Chile’s National Lithium Strategy Boosts Shares of Lithium Power as Codelco Undertakes Due Diligence
Chile’s new national lithium strategy, announced in April, has had a positive impact on lithium power stocks as state-run mining company Codelco carries out due diligence. The strategy aims to establish public-private partnerships for future lithium projects, granting the government a controlling stake in strategically significant operations while allowing private firms to retain control in non-strategic areas. As part of the strategy, Codelco has been tasked with negotiating the government’s stake in Albemarle’s and SQM’s lithium operations, the only two miners currently producing lithium in Chile.
In addition to this, Codelco, along with state miner Enami, is responsible for attracting partners for new contracts, which will eventually be taken over by a national lithium company. Lithium Power, a company focusing on the development of its Maricunga lithium brine project in Chile, has confirmed that Codelco is conducting due diligence on their operations.
The Maricunga project, located on a remote salt flat, is the largest permitted brine project in Chile, showcasing high-grade lithium deposits. This has attracted significant attention from prospective miners. Lithium Power’s share prices soared by 34.62% following this news, closing at A$0.35 and giving the company a market capitalization of A$220.23 million.
Chile is currently the world’s second largest producer of lithium, trailing behind Australia, and possesses the largest known lithium deposits globally. However, some analysts have questioned Codelco’s ability to boost its own lithium production given its lack of experience in the sector. Codelco, the world’s largest copper producer, has been facing challenges such as rising costs, growing debt, and declining copper production. The company’s output has fallen by 17% over the past five years, with projections indicating further decline until 2025.
Codelco Chairman Maximo Pacheco has addressed these concerns, stating that the company’s mine plan overhaul will address factors hindering production, including operating plants at capacities exceeding the mineral grade being mined. Pacheco also emphasized that while Codelco has delivered significant surpluses to the state since its establishment, it has not received adequate funds to invest in its own projects compared to private miners.
In conclusion, Chile’s national lithium strategy has led to a boost in shares for Lithium Power as Codelco conducts due diligence. The strategy aims to establish public-private partnerships in the lithium industry, with Codelco negotiating the government’s stake in existing lithium operations. However, questions remain regarding Codelco’s ability to increase lithium production while facing challenges in its copper mining business. Nonetheless, Codelco’s chairman is confident in the company’s ability to overcome these obstacles and improve its operations.
