‘High-cost producers should be worried’: Chile’s lithium pivot is great news for local explorers and miners
Chile’s national lithium strategy – a way for the government to participate in the sector via the establishment of a national lithium company — stunned the mining sector earlier this year.
While ostensibly aimed at ensuring that the lithium-rich nation benefits from its mineral bounty, nationalising resources and/or companies is a surefire recipe to spook potential investors.
It now appears fears were overdone. Recently, the Chilean Chamber of Deputies proposed a bill to integrate lithium into Chile’s general mining regulatory framework, eliminating the need for special government contracts for lithium exploitation.
The team at Stockhead spoke to Paul Lock who heads up Pan Asia Metals (ASX:PAM), an ASX lithium explorer/developer with a focus on securing low-cost assets, about his thoughts about the latest government pivot to pro-lithium foreign investment and how it could benefit the company’s Tama Atacama project.
Lock says the proposed mining bill shows division in Chilean politics regarding the Boric government’s National Lithium Strategy, and says there’s a strong case for the new measures to be implemented sooner rather than later.
“This bill is supported by a majority and therefore may possibly be approved by Chile’s congress during the Boric government’s term and against Boric’s wishes, if the parties presenting can maintain bi-partisan support,” he says.
“There are several steps before this can happen but nevertheless the sentiment is clear; Congress is positioned to pass this and or block alternatives, paving the way for normalisation of lithium policy in the current and/or the next government.
“This is positioning Chile to re-enter the global lithium market as the largest and lowest cost producer of lithium chemicals.
“In the global lithium landscape, as for any commodity, there is always room for low-cost production to push its way into a market and push high-cost production out. Chile is starting to position for this to happen.
“With the right policy framework, Chile is positioned to be a leader in low-cost lithium production. There’s always a place for low-cost production, it’s the high-cost producers who should be worried.”
PAM’s Tama Atacama project consists of seven block areas covering 1,600km2, which is ~13% of the highly prized Pampa del Tamarugal Basin, where super high-grade lithium has already been seen in surface assays up to 2,200ppm Li.
“The project is also located at lower elevations compared to Siete Salares, offering the company water replacement options such as the use of seawater to replace brine, as well as being a considerably more attractive elevation to work at in terms of comfort and overall cost,” Lock says.
Additionally, Tama Atacama’s easy access and nearby to all key infrastructure necessary, such as major highway access, solar power, nearby ports, airports, and major logistics hubs potentially lowers capex and opex for the project.
Lock says PAM has been reviewing historical activity and preparations have begun for field programs, focusing on surface sampling. The explorer is also considering a geophysics program to define drilling targets.
“PAM is also fielding interest from potential partners, targeting LIB and EV OEMs with an interest in securing future supply – which is still a hot topic despite the weaker LCE price as can be noted by corporate activity in Chile, in conjunction with corporate activity in Australia,” Lock says.
That includes state-owned Coldeco’s acquisition of Lithium Power International (ASX:LPI) for A$385m, a 136% premium to the 30-day volume weighted average price.
Then there’s French mining major Eramet – which recently acquired an early-stage 120,000-hectare portfolio of lithium brine assets for US$95m in the Atacama region.
Meanwhile, China’s Tsingshan Holding Group has committed to investing US$233.2m to set up a lithium iron phosphate battery plant in Chile, which incidentally also provides producers with a domestic offtaker for their lithium.
At Stockhead we tell it like it is. While Pan Asia Metals is a Stockhead advertiser, it did not sponsor this article.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.