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Codelco and SQM seal agreement to exploit lithium until 2060 in Chile
Friday, May 31, 2024 - 08:00
crédito web de Codelco

Starting in 2031, the State will receive 85% of the operating margin of the new production through payments to Corfo, taxes and the profits that Codelco receives as a shareholder.

The National Copper Corporation (Codelco) and the Sociedad Química y Minera de Chile SA (SQM) have officially signed this Friday the Association Agreement that they had announced in a Memorandum of Understanding released last December.

Said agreement establishes in detail all the steps, stages, rights, obligations, terms and conditions of the public-private partnership that will assume the production of refined lithium in the Salar de Atacama from 2025 to 2060.

The association, formed by Codelco, through its subsidiary Minera Tarar, and SQM, through SQM Salar, will become effective once all legal, technical and environmental regulatory requirements, and the respective indigenous consultation process, are met. all planned to conclude in the first months of 2025.

The agreement indicates that it is hoped to achieve a total additional production for the period 2025-2030 of 300 thousand tons of Lithium Carbonate Equivalent (LCE), while for the period 2031 to 2060 a lithium production of 280 to 300 thousand tons is defined. annual LCE. Said increase in lithium production will be achieved through improvements in process efficiency, the adoption of new technologies and the optimization of operations.

This increase will not imply greater brine extraction or an increase in the use of continental water, Codelco highlighted in the statement where it describes the details of the agreement.

"There are still several milestones to be met before this alliance becomes operational, but in advance I thank and congratulate the enormous human team at Codelco, which in record time and against many pessimistic forecasts, managed to shape an unprecedented partnership for Chile. both due to its nature and the magnitude of the resources involved,” said Máximo Pacheco, president of the Board of Directors of Codelco, in the statement.

“The association will have 100% of our infrastructure and plants, including the largest lithium product refining center in the world located in Antofagasta. We are committed to compliance with high environmental standards and to a continuous process of dialogue with the Atacama communities, to take care of the salt flat ecosystem. With the Codelco - SQM association, through different means, Chile will receive 85% of the operating margin starting in 2031,” said Ricardo Ramos, general manager of SQM.

AGREEMENT DETAILS

In line with the provisions of the Memorandum of Understanding signed on December 27, 2023, the signed Association Agreement establishes that:

1. The association will be implemented through a joint company in which Codelco will own 50% of the shares plus one.

2. Operational continuity and respect for the lease contract that SQM has until 2030 are ensured, guaranteeing compliance with current agreements with communities and other social organizations.

3. The association is expected to begin operations during 2025, once the preconditions are met. These include the indigenous consultation process led by Corfo and complying with all processes and permits for the operation, such as: authorization from the Chilean Nuclear Energy Commission, approval by the Comptroller General of the Republic. , and different free competition approvals from the National Economic Prosecutor's Office and other organizations abroad.

4. The company will have two periods of operation:
- First period, from the effective date of the association until December 31, 2030, where SQM will be in charge of general administration.
- Second period, from January 1, 2031 to December 31, 2060, where Codelco will be in charge of the general administration of the company.

5. The association will have the task of designing and developing a new productive project, which will incorporate new technologies to, together with tending to a water balance, increase the recovery of lithium with the highest environmental standards.

Among the most relevant matters addressed by the 20 articles of the Association Agreement are:

Association: regulates in detail the assets that will be part of the business and the association, the reorganization of SQM Salar so that it becomes the joint company, the CORFO-Tarar contracts, the indigenous consultation of said contracts, the modification of the CORFO contracts -SQM, the procedure before the Chilean Nuclear Energy Commission (CCHEN), among other aspects.

- Merger between SQM Salar and Tarar: regulates the corporate actions of SQM Salar and Minera Tarar for the merger between both entities, with SQM Salar remaining as the joint company, with a name to be defined.

- Salar de Maricunga Assets and intellectual property: regulation of the transfer from SQM to Codelco of SQM's assets in the Salar de Maricunga, and the granting of licenses for SQM's intellectual property in favor of Codelco and the company.

- Termination: regulation of the term of the Association Agreement in the event that the preconditions are not met.

- Indemnity: regulation of compensation in case of non-compliance with the obligations of the agreement or inaccuracy of the declarations and guarantees.

Codelco also announced a website (agreementcodelcosqm.cl) so that citizens know the scope of the agreement.

In economic terms, it is important to highlight that, during the life of the association, the State of Chile, through Codelco, Corfo and the Treasury, will receive approximately 70% of the operational margin generated by the new production between 2025 and 2030. Meanwhile As of January 1, 2031, the State of Chile will receive 85% of the operating margin, through payments to Corfo, taxes and the profits that Codelco receives as a shareholder.

Currently, both companies continue with the process of dialogue with the communities of the Salar de Atacama with the objective of achieving their participation in all matters of common interest regarding the productive activities of the joint company, especially in socio-environmental matters, in line with the Agreement. 169 on Indigenous and Tribal Peoples of the International Labor Organization (ILO). This dialogue process will extend beyond the signing of this agreement with the purpose of reaching consensus on human development, socio-environmental and governance matters.

Codelcó concluded its statement by highlighting that the project considers the use of new technologies in the exploitation of the Salar de Atacama "that will allow for a water balance and increase the recovery of lithium with the highest environmental standards, for which mechanical evaporation is considered. of solutions with water capture and filtration processes that allow solutions to be separated into flows with higher and lower concentrations of certain elements. The new technologies that will be incorporated will also allow the consumption of water from wells to be minimized and possibly eliminated and reinjected into the Salar de Atacama. a large part of the extracted solutions".

If the indigenous consultation (169 ILO) is completed and the Environmental Qualification Resolution (RCA) is favorably obtained, the project should begin execution before the end of this decade, ensuring uninterrupted production that will extend until the year 2060. .

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