After the Andean nation, which has the world’s largest reserves of the battery metal, unveiled a plan to nationalize the industry, shares of Chile’s top two lithium miners SQM and Albemarle slid on Friday.
Chile, the second-largest lithium producer in the world, would shift to a model in which the state would control all new lithium projects through a public company that would partner with private mining companies.
Nationalizing Chile’s Lithium Mines
The bid for state control of Chile’s lithium mines reflects a larger trend of lithium nationalism throughout Latin America, which is home to the “lithium triangle,” which contains the world’s largest trove of the metal necessary for electric vehicle batteries.
Manufacturers of electric vehicles scrambling to secure battery materials face a new obstacle. Mexico nationalized its lithium deposits last year, and in 2020, Indonesia will prohibit the export of nickel ore, a crucial component of batteries.
In his announcement late on Thursday, Chile’s young, progressive President Gabriel Boric said that the country would not cancel any contracts that were already in place. However, the country would try to negotiate with mining companies to voluntarily switch to a public-private model.
Albemarle was down 2.5% and SQM’s U.S.-listed shares fell 6.2% in early trading on Friday. Albemarle’s lithium contract in Chile expires in 2043, while SQM’s contract in Chile expires in 2030, providing it with additional protection from a potential move.
Mining partakes in London fell forcefully, as well. At one point, Rio Tinto fell as much as 5% to its lowest level in nearly a month, when it was down 4.7%. The basic resources sector was Europe’s worst performer, with shares of rival Anglo-Americans losing 4% on the day.
Governments in Chile, Argentina, and Bolivia, which are neighbors in the lithium triangle, are working to expand a burgeoning battery industry and push for a larger public stake in the mining of the metal.
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