 40%, immediately raising fiscal resources. Some propose advancing lease payments. Others, include the State in the property of the operators of the salt flat. And others, to bring forward the bidding for the SQM contract that ends in 2030.

The Atacama salt flat is a current source of wealth for the Treasury. A new salary for Chile. That is where the lithium that Chile exports for the batteries of electric cars around the world comes from. This is where the extraordinary resources that Chile received in 2022 came from, calculated for now at more than US$ 5,000 million, almost 2% of Chilean GDP and close to 7% of Treasury income.

The largest salt flat in Chile has exceptional conditions -high concentration of lithium, exceptional solar radiation and lack of rain- that are not found anywhere else in the world. The Treasury owns the mining assets in the Atacama salt flat and these assets have been leased long-term to two companies, SQM and Albemarle, the only local lithium producers, something that the world avidly demands for electromobility.

These two companies, and the industry in general, are attentive to the signs that the government of Gabriel Boric will give in a national lithium policy that is one year in the making and that had been promised by the end of 2022. That did not happen. But few have high expectations: in the industry they believe that this policy will be general, that it will aim at the management of the salt flats and that it will promote their exploration and exploitation in a public-private alliance, with the creation of the National Lithium Company, a promise campaign. It will be a medium and long-term policy whose main question is whether or not the jewel in the crown aspires to obtain higher yields.

The Atacama salt flat, analysts, experts and businessmen agree, is the most immediate path -if not the only one- to squeeze the global lithium boom. One option is the status quo: leave SQM and Albemarle's current fees and terms and continue to receive the extraordinary resources of the fervent demand. Some believe that this will be the path chosen, one that avoids political turmoil. The other is to allow increases in production, but in exchange for demanding even more money from the Treasury.

Two actors for a salt flat

Eight years ago, a commission of 20 people convened by President Michelle Bachelet issued 100 pages of diagnoses and proposals. That report recommended many things. Among them, creating a public company or a state corporation that would exploit salt flats, preferably in association with third parties; sustainably manage the nearly 50 salt flats in the north of the country and review the contracts in the Atacama salt flat, "the most important lithium deposit in the world," says that text. With this input, Corfo, then headed by Eduardo Bitran, renegotiated with Albemarle and SQM. Until then, Corfo charged SQM 6.8% of the sale price of lithium as a lease fee. Bitran raised that rate to a maximum of 40%, in a renegotiation that everyone applauds today and that is behind the surprising tax collection.

The first renegotiation was in 2016 with Albemarle, which was then Rockwood.

Corfo set the lease until December 31, 2043 and extended the authorized exploitation quota. And it established a scale of rates that began at 6.8% and exceeded 40% for a price above US$10,000 a ton. That ceiling then had a low probability. Prices in 2015, the presidential commission said, were between $5,500 and $6,000 a metric ton of lithium carbonate, the usual industry measure.

The following process was the harshest and was closed a year later, in December 2017, the day after the presidential elections that Sebastián Piñera won at the time. Bitran faced SQM in a hostile negotiation that focused on three aspects: rates, extra production quotas and changes in corporate governance, the most difficult of these negotiations. SQM intended to extend its contract from the 2030 set in 1993 to the same 2043 of Albemarle. But Bitran refused. He did manage to remove Julio Ponce, SQM's most relevant shareholder, from the board of directors, among other changes. Bitran agreed to deliver new installments, but used Albemarle's parameter: SQM would pay more than 40% if the price exceeded the difficult barrier of US$10,000.

But all estimates fell short. The world consumption of lithium, driven by electric cars, triggered that price: in 2022 it reached a peak of US$88,000 a ton and SQM sold an average of US$52,000. Between the lease and the first category tax, the Treasury takes more than half of the lithium rent. But SQM also improved its profits -almost US$4 billion in 2022- and today it is the Chilean firm with the highest stock market value. Albemarle summarized the agreement in Chile this month for his investors: "For every US$1 out of US$10 per kilo of lithium carbonate equivalent, Albemarle pays US$0.4 to Corfo."

What to do with the contracts?

The State has entrusted Codelco with productive development in lithium: the mining company has mining concessions equivalent to 18% of the surface of the Maricunga salt flat. But that salt flat is one tenth the size of the Atacama salt flat and other actors also have belongings there. Minera Salar Blanco has approved environmental permits and a US$700 million project that it intends to carry out starting this year, but a legal uncertainty is holding it back: Codelco asked the Ministry of Mining for ownership of all that salt flat. There is also a company owned by Francisco Javier Errázuriz Ovalle with the Simbalik Asian fund.

The problem is that any new project will take time - between seven to 10 years, less in the case of Salar Blanco - and the spectacular window of current prices could close before adding new production. The only way to get extra current income is the Atacama salt flat. This is how Bitran put it in a column in the DF (Dario Financial) in September: "There is a window of opportunity to more than double production in the Atacama salt flat and allow the State to obtain more extraordinary resources for a few years." It is not a single formula. “There are several possible alternatives,” says a player in the local lithium market.

SQM has a global quota that, until 2030, is equivalent to some 216,000 metric tons per year. The world consumed 760,000 in 2022 and will reach 1.5 million in 2025. SQM sold 157,000 in 2022: its production capacity has already increased to 180,000 tons and by 2024 it will reach 210,000. But he already sent a message to the government. It was public. In September, SQM announced its Salar Futuro project: it promises gigantic investments - including a lithium battery plant - but for this, it said, its contract must be renegotiated. “SQM will not invest more money if its contract expires in 2030 and it is not certain about its renewal,” says an industry expert. The end of the contract in 2030 is such a real threat that the company has sought to expand its operations outside of Chile: by 2025 it expects to produce 30,000 tons in China and 25,000 in Australia.

SQM's problem remains the same as in 2018: the presence of Ponce as a shareholder. For the government of Gabriel Boric, it is difficult to present to extend rights to SQM. But there are the pragmatic numbers: SQM contributed more than Codelco in 2022 and this year it is on a similar path. The option of improving tax revenues even more - and with the always useful argument of solving social emergencies - could lessen the Ponce factor, believe some in the industry. SQM, for this very reason, has launched a speech that highlights that it is already a partner of the Chilean State. At the launch of Salar Futuro, he repeated it: the contract with Corfo "is the best example of a successful public-private partnership."