Codelco’s $244 million acquisition of Lithium Power International will transform Chile’s lithium industry

In a major acquisition expected to reshape Chile’s role in the lithium industry, the country’s state-owned copper mining company Codelco has reached a deal to acquire Lithium Power International (LPI) for A$385 million ($244 million).

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Maricunga salt flat. Source: Lithium Power International

The acquisition is the first of its kind for Codelco and an important step for the company in the lithium industry, as evidenced by the public-private partnership model announced by the Chilean government earlier this year.

The agreement reached after weeks of negotiations includes a cash offer of A$0.57 per LPI share. The deal requires a shareholder vote in January 2024 to go ahead. Lithium Power is an Australian company with significant assets in Chile, notably the Maricunga project. The flagship project is located in the “Lithium Triangle” in northern Chile and is expected to contain approximately 1.9 million tons of lithium carbonate equivalent (LCE).

The deal follows Lithium Power divesting its assets in Western Australia in June to focus on the Maricunga project. Maricunga Assets is considered a high-performing and cost-effective business. According to a definitive feasibility study prepared by WorleyParsons and released in the first quarter of 2022, the project will generate operating costs of $3,718 per tonne and support annual production of 15,200 tonnes of LCE over a 20-year mine life. The study also estimated the project’s pre-tax net present value at $1.98 billion. It is worth noting that the project has received environmental protection approval from the Chilean authorities since February 2020.

Codelco CEO Maximo Pacheco said the acquisition was an example of how the company was working to “become a key global supplier of metals to enable the energy transition.” Still, some industry analysts question Codelco’s ability to navigate the lithium market because the company is traditionally a copper miner and has no experience in lithium mining.

Codelco has also faced some financial challenges recently, with production hitting its lowest level in nearly 25 years. The company’s production fell 17% and is expected to continue declining through 2025. Earlier this month, Moody’s Investors Service also downgraded Codelco’s credit rating to investment grade.

Codelco occupies a key position under the new public-private partnership model for the lithium industry launched by the Chilean government in April. The model envisions such partnerships for future lithium projects to further solidify Chile’s position in the global lithium market. Chile is currently the world’s second-largest lithium producer after Australia and has the world’s largest known lithium deposits.

Lithium Power International is a pure-play lithium company with three distinct project areas: one in the South American brine region and two in Western Australia. The company’s primary focus is to develop the next sustainable, high-grade lithium mine in Chile, supported by a robust infrastructure that includes accommodation, laboratories, workshops and a range of utilities and utilities.

As the deal awaits shareholder approval, the acquisition will be closely watched, especially given Chile’s ambitions to become a dominant force in the lithium industry, which is critical for batteries in electric vehicles and renewable energy storage systems .

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