Chile Awards New Lithium Contracts Despite Political Storm

(Bloomberg) -- Chile’s government pushed ahead with contracts to tap more of the world’s biggest lithium reserves, raising harsh criticism from President-elect Gabriel Boric and other opposition groups seeking to halt the bidding process. 

The country awarded two of five contracts on offer -- one to Chinese electric vehicle maker BYD Co. Ltd. and another to local firm Servicios y Operaciones Mineras del Norte, the Mining and Energy Ministry said in a statement. 

The outgoing government of center-right President Sebastian Pinera is looking to reverse a decline in the country’s share of the global lithium market at a time of surging prices as suppliers battle to meet demand in an electric-vehicle boom. 

But the timing has drawn criticism from Chilean opposition groups. Speaking to reporters Wednesday, Boric said that while the current administration has the right to award contracts, its decision resembles “those laws that tie you up at the last minute when a government is about to end.”

Parliamentarians allege authorities bypassed proper community consultation to complete the process before the March 11 change of government. After the winners were announced Wednesday, some lower-house members stormed out of a special lithium session and vowed to take their case to the Office of the Comptroller General. 

“We’re not going to allow the government to carry out armed robbery of a resource that belongs to all,” Catalina Perez, a deputy from Boric’s Apruebo Dignidad coalition, told reporters.

Boric also wants to ensure the state participates in lithium production. Some of his advisers met with the government, delivering suggestions on how to improve the process. 

Mining and Energy Minister Juan Carlos Jobet said Wednesday that those requests were taken up, with some of the resources from the contracts earmarked for communities and a negotiating table to be established for long-term lithium policy.

The awarding of contracts comes as Chile reassesses its stance on natural resources in a process to draft a new constitution. While pumping up brine from under Chilean salt flats and letting it evaporate is cleaner than hard-rock mining as practiced in Australia, there is growing concern over the impact on fragile desert ecosystems. 

BYD offered $61 million and Servicios y Operaciones bid $60 million for quotas to produce 80,000 metric tons of lithium over 20 years. Together, the contracts represent about 1.8% of Chile’s known lithium reserves. Winners will still have to undertake exploration work and go through all the usual permitting before they can develop projects. 

Soc. Quimica y Minera de Chile SA and Albemarle Corp. are the only two producers in Chile currently. Last year, the nation churned out about 18,000 metric tons of lithium.

Both SQM and Albemarle, as well as Cosayach Caliche SA, presented offers, which authorities said were well below the winning bids.

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