Chile’s Codelco enters into PPP with SQM to create lithium-mining company

The partnership follows the merger between Minera Tarar and SQM Salar, subsidiaries of Covelo and SQM, respectively. The deal is valued at around $7.5 billion.

Nova Andino Litio will carry out exploration, mining, production, and marketing activities for lithium in the Atacama salt flat until 2060. Codelco holds 50% plus one share of Nova Andino Litio.

Nova Andino Litio is the world's largest producer of lithium from brine and holds all the assets, subsidiaries, permits, technical expertise, and personnel necessary for developing the lithium business. Furthermore, the agreement ensures operational and contractual continuity in the Atacama salt flat, under contracts with Corfo that will remain in effect until 2060.

This transaction is the largest public-private partnership in Chilean history, and constitutes the cornerstone of Chile's National Lithium Strategy. Through the formation and operation of Nova Andino Litio until 2060, Codelco will  effectively control the production of lithium from one of the world's richest salt flats, play a key role in the energy transition through the production of copper (the largest producer globally) and lithium from brine, supporting national goals in securing a leading position in the production of critical minerals.

The deal will also generate substantial long-term revenues for the state of Chile, estimated in between $25 billion and $45 billion through the payment of dividends to Codelco, payment of rent to Corfo and payment of general taxes; and (iv) diversify its mineral portfolio by adding lithium as a new strategic line of business.

The Chilean state will receive 70% of the operating margin of Nova Andino Litio during the first period (2025-2030), which will increase to an 85% of the operating margin during the second period (2031-2060). The partnership will develop a new large-scale project (the largest worldwide) to continue the exploitation lithium from the Atacama salt flat using new technologies, drastically reducing the levels of water usage and meeting higher environmental standards.

Codelco was advised on the deal by Chilean law firm Carey.

“This project was particularly challenging as it entailed successfully navigating through various workstreams in Chile and globally, including negotiating a 30-year lease agreement between Codelco and Corfo (the state agency owning the mining concessions in the Atacama salt flat), the due diligence of SQM and its lithium assets in Chile and abroad, and negotiating a complex private-public partnership agreement and shareholders agreement with SQM,” Carey said.

In addition, the negotiation involved obtaining merger control clearances in seven jurisdictions, including China and the EU, obtaining foreign investment clearances in four jurisdictions, completing a broad indigenous consultation process with more than 30 indigenous communities and organizations, obtaining lithium extraction and commercialization quotas from the Chilean Nuclear Energy Commission, achieving the dismissal of various lawsuits and injunction requests filed by third parties (including an SQM minority shareholder) before local courts, courts of appeals, the Supreme Court and administrative bodies, intended to suspend of invalidate the transaction, and attending to more than 10 hearings in congress to provide information and answer queries regarding the partnership.

The negotiation lasted for three years from its commencement up to closing and the partnership agreement was reviewed by more than 20 authorities both in Chile and worldwide and involved the participation of more than 100 lawyers from Carey.

Carey’s team was led by M&A partner Cristián Eyzaguirre, mining and environmental law partners Rafael Vergara, Alberto Cardemil and Julio Recordon; IP and data protection partner Francisco Carey, litigation partners Aldo Molinari and Mónica Pérez, insurance partner Matías Vergara, tax partner Manuel José Garcés, energy partner José Tomás Hurley, antitrust partner José Pardo, and public law partner Camilo Lledó.