Chile’s deputy mining minister 'quits' after lithium fiasco

Chile's deputy mining minister, Pablo Wagner, resigned a day after the government decided to revoke the lithium mining concession awarded to a local company last week, acknowledging problems with the tender process.

The Special Tender Committee (CEL), which included Wagner and the vice-chair of the Chilean Copper Commission, Julio Poblete, met Monday 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 the Chemical and Mining Society (SQM) should have been barred from the tender because it is currently being sued by several government agencies.

The committee decided to nullify a decision allowing local Chemical and Mining Society (SQM), the world’s largest lithium producer, to develop a new concession of the so-called white gold.

“I did not achieve the objective of the plan, and for that I need to take responsibility,” Wagner told radio station Cooperativa. “Professionally, the right thing for me to do is resign,” he added.

But local newspaper La Tercera (in Spanish) is reporting President Sebastian Piñera actually asked Wagner to quit as soon as the government announced it was revoking the lithium contract.

Wagner led the bid because Minister Hernan de Solminihac chose to remain an observer since his brother, Patricio de Solminihac, is member of the board of directors of SQM.

Since Chile’s government announced in June its decision to privatize the country’s lithium, politicians, community leaders and even the local media have been immersed in a heated debate over who has the right to exploit the vast reserves of the so called “white gold” mineral the country has.

The most polemic point in this process has been the fact that SQM belongs to Julio Ponce Lerou, son-in-law of dead dictator Augusto Pinochet, who ruled the country from 1973 to 1989.

Critics had also blasted the government for surrendering a valuable resource to private hands.

Large reserves

Chile, together with neighbours Bolivia and Argentina, own 85% of the world's known lithium reserves.  Almost a third of the commodity's world production has been – until now – in the hands of two of the country’s State-owned companies.

According to America Economia, Chile alone owns 70% of the world's lithium reserves. From these, SQM was granted rights to mine up to 100,000 tonnes of lithium over a 20-year period, in exchange for royalties paid to Chile’s government equivalent to 7% of the total output.

Under Augusto Pinochet's 1973-1990 military regime, lithium was considered a "strategic resource" due to its possible applications in the manufacturing of nuclear weapons and atomic energy. Now Chile’s rightist administration thinks it's "a good idea" to change that policy and pitch the resource to potential investors, since no lithium concessions have been issued since 1982.

Jumping into the lithium wagon seems to be a smart choice for companies, says Robert Baylis, industrial minerals research manager at UK-based Roskill Information Services.

In a presentation given in January at the 4th Lithium Supply & Market Conference, he explained the market for the commodity is growing at a brisk pace and is dominated by only a handful of firms, including SQM, FMC, ROC, Canadian miner Talison Lithium and mining behemoth Rio Tinto.

Image: Deputy mining minister Pablo Wagner announces his resignation at the Government Palace/ DiarioFinancieroTV.

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