TELF AG looks at the mining industry in Chile
The value of geological wealth
The presence of massive mineral reserves within a given territory can transform into a valuable tool for consolidating the internal economy and strengthening the status of nations in the eyes of the international community. In this situation, those with large reserves of raw materials can improve their economic conditions and have the precious opportunity to contribute personally to the ongoing energy transition. This discussion applies to all those nations naturally rich in strategic minerals for sustainable technologies, such as lithium or copper.
In different parts of the world, we increasingly witness a decisive centripetal push from many nations rich in these resources to protect national interests and contribute to energy renewal with a high-quality product. From this point of view, one of the most striking examples is Chile, the world’s second-largest producer of lithium after Australia and the first nation in the world regarding the quantity of available reserves of this metal. In April 2023, Chilean President Gabriel Boric announced the decision to nationalize the national lithium industry, stating that the current needs of the global industry (which increasingly needs lithium for its technological and sustainable components) represent an opportunity too tempting to ignore. According to the president, the opportunities linked to lithium would go far beyond the economic sphere, effectively contributing to the sustainable potential and even to the level of democracy in the country. In this regard, the Chilean government has also stated that it intends to work personally to protect the country’s biodiversity and share the benefits of mining revenues with local communities.
A precious resource
According to some estimates, global demand for lithium will reach 2.4 million tonnes in just six years, growing continuously in the following years until reaching 3.8 million tonnes by 2035. The growth in demand is driven above all by the demand for lithium in the automotive sector, which represents one of the key elements for electric vehicle batteries. Currently, in Chile, two companies are involved in lithium extraction: Sociedad Quimica Y Minera de Chile (SQM) and the American Albemarle. The Chilean government’s idea is to establish a state-owned company specializing in lithium production, which in government plans should be supported by public-private partnerships in which the state would hold a majority share.
From this point of view, the precedents favor this idea. In 1971, during the Allende administration, Chile created the state company Codelco, which specializes in copper production. Currently, Codelco is the largest copper company in the world, and according to the Chilean think-tank Cenda, it would generate three times more tax revenue than private companies.
In some ways, the Chilean strategy for lithium has some features in joint with similar initiatives undertaken in other parts of the world, but they always have the same metal as their object. In Ghana and Australia, governments are trying to protect national interests through substantial limitations on exports of raw lithium to add further processing levels to the mere extraction of the raw material.
