Wednesday, October 3rd 2012 - 01:29 UTC

Chile revokes lithium concession; triggers major scandal on “strategic minerals”

Chile revoked the concession awarded to Sociedad Quimica y Minera de Chile to exploit substantial reserves of lithium in the Andes region, acknowledging problems with the tender process.

Deputy Mining Minister Pablo Wagner lost his job

The Special Tender Committee, which includes Deputy Mining Minister Pablo Wagner and the vice-chair of the Chilean Copper Commission, Julio Poblete, met to review a complaint filed by one of the unsuccessful bidders.

Minera Li Energy SpA, a Chilean subsidiary of US-based Li3 Energy that was part of a bidding consortium led by South Korea’s Posco, said SQM should have been barred from the tender because it is currently being sued by several government agencies.

Pending litigation with the government is grounds for exclusion from a public tender.

The involvement of SQM had already forced Mining Minister Hernan de Solminihac to abstain from any opinion on the case since his brother is a top executive with the company, which is one of the world’s leading lithium producers. SQM’s shareholders include Julio Ponce Lerou, a former son-in-law of late Chilean dictator Augusto Pinochet.

Chile’s 1973 Mining Code defines lithium as a “strategic” mineral for which regular mining concessions cannot be awarded, but the constitution allows private exploitation of strategic minerals under special contracts.

President Sebastian Piñera conservative administration devised something called the Special Lithium Operation Contract, or CEOL, to involve private companies without violating the Mining Code. But the initiative was controversial even before the disqualification of SQM, with many saying that the matter should be debated in Congress.

Expressing surprise at the Mining Ministry’s “sloppiness,” opposition Sen. Jose Antonio Gomez said Congress needs to define how Chile will develop its massive lithium reserves, second only to those of neighbouring Bolivia.

Wagner resigned as deputy mining minister following the annulment of SQM’s concession.

“Regrettably, we were unable to achieve the objective. It is up to me to assume responsibility for that,” he said Tuesday at the presidential palace.

Wagner stepped down voluntarily, government spokesman Andres Chadwick said later, insisting that the Piñera administration had acted “transparently and immediately” once it learned of the error in the tender process.

The Chilean government says it expects to collect 350 million dollars via a 7% sales royalty on lithium, a key component in batteries for mobile devices and electric/hybrid vehicles.

Global demand for lithium has tripled over the past 10 years and the price of lithium carbonate on world markets has risen from 2.000 per ton in 2001 to around 6.000 per ton currently.
 

5 comments Feed

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1 British_Kirchnerist (#) Oct 03rd, 2012 - 02:49 am Report abuse
Good for Chile =)
2 The Chilean perspective (#) Oct 03rd, 2012 - 10:14 am Report abuse
This whole thing smelled funny from the start. These processes must be Squeaky clean and fully transparent if you don't want the wrath of the press and the people. Very bad move from an otherwise very professional outfit. Clean up your act!
3 Condorito (#) Oct 03rd, 2012 - 02:06 pm Report abuse
@1 + 2
I agree with both of you.
I gave them the benefit of the doubt to start with, but I am happy to be wrong on that. The press has done what it is supposed to do and the gov't has responded correctly.

However, the process must come down to the technical offer. It will not be right if a USA/Korean company walk away with the contract just becasue Pinochet's son-in-law is not on their board.

I say, break up the exclusive contract and put 5 or 6 contracts up for tender.
4 ChrisR (#) Oct 03rd, 2012 - 08:59 pm Report abuse
@3 Too late now.
5 British_Kirchnerist (#) Oct 04th, 2012 - 02:57 pm Report abuse
#3 “It will not be right if a USA/Korean company walk away with the contract just becasue Pinochet's son-in-law is not on their board”

Wow, that really is corrupt, though in this case I doubt his father would be spinning in his grave!

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