What's Happening?
Chile's comptroller has approved an agreement between state-owned copper company Codelco and local miner SQM to form a joint lithium venture in the Atacama salt flat. This decision follows the announcement
of an unprecedented audit prompted by complaints from members of parliament. The audit was initiated due to concerns about the direct negotiation process used to reach the agreement, bypassing a public bidding process. Additionally, questions were raised about Codelco's choice of SQM as a partner, given SQM's ongoing legal issues with tax authorities. Despite these concerns, the comptroller's approval includes guidelines ensuring Codelco maintains a majority stake in the venture. The approval was the final step needed after other national and international regulators had cleared the deal.
Why It's Important?
The approval of the Codelco-SQM joint venture is significant as it aligns with President Gabriel Boric's strategy to increase state control over the lithium industry, a critical sector for the global transition to renewable energy. The deal could enhance Chile's position as a leading lithium producer, potentially impacting global lithium supply and prices. However, the controversy surrounding the negotiation process and the audit could affect investor confidence and raise questions about transparency and governance in Chile's resource management. The involvement of major stakeholders like China's Tianqi, which has attempted to block the deal, underscores the international interest and competitive dynamics in the lithium market.
What's Next?
Codelco is expected to proceed with transparency and professionalism during the audit process, which aims to confirm the integrity of the agreement. The company is also awaiting approval for lease agreements related to the salt flats, a process that began in September. The outcome of the audit and the resolution of legal challenges by stakeholders like Tianqi will be crucial in determining the future of the joint venture. The situation may prompt further scrutiny of how resource agreements are negotiated in Chile, potentially leading to policy changes or reforms in the industry.
