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Chile’s New President Could Hugely Change Global Lithium Market

Tim Worstall
Tim Worstall trader
Updated 22 Dec 2021
  • Chile has a new firebrand Socialist President who could radically change the global lithium market
  • The mining law is already under discussion as a result of the constitutional convention
  • This could go either way, more lithium from Chile or less lithium from Chile

Lithium miners globally – so this would include Bacanora Lithium (LON: BCN), Atlantic Lithium (LON: ALL) and Cornish Lithium as examples – face a certain amount of political risk as a result of the election of that Socialist as President of Chile. As ever with the irruption of politics into business it’s not obvious which way this is going to go. What makes it worse is that the Chilean law on lithium mining is so screwed up that a socialist could actually make it better. Which would be a first in political annals but there we are.

The current law dates from Pinochet days and back then it was noted that lithium-6 – an isotope – is used to make hydrogen bombs. Therefore a mining licence for lithium in Chile had to be approved by the nuclear ministry. Or, the mining must be done by the state directly. The only folks who had such a licence were grandfathered in and no new licences have ever been awarded. There isn’t even a clear path of rules for a new one to be awarded. 

All of which is a bit of a pity as Chile’s salt flat brines are an obvious place to supply a goodly portion of the world’s coming demand for lithium.

So, there’s already been the call for a constitutional convention and that’s going to revisit at least, if not entirely change, Chilean mining law. Then there’s this new socialist elected as President. Gabriel Boric is insisting that the current system doesn’t suit and must be changed along more equitable lines. Quite what he means by this is entirely unknown.

It could be that the current restrictions will be lifted, more licences granted. Within domestic Chilean politics, it is believed – whether it’s true or not doesn’t matter, it is believed – that offshoots of Pinochet’s family control at least one of the extant two licences. Sticking it to them would appeal.

It’s also possible that Boric will attempt to follow the more usual socialist stupidity route. As with the Bolivians who also have access to such salt brines. Where they have been insisting that no9 one may merely mine for the lithium, it’s necessary to make the batteries – and in some speeches, the cars – up there high in the Andes as well. So, of course, nothing is happening with the Bolivian lithium.

No one knows – probably not even Boric – which way this is going to go. But Chile is a large enough, potentially at least, and certainly low cost enough, producer of lithium that changes in that mining law will affect the entire global market. All other lithium miners, especially the early-stage exploration companies, now face that political risk. 

What’s Chile going to do about lithium mining? That’s going to be a major determinant of the global lithium price in the medium term and is thus something to consider when looking at lithium miners.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.