MercoPress. South Atlantic News Agency

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

Deputy Mining Minister Pablo Wagner lost his job

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.

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.