Simco threatens international lawsuit over alleged expropriation of Chilean lithium property

Bnamericas Published: Saturday, October 29, 2022
Simco threatens international lawsuit over alleged expropriation of Chilean lithium property

Chilean mining company Simco said it could file an international lawsuit against the State over the expropriation of its properties in the Maricunga salt flat in northern Chile's Atacama region.

Simco made the announcement after the mining ministry said that state-owned miner Codelco would be the only lithium operator in the country's second-largest salt flat.

"The worst thing that could happen to the country is an international lawsuit on this case," Gerardo Maldonado, strategic prospective manager at Ripp Consulting, told BNamericas. 

It is essential to give signs of transparency to the world market, since international investors are looking at Chile and what happens to the country's lithium resources will have repercussions, added the expert, author of a study entitled 'Strategic policy for the management of lithium wealth in Chile's salt flats through 2035'.

Damages for the alleged expropriation of the firm's property and ignoring its license to exploit lithium in Maricunga could reach as much as US$2.5bn, claims Simco, which is owned by the local Errázuriz group and the Taiwan-based Simbalik Group.

Simco said in a statement that its authorization to produce lithium was granted by the Chilean nuclear energy commission in 2013 and its project was approved by the environmental assessment service (SEA) in 2020.

There has been a dispute over the lithium resources in Maricunga for some time, but the conflict reached a new level after the mining ministry announced that it would process the extension of Codelco's special lithium operation contract (CEOL), through its subsidiary Salar de Maricunga

The Codelco project was started in 2018 and is aimed at reaching a production of 325,000t of lithium per year, but has been halted due to the problems related to the ownership of the property.

The contract awarded to Codelco does not consider the existence of other assets in Maricunga, with the only contracts in force in Chile being those held by SQM and US-based company Albemarle, mining undersecretary Willy Kracht said in a televised interview on Thursday.

The property claimed by Simco would have been registered prior to 1979, when the 1932 mining code was still in effect, Kracht added, pointing out that lithium has been considered an asset that could not be awarded under concessions since that year (under decree Law No. 2,886), unlike copper and other minerals, and can therefore only be produced under contracts granted by the State.

"Agreements must be respected," Maldonado said regarding the apparent overlapping of the mining properties, adding that also public-private partnerships would be the best way to drive production of the lithium industry in Chile.

Since Codelco does not have extensive experience in producing lithium as it does in copper, the involvement of a strategic partner to provide know-how to the State company would be very beneficial.

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