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Chile launches lithium auction to rev up stalled production

Credit: REUTERS/Ivan Alvarado

Chile has launched an auction process to award special operating contracts to explore and produce 400,000 tons of electric battery metal lithium, the mining ministry said late on Wednesday, a move to bolster production and meet global demand.

By Fabian Cambero

SANTIAGO, Oct 14 (Reuters) - Chile has launched an auction process to award special operating contracts to explore and produce 400,000 tons of electric battery metal lithium, the mining ministry said late on Wednesday, a move to bolster production and meet global demand.

The move comes as the Andean country, which sits on South America's so-called "lithium triangle" and is one of the world's top producers of the metal, looks to accelerate development of new projects, which have stalled in recent years.

Global lithium demand is rising, driven by a shift towards electric vehicles and the increase use of electric batteries, which need the ultra-light metal.

The ministry said the contracts would be divided into five quotas of 80,000 tons each, giving bidders a period of 7 years to carry out the geological exploration, studies and development of the project, extendable for another two years.

It would then provide for another 20 years for production, with the state taking a royalty payment for the allocation of the quotas as well as a variable payment during production.

The ministry said in a statement the auction intended "to meet the increase in global lithium demand and the growth that is projected in the future, within the framework of the fight against climate change".

Chile's lithium sector is dominated by mining firms SQM and Albemarle, which have major projects in the Salar de Atacama desert, where the firms use brine pools to extract lithium from beneath the salt flats.

The Andean nation, the world's no. 1 copper producer, is also the second largest producer of lithium behind Australia. It has the world's largest reserves of the metal, with 9.2 million tons according to the U.S. Geological Survey.

The auctions could help Chile raise production, though this involves a long process in a highly technical industry where many projects fail. Chile has over time lost ground to rivals, with criticism that it has been slow to develop new projects.

"Our country, which until 2012 was the world's leading lithium producer, was overtaken by Australia and it is expected that by the end of this decade China will displace us to third place," the ministry said in its statement.

Chile declared lithium of national interest in 1979 and tightly controls its production, which can only be done by the state, through a Special Lithium Operation Contract (CEOL), via state companies, or through Administrative Concessions.

(Reporting by Fabian Cambero; Editing by Adam Jourdan and Diane Craft)

((adam.jourdan@thomsonreuters.com; +54 1155446882; Reuters Messaging: adam.jourdan.thomsonreuters.com@reuters.net))

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