Codelco’s $244 Million Acquisition of Lithium Power International Set to Change Chile’s Lithium Industry

Maricunga salt flat. Source: Lithium Power International

In a major acquisition that is expected to reshape Chile’s role in the lithium industry, the country’s state-owned copper mining company, Codelco, has entered into an agreement to acquire Lithium Power International (LPI) for A$385 million, approximately US$244 million. The acquisition is a first of its kind for Codelco and marks a major step for the company within the lithium sector, as outlined by the Chilean government’s public-private model announced earlier this year.

The agreed-upon deal, which comes after weeks of negotiations, includes a cash offer of $0.57 Australian dollars per LPI share. A shareholder vote in January 2024 is required for the transaction to proceed. Lithium Power, which is an Australian company, has significant assets in Chile, most notably its Maricunga project. Located within the ‘Lithium Triangle’ in northern Chile, this flagship project is estimated to hold around 1.9 million tonnes of lithium carbonate equivalent (LCE).

Prior to this deal, Lithium Power had divested its assets in Western Australia back in June, to concentrate on the Maricunga project. The Maricunga asset is considered a strong and cost-effective operation. According to a Definitive Feasibility Study completed by WorleyParsons and released in the first quarter of 2022, the project has an operating expense of $3,718 per tonne and supports an annual production of 15,200 tonnes of LCE over a 20-year mine life. The same study also placed the project’s net present value at $1.98 billion before tax. Notably, the project has received environmental approval from Chilean authorities as of February 2020.

Codelco Chairman Maximo Pacheco stated that the acquisition exemplifies how the company intends to become “a globally relevant supplier of critical metals to enable the energy transition.” Despite this, some industry analysts have questioned Codelco’s ability to navigate the lithium market, given that it has traditionally operated as a copper miner and has no prior experience in lithium extraction.

Codelco has also recently faced some financial challenges, posting its lowest production in nearly 25 years. The company’s output has decreased by 17% and is projected to continue falling until 2025. Earlier this month, Moody’s Investors Service also downgraded Codelco’s investment-grade credit rating.

The Chilean government’s new public-private partnership model for the lithium sector, unveiled in April, has assigned a key position to Codelco. The model calls for such partnerships for future lithium projects in an attempt to further solidify Chile’s standing in the global lithium market. Currently, Chile is the world’s second-largest producer of lithium, trailing only Australia, and possesses the largest known lithium deposits globally.

Lithium Power International is a pure-play lithium company with three distinct project regions: one in South America’s brine region and two in Western Australia. The company’s main focus has been on the development of Chile’s next sustainable high-grade lithium mine, supported by a robust infrastructure that includes accommodations, labs, workshops, and a range of utilities and supplies, among other facilities.

As the transaction awaits shareholder approval, the acquisition will be watched closely, particularly concerning 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.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

Matthew Evanoff

I specialize in the mining industry, focusing on top global mining stocks. My reporting covers the latest industry news, company/project developments, and profiles of key players. With a degree in finance and economics from the University of Toronto, I've contributed to a wide range of industry publications. Beyond my professional pursuits, I have a keen interest in global business and a love for travel.

By Matthew Evanoff

I specialize in the mining industry, focusing on top global mining stocks. My reporting covers the latest industry news, company/project developments, and profiles of key players. With a degree in finance and economics from the University of Toronto, I've contributed to a wide range of industry publications. Beyond my professional pursuits, I have a keen interest in global business and a love for travel.

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