Chile's "nationalisation" of lithium industry: opportunities for partnership

I wanna talk about this. What it means, what it doesn't mean, what it is, what it isn't, and more importantly, what it might mean in terms of cooperation in the global South, especially between the Muslim world and Latin America. First of all, Chile is not nationalizing the lithium industry. That's a very sensationalistic portrayal of president Boruch's proposal. Second of all, that's exactly what it is right now.

It's just a proposal. Thirdly, even if the proposal gets approved and becomes actual policy in Chile, it won't actually have any impact or affect any structural changes of any significance in Chile for a few years yet. What the president of Chile, Gabriel Boric, actually wants to do is to create a national lithium company of Chile. And then he wants that national company to own majority shares of any lithium project in the country. So what he does not want to do is expropriate existing companies that are working in the lithium sector.

That's not what he's talking about, which is what most people think of when they hear the word nationalization. Now there are two major companies that are dominating the lithium industry in Chile. One is called SQM, which is a Chilean company, and the other is a company called Albemarle, which is an American based multinational company. And president Boric said that their contracts will remain intact. When their agreements expire, then they'll have to renegotiate that.

And at that point, what Boric hopes is that a national lithium company of Chile will be able to be the majority shareholder in whatever projects move ahead with SQM and the American company. Now SQM's agreement will expire in I think 2030, but the American company, Alber Male, their contract or their agreement is good for roughly another twenty years. So they're almost not impacted at all. But Borch's idea is that a national lithium company of Chile will partner with smaller companies, second tier companies, third tier companies that are maybe currently just involved in exploration, of lithium deposits or who are just thinking about extraction of lithium and processing and refining of lithium in Chile. Theoretically, smaller companies and investors would get a boost by partnering with the government, which would then again theoretically make that sector more internally competitive and it would help Chile to more efficiently tap the lithium reserves that they have in the country.

Boric wants most if not all of the processing and refining to be done in Chile rather than having Chile export the raw lithium to be refined and processed by others. This obviously will help Chile profit more from as well as to have greater control of their own resources. Now the interesting thing about what Boruch is doing and what he wants to do is that he is at least partially inspired by what Indonesia did recently which was to ban the export of raw nickel ore from Indonesia. And they insisted that processing and refining should be done in Indonesia. This is part of Indonesia's industrial policy to produce downstream materials and add value themselves to nickel products.

Now obviously, this has helped Indonesia in terms of increasing investment in the sector, increasing exports of nickel derived products, and obviously this has helped Indonesia to capture a greater share of the value chain by transforming their own raw nickel into high end products like batteries for electric cars. And due to the success of this policy, Indonesia has actually said that they're planning on banning the export of other raw materials so that they can grow and develop their domestic capabilities for processing, refining, and manufacturing. So here's the opportunity. Indonesia should move into the space being created in Chile by Boruch's proposal. Indonesia should go to Chile and share their technical expertise in how to develop refining and processing industries in their country, which they now have experience in, and share that knowledge with, Chile to help them develop their lithium processing and refining industries there.

So Indonesia can invest directly or indirectly through a joint partnership with maybe already existing smaller firms that would benefit from Borje's proposal. In other words, some of the smaller companies that will partner with the Chilean government, those companies can partner with Indonesian companies. Indonesia could get involved in that industry in Chile and partner with the Chilean government. This will create new opportunities for Indonesian companies to start tapping into the global lithium market. And of course, it would be beneficial to Chile because it will help them to develop their own processing and refining industries domestically, which will of course create manufacturing jobs, which will of course give them more exports in terms of higher end products that are derived from the lithium.

I mean, benefits are mutual. There's Antam, which is a state owned mining company in Indonesia. I mean, they have experience in exploration, they have experience in mining, they have experience in processing minerals, and they have expressed their interest in the past in investing in the lithium industry. So I think Antam is an obvious choice that should be looking at participating in partnerships, public private partnerships with smaller firms in Chile who can then also partner with the government. So it'd be like a three part partnership.

You have the, potentially the national lithium company of the state of Chile, then you have a smaller company that's maybe based in Chile who will then partner with Antam or Antam could just go directly and potentially make an agreement with the Chilean government or the the national lithium company. This is the thing. You have about seven years, six, seven years to really start to make inroads into Chile and make partnerships with local companies that are already involved, like I said, second tier companies that are already involved in exploration or third tier companies that are just starting out. The ones that are just starting out might even get a bigger boost by this proposal because these companies are gonna go potentially from small operations to overnight relatively major players because they're going to become they're gonna go from being a small company to a company that is that has a 51% partner, which is the government of Chile. Antam or PTFI or even smaller players from Indonesia could go over to Chile and and with a relatively small investment, get involved in second tier or third tier companies that are either exploring already or are in the early stages of starting a project in Chile.

And then that smaller company that you invested as relatively small amount in will become a much larger player the moment it becomes a 49% partner with the government, with the government being a 51% partner, the national lithium company owning half of the shares. I mean, obviously, it doesn't have to be Indonesia. Doesn't have to be Indonesian companies. You could also talk about Saudi Arabia as an obvious choice, Qatar is an obvious choice, UAE is an obvious choice, and even Malaysia. There's no reason why Malaysia couldn't also enter the lithium market in Chile.

If these countries, if Indonesia, if Malaysia, or obviously Saudi Arabia, UAE, other the GCC countries, if these countries can get a foothold in the lithium industry and the in the market of lithium based products, obviously, that's gonna be beneficial not just in the short term, but in the long term. I mean, there's exponential growth potential here and all the while helping Chile to develop their own domestic industry and support their own economy. This kind of cooperation, in my opinion, is how countries in the global South can help economically empower each other, can bolster and help to fortify each other's economic sovereignty and political sovereignty and political independence. And they can, by working together in this way, they can help to uplift the entire Southern Hemisphere from western domination. So I think this is a this is a very good opportunity for Muslim countries, that are that have some expertise or experience or even just have companies that have expertise and experience in mining, raw materials, raw minerals, rare earths, and so on to get involved.

Don't let it just be China. You know? It doesn't always have to be China. It doesn't always have to be Russia. It certainly doesn't always have to be The United States.

Muslim countries have experience in mining, in extraction of raw materials, in extraction of raw minerals, rare earths. They have experience in these things. They have experience now. Indonesia has experience now in developing their own processing, their own refining, and how to, ensure that your raw materials don't have to just be exported for somebody else to profit from. The profit is in what's made from the raw materials, not the raw materials themselves.

So you have to be able to make those industries in your country, and Indonesia has already started doing that with nickel, and they're saying they're gonna do it with other raw materials. So they're already leading the way, and they can help bring that expertise to Chile and help to teach them that and help to share that knowledge with them and that expertise and technology, and then they can even start developing technologies together. See, it's this kind of cooperation that needs to happen. And we see every time Indonesia is leading the way in these types of things. It's wonderful.

I really hope that they will take advantage of this and that we will start to see some involvement of Indonesian companies like Antam or whoever else, even smaller sized companies, even smaller sized investors, even small coalitions of investors who wanna bring their money to help support smaller companies in Chile who are third tier companies that are looking to, take advantage of this opportunity that is presented by Boruch's proposal. And again, it is still just a proposal. It may happen, it may not happen. But either way, the agreements between SQM and the American company are going to expire. Forget about the American months, twenty years away.

But the SQM, that's gonna expire in 2030. If you can get a foothold in that market, you should do it. It will bring hundreds of millions of dollars to your economy. Anyway, just some ideas.