Lithium Miners Slump as Chile Unveils State-Led Policy
PRESIDENT PLANS TO CREATE A STATE-OWNED COMPANY FOR THE METAL USED IN ELECTRIC CARS
Shares of some of the world’s biggest lithium mining companies traded sharply lower on Friday after Chilean President Gabriel Boric unveiled a new state-led strategy to develop its vast resources of the metal, which is vital for the development of electric vehicles.
Mr. Boric, a leftist former student protest leader who took office last year, announced late Thursday plans to create a state-owned lithium company to develop Chile’s lithium resources, a key campaign promise. In a televised address, Mr. Boric said the state would take a majority stake in partnerships with private companies to develop lithium.
“The state will participate in the entire productive process of the mineral,” Mr. Boric said. “This is the best chance that we have to transition to a sustainable and developed economy. We don’t have the luxury to waste it.”
Shares of Sociedad Química y Minera de Chile SQM -1.44%decrease; red down pointing triangle, one of the world’s top lithium producers, and partially owned by China’s Tianqi Lithium Corp., fell Friday nearly 19% in New York. U.S.-based Albemarle Corp., ALB -3.97%decrease; red down pointing triangle the only other producer in Chile, was down 10%. Both companies extract lithium from salty brines located under Chile’s northern Atacama salt flat.
A spokesman for SQM declined to comment. Albemarle said it expects “no material impact” on its operations as the government will respect existing mine contracts.
“We will continue to collaborate with the government of Chile regarding the proposed national lithium strategy,” it said. “We have many shared interests to include how best to grow the lithium market and deploy new sustainable technologies.”
Rony Zimerman, a mine lawyer in Santiago who has represented lithium miners in Chile, said Mr. Boric’s state-led lithium proposal could still be attractive for foreign investors looking to tap in to Chile’s deposits.
“I think companies will start calling Codelco and Enami today and asking, ‘How do we do this?’” he said. “The final conditions may be attractive for a company.”
Mr. Boric’s policy will require approval in Congress, where he has struggled to approve legislation since last year’s rejection of a new constitution that he backed and that would have ramped up the state’s role in the economy.
Juan Ignacio Guzman, a mining expert at Chile’s Catholic University, said he expects Mr. Boric will struggle to win approval in Congress for his lithium proposals. He said those proposals would further erode Chile’s competitiveness and undercut future production.
“People in general do not want the state to be in charge of business in Chile, but to effectively manage the wealth created by private companies,” he said.
Patricia Garip contributed to this article.
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