Lithium tightness to stay while Chile sets regulatory framework, says Wealth Minerals exec

By IM Staff
Published: Friday, 26 January 2018

Tightness in the lithium market is set to remain for up to a decade due to delays in securing the appropriate regulatory framework in Chile, a senior executive at Canada-based junior mining firm Wealth Minerals told special correspondent Andrea Hotter.

Demand for lithium has skyrocketed in recent months following a boost to demand for the batteries used in electric vehicles. But Chile, which has the world’s second largest lithium reserves, currently places the material in the same category as uranium and is yet to approve rules governing investment, according to company executive director Marcelo Awad. 

"The supply side of the equation will catch up, but I think the market will continue [to be] in deficit or very tight for the next seven to 10 years before the supply side can catch demand. Why? Because Chile is running behind, because the government has taken so long to release the regulatory framework for investors," he told Metal Bulletin.

A draft of the regulatory framework is expected to be sent to the state controller by early January, after which it typically takes around two months to be signed into law. If it is not approved before the change of government in Chile on March 7, the new presidential administration of Sebastian Pinera is likely to review the framework, which could take several months more. 

The framework is expected be supportive of investors, "because Chile has been a mining country for 150 years and always favored foreign as well as private investment, and I’m confident it’s going to be pro-business for lithium," according to Awad, previous chief executive officer of London-listed copper miner Antofagasta. 

The low-manganese content of Chile’s lithium makes it ideal for use in battery materials, with sole domestic production so far coming from Atacama Salar in Region II, host to more than 15% of the world’s known lithium reserves.

The low-manganese content of Chile’s lithium makes it ideal for use in battery materials, with sole domestic production so far coming from Atacama Salar in Region II, host to more than 15% of the world’s known lithium reserves. Production there is from brines, which are formed in seasonally-flooded dry lakes called salars. 

Wealth Minerals have several projects over 100,000 hectares in Chile, and lithium could become the country’s second largest export after copper once investment starts to flow into the country, Awad said. 

The company’s most important project is also in Atacama Salar, and spans around 46,000 hectares. 

"Wealth Minerals acquired a number of concessions, consolidated them, and is now putting money in the ground by conducting geophysical drilling on three projects – Laguna Verde, Trinity and Atacama Salar," Awad said. 

Laguna Verde is in Chile’s Region III while the Trinity project comprises land positions in three different salars - Aguas Calientes Norte, Pujsa, Quisquiro – located in close proximity to each other.  

The results of initial drilling at the three projects are due in the first quarter of 2018, meaning that by the second quarter the company will have, "very good information from the three salars about the lithium concentration. Our plan is to continue developing all the salars we hold in our portfolio," Awad added. 

The company is also analyzing a couple of mining concessions in Argentina, but would more than likely give priority to Chilean concessions once the regulatory framework is in place.

Strategic plan 

The strategic plan of the junior mining company is to develop all deposits up to bankable feasibility study stage, with all environmental permits in place, and then enter into joint ventures for them. 

The company, which is listed on the TSX Venture Exchange, is most likely aiming to relinquish its majority shareholding at this point and reduce its stake to 10-25% in order to secure finance for the project to production stage, Awad said. 

"We’re willing to listen to offers to joint venture with a company looking to get involved at an earlier stage, but we would then aim to keep our majority stake," Awad said.

"We have been approached by a number of parties and we’re holding formal and informal discussions with a number of them. There’s nothing concrete yet, but one or two parties are very aggressively hoping to joint venture with us, because they want to get involved in lithium," he added. 

Aside from batteries in electric vehicles, lithium has an important use as battery storage for energy. 

"Lithium will be extremely important for electromobility, not just in transportation but also in battery storage for energy [for] solar and wind producers, who will be generating energy and at the same time accumulating or storing energy. This source of energy is going to become very cheap and extremely popular," he told Metal Bulletin. 

It will also be extremely beneficial for Chile, where energy costs are among the highest on the continent. Although costs have fallen over the last 12 months due to a number of renewable energy projects, Awad noted there is "still room to go further." 

"Ultimately I think Chile will benefit from lithium batteries for storing energy to continue generating overnight," he added.

Note: This article from the February 2018 issue of Industrial Minerals' magazine was first published on on 4 January 2018.