Lithium Power International Ltd (fka LTHHF)

[Dr_Vonschellan]

Fastmarkets_says Chile_will go_from 2nd_to 4th_in lithium_production after
Mommy's Boy Gabby Boric's disastrous NLP announcement https://www-latercera-com.translate.goog/pulso-pm/noticia/the-economist-y-financial-times-alertan-sobre-efectos-de-la-estrategia-nacional-del-litio-y-posible-perdida-de-mercado-para-chile/4SQZN4VLUNCKHLXUHLYM4HVEIU/?_x_tr_sl=es&_x_tr_tl=en&_x_tr_hl=en-US&_x_tr_pto=wapp
Reprinted below in English in case paywall gets reactivated.

The Doctor
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The Economist and Financial Times warn about the effects of the National Lithium Strategy and possible market loss for Chile

The English weekly says that with this initiative "the big question is whether Chile's part of the pie will end up being smaller than it could have been." Meanwhile, the FT adds that, according to data from the consulting firm Fastmarkets, "the inability to take advantage of the lithium boom suggests that Chile will go from being the second largest lithium producer in the world last year to fourth in 2030, behind China, Australia and Argentina, and that its quota be reduced from almost a third to 12%".

The National Lithium Strategy (NLP) announced a couple of weeks ago by President Gabriel Boric continues to make people talk internationally.

This week two of the world's leading financial publications, The Economist and the Financial Times, reported on the issue, both with a generally negative view of the current administration's idea.

The English weekly The Economist highlights in an article entitled "The green revolution will stagnate without Latin America's lithium" that "more than half of the world's lithium, the metal used in electric vehicle batteries, is found in Latin America. The region also has two fifths of the copper and one quarter of the nickel”, which is why delegations from Europe and the United States have visited the region to try to secure these key resources for the energy transition.

“But while the outside world spies on Latin America's resources, governments are taking back control. On April 21, Gabriel Boric, Chile's left-wing President, announced plans to create a state-owned company to produce lithium. If the law is passed later this year, private companies will have to form joint ventures in which the state company has a majority stake," notes The Economist, adding that "Boric is not the only supporter of green nationalism" in the region. In fact, he points out that in Mexico the Senate approved changes to the mining code to reduce the duration of mining concessions. Andrés López Manuel Obrador, Mexico's populist president, also signed a decree in February to speed up the nationalization of the country's lithium reserves. The governments of Argentina, Chile, Bolivia and Brazil are debating the creation of an OPEC for lithium to control world prices. In Bolivia, the lithium industry is totally in the hands of the State, ”he points out.

In addition, the publication highlights that the Resource Nationalism Index, a classification prepared by the consultancy Verisk Maplecroft, which tracks the increases in royalties, the demands for locally produced goods and the expropriation of assets, shows that Mexico, Argentina and Chile have moved up the rankings. "Chile ranks 70th, from 89th in 2018," they say.

According to the weekly, “much of this is due to the fact that a wave of newly elected left-wing governments are now in power in the region. They want to do things differently than in the past, when wealth from raw materials ended up abroad or lining the pockets of friendly capitalists.” Thus, Latin America is part of a global trend, which has also been seen in Africa and elsewhere.

The Economist says that IMF data anticipates that if the goal of net zero emissions is achieved by 2050 in the world, revenues from related metals could quadruple, including lithium. “Chile is one of the places most likely to benefit from the windfall. Already mining, especially copper, represented 15% of its GDP and 62% of its exports in 2021.

In addition, he says that “many politicians think that natural resources should be used as inputs in local manufacturing instead of being exported as raw materials. The same day he announced his lithium plans, Boric proclaimed: “This is the best chance we have to transition to a developed, sustainable economy. We cannot afford to waste it."

“ But resource nationalism carries enormous risks. Nationalization has a bad record in the region. Pemex, the Mexican state oil company, is the most indebted oil company in the world. The Venezuelan state oil company, PDVSA, is synonymous with the collapse of the country. Petrobras, Brazil's public oil company, was at the center of the region's biggest corruption scandal, known as "Lava Jato." And state-owned companies may lack access to the cutting-edge technology that multinationals often excel at. For example, LitioMx, Mexico's new state-owned lithium company, is unlikely to prosper on its own. To date, Mexico has been unable to produce lithium on a commercial scale, in part because its deposits are more difficult to extract, since they are found in clay rather than brine. To dig them you need technology,

It also highlights that “Bolivia is the second country in the world with the largest lithium reserves. But it hasn't mined anything on a large scale yet. In 2019, the government issued a decree annulling a lithium project involving a US$1.3 billion investment by Aci Systems, a German company, after local protesters demanded higher royalties.

“As long as the appetite for green resources remains insatiable, Latin America will have enough leverage to impose conditions on private companies without choking investment flows. The big question, however , is whether your piece of the pie will end up being smaller than it could have been.. Chile is an example to take into account. The government already plays an important role in the production of lithium, which is considered a strategic resource. Royalties reach up to 40% (compared to 3% in neighboring Argentina), and companies are required to sell up to 25% of local production at below-market prices to producers who promise to develop the value chain of the national lithium. As a consequence, Chile is losing market share. Production is expected to grow by three-fifths between now and 2026. By comparison, Australia is expected to double its production in the same period,” they add.

Financial Times

For its part, the English newspaper Financial Times points out that "Chile has taken measures so that the State controls key lithium projects in an attempt to develop its vast resources of this key metal for electric car batteries, after decades of dominance by production by two industry leaders.”

“But mining executives and analysts believe the strategy unveiled last month will have the opposite effect, further eroding the attractiveness of the world's second-largest lithium producer as an investment destination, to the benefit of Australia, Argentina and several African countries. ”, says the newspaper, which adds that “the measure brings Chile closer to its Latin American neighbors Bolivia and Mexico in terms of dissuading commercial investors by imposing greater state control, although Chinese groups could continue to be interested in filling the void, according to an executive.”

Among the comments reported by the newspaper is that of Reg Spencer, an analyst at Canaccord Genuity, who said that “the Chileans have shot themselves in the foot. Although the policy opens up opportunities for further development, it is going to have the opposite effect due to uncertainty.”

At the center of the strategy is the jewel in the crown of Chilean lithium, the Salar de Atacama, in the north, where the material for the batteries is extracted from the brine through evaporation ponds, the publication highlights, but alerting that “The groups that operate there have already started looking further afield. Albemarle, which has been quiet about the Atacama expansion for two years, submitted a $3.7bn offer in March to acquire Liontown Resources, an Australian hard-rock lithium producer. “I don't think it's a coincidence,” Spencer said.

According to the FT, “beyond the Salar de Atacama, there are sources of optimism. Junior lithium miners see opportunities to take stakes in nine salt flats held by Chilean state entities. But, efforts to introduce new competitors have failed. A potential new deal fell apart last year when an appeals court suspended a contract auction over objections from the local governor, after awarding quotas of some 80,000 tons of lithium to the world's largest electric vehicle maker, BYD, China. and a local company”.

“However, the inability to take advantage of the lithium boom suggests that Chile will go from being the second largest lithium producer in the world last year to fourth in 2030, behind China, Australia and Argentina, and that its share will be reduced by almost a third to 12%, according to Fastmarkets,” they say.