Chile launches lithium auction in bid to speed up production

Chile announced an auction process to award operating contracts to explore and produce 400,000 tons of lithium metal for batteries, in an attempt to boost production and meet global demand.

The measure comes as the Andean country, which is in the so-called “lithium triangle” of South America and is one of the world’s leading producers of the metal, seeks to accelerate the development of new projects, which have stalled in recent years.

Global demand for the light metal is increasing, driven by a shift towards electric vehicles and the increased use of electric batteries.

The ministry said the contracts would be divided into five installments of 80,000 tons each, giving bidders a seven-year term for geological exploration, studies and project development, extendable for another two years.

Then, it would provide another 20 years for production, and the state would receive a royalty payment for the allocation of quotas, as well as a variable payment during production.

The ministry pointed out that the auction was intended to “satisfy the increase in world demand for lithium and the growth that is projected in the future, within the framework of the fight against climate change.”

Chile’s lithium industry is dominated by SQM and Albemarle, which have major projects in the Salar de Atacama, where companies use pools of brine to extract lithium from under the salt.

The world’s largest producer of copper is also the second largest producer of lithium, behind Australia. It has the world’s largest reserves of the metal, with 9.2 million tons according to the US Geological Survey.

The auctions could help Chile increase production, although this implies a long process in a highly technical industry where many projects fail.

Chile has lost ground over time to its rivals, with criticism that it has been slow to develop new projects.

“Our country, which until 2012 was the world’s leading lithium producer, was overtaken by Australia and it is expected that by the end of this decade China will displace us to third place,” the ministry said in its statement.

Chile declared lithium of national interest in 1979 and strictly controls its production, which can only be done by the State, through a Special Lithium Operation Contract (CEOL), with state companies or through Administrative Concessions.