Tesla shows interest in Chilean lithium

Tesla may be interested in building a lithium production facility in Chile with local manufacturer, Sociedad Química y Minera de Chile SQM. The development was announced yesterday by the executive vice president of the Chilean Production Development Corporation (Corfo), Eduardo Bitran, in a statement provided to the Financial Times, parts of which were also published in Spanish on Corfo’s Twitter account.

While talks still at an early stage (and neither SQM nor Tesla have issued any official statements on the matter), according to Bitran, Tesla is interested in producing lithium hydroxide directly from the brine that lies beneath the Chilean desert of Atacama, without the carbonate of lithium as an intermediate step.

“Tesla could also bring a partner to manufacture battery cathodes in the country, because Chile has one of the cheapest solar energy sources in the world,” Bitran added.

It is interesting to note, that Tesla’s interest comes after SQM and Corfo reached an agreement over a long-running dispute. The matter was concluded in arbitration. It arose regarding SWM’s operations on the Salar de Atacama, which are exploiting the world’s largest and most pure active source of lithium.

Earlier this month, publicly listed Australian lithium miners’ stocks fell on average between five and ten percent on the back of warnings of an oversupply. Alongside the resolution of the dispute between SQM and Corfo, The West Australian reported that the lithium miners were impacted by the announcement by SQM that it will double the output of its Argentinian lithium production.

Several Chilean media outlets reported that Corfo’s Bitran traveled to the U.S. to meet with senior Tesla officials before the agreement between SQM and Corfo was reached in mid-January.

The dispute has been ongoing since 2014. It arose on the back of conflicts over taxation, environmental compliance and water rights. In essence, the agreement imposes new rules on the mining company, which must change the structure of its corporate governance. Among other changes, Julio Ponce, the current president of the company and controlling shareholder, must step aside.

The amount of rental income the government receives from the miner has also been increased to match those of the North American Albemarle (the other company that operates the Salar de Atacama). As a part of the agreement, SQM can increased its lithium extraction quota by almost 350 thousand tons by 2030.

The agreement also establishes the supervision of compliance with environmental contracts and regulations (since SQM has opened a sanctioning process with the Superintendency of the Environment, in which there are three major infringements), and the reserve option that 25% of lithium production to be sold in Chile.

Several social organizations have expressed opposition to the agreement between SQM and Corfo to exploit lithium until 2030 in the Salar de Atacama, and a demonstration that took place last Monday ended with several arrests. “You cannot do business with a company that has transgressed all the canons of ethics,” said the national coordinator of The Lithium Movement for Chile, Miguel Soto. Against this, Bitrán said, “We have recovered the lithium for Chileans.”

Edited and local content added by Jonathan Gifford