In a significant development less than a year after the Chilean government's announcement of plans to secure a stake in the nation's lithium operations, SQM, a prominent Chilean chemical firm, has entered into a partnership with the state-owned copper company, the National Copper Corporation of Chile (Codelco). The collaboration aims to sustain operations at Chile's largest lithium extraction site, the Salar de Atacama, through the formation of a joint venture in 2025.

Under the proposed joint venture, SQM will contribute its extensive mining infrastructure, a dedicated workforce, and substantial knowledge in lithium production. Meanwhile, Codelco will play a crucial role by providing a lease, permitting lithium mining until 2060, along with authorization to extract more lithium than SQM is currently permitted. This strategic move aligns with Chilean President Gabriel Boric's vision, declared in April 2023, to have the government hold a majority stake in operations involved in extracting the battery raw material. If successfully finalized, the agreement will grant Codelco slightly over 50% control in the new joint venture.

The partnership not only secures the future of SQM but also guarantees access to lithium brines for an extended period. SQM presently holds lithium mining rights in the Salar de Atacama through a lease from the Chilean Production Development Company (Corfo), the government's economic development agency. However, this lease was set to expire in 2030. SQM had been preparing to negotiate an extension when President Boric unveiled the new policy. During negotiations with SQM, Codelco collaborated with Corfo to formulate a new, long-term leasing arrangement, providing stability to SQM's operations.

Moreover, the SQM-Codelco collaboration is poised to enhance lithium production, a critical aspect of Chile's lithium industry. The existing agreement between Corfo and SQM imposes a cap on lithium output, which will be lifted for the joint venture. SQM anticipates increased production while concurrently reducing the processing of lithium-containing brine. Currently, SQM employs evaporation ponds to concentrate brines, but the company is transitioning toward direct lithium extraction techniques known for their efficiency in removing the metal.

The collaborative efforts between SQM and Codelco not only navigate the evolving landscape of Chile's lithium sector but also address challenges posed by government initiatives. The joint venture promises a sustainable future for lithium extraction in the Salar de Atacama, incorporating technological advancements to optimize production processes. As Chile continues to be a key player in the global lithium market, such strategic partnerships underscore the industry's adaptability and commitment to meeting the demands of a rapidly evolving market.