Chile-Focused Miners Shares Drop After Early Proposal For Nationalizing Copper, Lithium Gets Approved

Chile is one step closer to nationalizing its copper and lithium mines. But not only does this might spell trouble for Chile-focused mining companies but also maybe for the South American country.

Soon after Chile elected 35-year old activist lawmaker Gabriel Boric as its president in December 2021, the government convened a constituent assembly to rewrite the country’s constitution. On Tuesday, the assembly’s environment committee approved an early proposal that aims to give the country one year to nationalize its lithium and copper mines, removing management away from private firms.

The motion also suggests that mining projects since 1993 would have to undergo an environmental evaluation within three years, while those situated in excluded areas–such as indigenous lands–would be revoked.

In terms of indemnification for private firms, the repayment plan will be based on the book value of equities and will be paid over a maximum of 30 years.

While this is a first for Chile, it came as no surprise as Boric has criticized lithium industry privatization and argued for a national lithium company during his campaign. Nevertheless, the proposal still has to win in-favor votes from two-thirds of the assembly and get ratified by a public referendum.

But this early on, the proposal is facing resistance from various personalities. National Mining Society President Diego Hernández, representing the mining industry, chastised the proposal and called it “barbaric, with clear and obvious legal errors”.

“A nationalization would have serious consequences for our economy in a context of globalization since the affected companies will resort to these treaties to defend their legitimate interests,” he added.

Former Minister of Mines Sergio Bitar also criticized the proposal, describing it as “a delirious return to the past.”

“Please let us be realistic, [be] aware of what is possible and what is not possible,” Bitar said in a MercoPress interview. “We can increase the added value of minerals exported. Move quickly to green copper, green hydrogen, increase solar power, even possibly a state-managed company. We must advance in the desalinization of water, a crucial issue for all the regions of Chile.”

Major copper and lithium players have seen price drops since the proposal passed the assembly committee. Sociedad Quimica y Minera de Chile SA (NYSE: SQM) dropped 7.8% on Monday and further dipped as much as 4.7% as the market opened today.

Global X Lithium & Battery Tech (NYSE Arca: LIT) and Freeport-McMoRan (NYSE: FCX) also fell by 5.1% and 5.9%, respectively.

Albemarle Corp (NYSE: ALB), which initially said it does not expect the new administration will have any impacts on its operations in Chile, also saw its shares drop by 3.9%. The company’s current contract allows the firm to operate in the country until 2043.

Nationalizing the country’s copper and lithium mines will create a huge impact on global resources. Chile is the world’s top copper producer and second-largest lithium producer. The South American country also holds the world’s largest known reserves of copper and lithium.

All the Copper in the World
Global lithium production by country

It is estimated that there are around US$70 billion in potential mining projects for the decade. Between buying out the private companies and spending for social services–which triggered the constitution change in the first place–the nation’s outlook on its largest sector is shaky at best as Boric takes oath on Friday.


Information for this briefing was found via Mining.com, MercoPress, Bloomberg, Forbes. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply

Video Articles

Endeavour Mining Q1 Earnings: Cash Flow Is King

G Mining Oko West Feasibility: Move Fast, Break.. Nothing?

New Gold Q1 Earnings: What’s Behind The Market’s Surprising Reaction?

Recommended

First Majestic Posts Record Cash Flows In Q1 As Production Costs Fall

Brazil Potash Secures Funding In Support Of US$2.5 Billion Autozales Project

Related News

Copper Prices Hit 7-Month High As Peru Protests Chokehold Supply

Copper futures have reached past the $4.20 per pound mark, the highest level in seven...

Friday, January 20, 2023, 03:36:00 PM

Noram Reports 1113 PPM Lithium Over 88 Metres At Zeus Property

Further assay results were released this morning by Noram Ventures (TSXV: NRM) in connection with...

Thursday, January 28, 2021, 07:22:36 AM

Are Copper Stockpiles Empty? Metal Expected to See New Highs In the Next 12 Months

Experts have long warned that copper stocks are running dangerously low. And now with a...

Monday, March 27, 2023, 11:44:00 AM

Spruce Ridge Releases Final Assays From Copper-Focused Drill Program

Spruce Ridge Resources (TSXV: SHL) this morning reported the final assay results from its 2020...

Thursday, March 18, 2021, 09:32:35 AM

Interra Copper Launches Maiden Drill Program At Thane Property

Interra Copper Corp (CSE: IMCX) this morning announced that they have begun drilling. The maiden...

Wednesday, July 21, 2021, 02:59:00 PM