Chile finds itself at a crucial momentin the global shift towards sustainable energy, holding the world's largestreserves of lithium, an essential mineral for technologies ranging fromsmartphones to electric vehicles. Despite these abundant reserves and its keyposition, Chile's potential as a top lithium producer remains significantlyunderexploited. This situation stems from the country's regulatory frameworkfor lithium, established primarily by the 1979 law that declared lithium astrategic mineral, creating an environment marked by tension between governmentcontrol and free-market principles.

The Regulatory Landscape

Chile's journey with lithium regulationbegan in the late 20th century when global demand for lithium was a fraction ofwhat it is today. The government, under a military junta led by AugustoPinochet, recognized the strategic value of its vast lithium reserves fornuclear purposes -all this in the context of the Cold War-, leading to theenactment of Decree Law 2,886 of 1979. This legislation declared lithium astate-reserved mineral due to its national interest, placing it under directstate control, distinct from other minerals like copper.

In summary, the current regulationstipulates that lithium can only be exploited by the state or its companies, orby private entities under specific conditions:

Through an administrative concession or special operation lithium contract (“CEOL”) granted via a Supreme Decree by the President of the Republic (processed through the Ministry of Mining).
If the mining concession was granted before 1979.

‍

This classification has created a uniqueregulatory environment for lithium, where government intervention and marketdynamics are in constant interplay. Unlike the more liberalized copper sector,lithium operates under a cloak of uncertainty and restricted growth potentialdue to limited private investment.

‍

2023: The Year of Changes

After more than four decades withoutchanges in lithium regulation, and with only two companies authorized toexploit lithium in only one slat flat - the Salar de Atacama-, the Chileangovernment unveiled the National Lithium Strategy (“NLS”) in April 2023. TheNLS is a strategic framework, not a definitive policy or a change of the legalframework, outlining principles to foster growth in the lithium sector throughpublic-private partnerships in certain salt flats and private initiatives inothers. Despite its left-leaning ideological roots, the NLS aims for apragmatic approach to lithium industry development, evidenced by governmentannouncements in March 2024 indicating a more flexible stance.

Simultaneously, in November 2023 Congresssaw bipartisan efforts to reclassify lithium as a "concessionable"mineral under the broader Mining Code. Although this bill has garneredsignificant support, legislative intricacies and lack of governmental backinghave slowed its progress.

‍

The RFI Process

As part of the NLS, on April 15, 2024,the Ministry of Mining issued a Request for Information (“RFI”), invitingcompanies to express their interest in developing lithium projects in the areasthat they choose. The Ministry plans to use the responses to develop mechanismsfor assigning CEOLs for promising projects.

On July 9, 2024, the Ministry announcedthe RFI results, highlighting:

High Interest: 88 applications were submitted.
Diverse Participation: Interest from companies based in 10 countries.
Geological Potential: Most interests target areas with significant geological promise.
Innovative Technology: Over 80% of projects aim to utilize direct lithium extraction (DLE) technologies.

‍

Next Steps in the CEOL AssignmentProcess

The Ministry of Mining is currentlyanalyzing the RFI submissions, focusing on financial capability, estimatedannual production, technology, and mining experience. This evaluation willdetermine which lithium deposits proceed to the next stage of contractassignments. By the end of August, the mechanisms for assigning contracts toprioritized deposits will be revealed. In cases of direct impact, necessaryindigenous consultations will be initiated.

The Ministry plans to initiatenegotiations or bidding processes to start assigning CEOLs by early 2025.However, limited personnel may hinder the Ministry's ability to manage a largenumber of negotiations or bidding processes simultaneously.

‍

Conclusion: A Promising Horizon

Chile's lithium sector stands at apivotal point. Evolving policies, strategic partnerships, and an open approachto global investors position Chile as a formidable player in the global lithiummarket. For investors, this represents a unique opportunity to be part of asustainable and profitable future in lithium production.

To realize this bright future, thegovernment must act promptly to grant CEOLs during 2025. Additionally, in thelong term, the potential approval of the bill to make lithium concessionableoffers an attractive alternative for companies not assigned a CEOL.

The message is clear: after decades oflimited activity, Chile is now open for new players in the lithium space, readyto explore the dozens of salt flats with excellent geological potential forlithium extraction.

‍

RELATED POSTS

September 30, 2024

•

Article

Chile Prioritizes Six Salt Flats For Lithium Exploration In A First Round

Chile prioritizes six salt flats for lithium exploration, advancing its National Lithium Strategy to meet rising global demand. This move strengthens Chile's position in the lithium market, with more projects to follow.

September 24, 2024

•

Article

Latin America and the Caribbean: The Next Prime Destination for Energy Investment

Latin America and the Caribbean are growing hotspots for energy investment, with remarkable potential for those looking for the opportunity. The region’s abundant renewable resources and recognised commitment to a clean energy future make it an attractive prospect for investors. Here’s a closer look at why Latin America and the Caribbean are so promising and how the Cuba Energy Summit 2024 can open doors to those opportunities.

August 14, 2024

•

Interview

Exclusive Interview with Romina Parquet, CEO & Founder of CIMC WETRANS Argentina

Romina Parquet, CEO & Founder of Delfin Group Argentina, emphasizes CIMC WETRANS's high-quality modular containers that ensure efficient, durable, and eco-friendly construction for remote mining and energy projects. These containers offer rapid deployment and customizable solutions, making them ideal for Argentina's demanding industrial sectors.