Eye on Lithium: Chile’s move to nationalise resources spooks investors

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• Chile to transfer controlling interests in projects to public company
• Japan to secure supplies by subsiding cost of surveys, mine development and smelting projects
• Forrestania drilling strikes high grade lithium

All your lithium news, Monday April 24.

With the growing momentum towards achieving net zero driving demand for lithium to expand energy storage capacity, governments around the world are increasingly taking steps to either secure supplies of the critical metal or to profit from its extraction.

It was really only a matter of time that a lithium producing country moved to ensure that it was receiving the most benefit from the boost in lithium demand, which is exactly what Chile has done by announcing its move to boost state control over its resources and capture more value along the battery supply chain.

Under the move, Chile will effectively nationalise its lithium resources by transferring controlling interests in all projects to a public company that will partner with private mining companies.

Existing contracts with Albemarle and SQM, which expire in 2024 and 2030 respectively, will be kept under current terms though President Gabriel Boric encouraged companies to boost state participation before they expire.

Chile will also seek to promote more downstream investments in a bid to capture more value from the growing demand for electric vehicles and grid energy storage.

While ostensibly aimed at ensuring that the country benefits from its mineral bounty, nationalising resources and/or companies is a surefire recipe to spook potential investors.

After all, if the country is willing to transfer a controlling interest in projects to a state-owned company, what other steps will it be willing to take?

Rather predictably, SQM’s US-listed shares dropped more than 18% on Friday while Albermarle was spanked on the order of about 10%.

However, CNBC quoted Economist Intelligence Unit senior analyst Nicolás Saldías as saying that phrasing the move as nationalisation is too strong.

He noted that the proposal actually provided the private sector with more opportunity than the existing framework as it granted more ability to partake in projects than the current system.

Chilean Finance Minister Mario Marcel said that under the plan, private companies would contribute capital, technological knowledge and experience while Chile provides “financing” and safeguards both the environmental conditions of the salt flats and the “relationship with the Indigenous peoples” of the affected area.

Securing lithium supplies

Lithium consuming countries – particularly those without substantial resources of their own – are also taking steps to ensure supplies of lithium.

Japan has come up swinging with its Ministry of Economy, Trade and Industry moving to subsidise up to half the cost of mine development and smelting projects for lithium, manganese, nickel, cobalt, graphite and rare earths.

Funding will be drawn from the 105.8 billion yen ($1.18 billion) already budgeted for related outlays in a fund set up by the Japan Organization for Metals and Energy Security.

This initiative will also subsidise geological surveys to determine the profitability and quality of mines.

Here’s how ASX lithium stocks are tracking:

Lithium continued to be challenged with 56 companies tracked by Stockhead in the red while 38 companies made share price gains. Another 59 companies were unchanged.

WHO’S GOT NEWS OUT?

Forrestania Resources (ASX:FRS)

Drilling at Forrestania’s namesake lithium project in Western Australia’s southern Yilgarn region has returned high-grade lithium and tantalum results from the Giant Pegmatite target area.

This included assays such as 10m grading 1.49% Li2O from a down-hole depth of 74m including 2m at 2.64% Li2O from 75m and 4m at 1,106 parts per million (ppm) tantalum from 45m including 1m at 2,870ppm tantalum from 46m.

Additionally, pegmatites at South Iron Cap East have been confirmed to be part of a highly fertile LCT pegmatite system based on anomalous lithium assay results and favourable geochemistry.

Lithium Power International (ASX:LPI)

Lithium Power says it is pleased with Chile’s new National Lithium Policy with director Russell Barwick noting that it is very much along the lines of what was discussed and expected in its various discussions with Chilean authorities.

He noted that while a central part of the strategy is focused on current operations and future exploitation of the Atacama Salar, there is also an outline on the future development of projects in other Chilean Salars such as its flagship Maricunga lithium brine project.

The company’s Stage One concessions do not require a Special Lithium Operation Contract (CEOL) and is awaiting closing of the financing process to begin construction.

It also welcomed the possibilities for future public-private alliances as declared by the NLP, for the development of the project’s second stage.

Red Dirt Metals (ASX:RDT)

Drilling by Red Dirt has intersected substantial new mineralisation outside existing resources at its Mt Ida project in WA’s Eastern Goldfields region.

The 90.1m hit grading 0.95% Li2O from a depth of 650.8m outside the BFB target includes higher grade intervals of 7.7m at 1.57% Li2O from 658.8m and 22.4m at 1.52% Li2O from 703.2m (IDRD229W1).

Further drilling is required to determine the true width of this pegmatite and delineate the potential to add it to the existing resource at Mt Ida, which stands at 12.7Mt grading 1.2% Li2O.

Red Dirt currently has six drill rigs operating across Mt Ida.

Voltaic Strategic Resources (ASX:VSR)

Voltaic is planning to carry out maiden lithium drilling at its Ti Tree project in WA’s Gascoyne region where initial rock chip sampling had identified over 30 drill targets with very favourable lithium-caesium-tantalum (LCT) geochemistry.

This first drilling will test four areas of high priority geochemical anomalism within the Andrada prospect, one of three regional targets identified to date.

Ti Tree has never been systematically explored for lithium and the company’s maiden drilling is intended to expand the known surface footprint of LCT mineralization at shallow depths, and to identify potential mineralisation down-plunge and along-strike.

Zenith Minerals (ASX:ZNC)

Drilling has confirmed and extended lithium mineralisation in the central western portion of Zenith’s Rio Pegmatite – Split Rocks project.

Final drill results such as 15m grading 0.8% Li2O including 4m at 1.8% Li2O have outlined a lithium mineralised zone with a strike length of more than 2,900m and a width of up to 1,100m that remains open to the north and south.

This includes a higher grade zone with a strike length of more than 750m and a width of more than 500m.

Zenith notes that significant “blue-sky” potential exists within the wider Split Rocks project area, in the very large, untested lithium geochemical soil anomaly, “Cielo”, located 26km south of the Rio Pegmatite and 18km northwest of the Mt Holland deposit.

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