Chapters in this guide
18
Lithium in Chile: strategic development
Chile holds between 36% and 40% of the world’s lithium reserves (within salt flats located in its northern regions), placing the country in a privileged position for the critical minerals race.
As the global energy transition accelerated demand for lithium — driven by the increasing production of electric vehicles — Chile had to face a strategic decision: enhancing resource sovereignty, or private investment, or both.
The legal framework governing lithium in Chile is unique: lithium was reserved to the state in 1979, and its exploitation requires navigating a layered regulatory regime that blends constitutional law, mining, environmental and nuclear energy regulations, Indigenous rights and water governance, among other legal considerations.
In this context, it is essential for practitioners and private investors to understand how Chile is reshaping the development of the lithium industry and the participation of private developers; and how state strategy, environmental, social, and governance (ESG) commitments and water scarcity are transforming the structure of mining joint ventures.
The rise of “strategic resource sovereignty”
During the Cold War, Decree Law No. 2,886 of 1979 declared lithium as a mineral substance that is reserved to the state on national interest grounds (i.e., potential use in nuclear fusion). As a result, to this date lithium can only be exploited:
- based on pre-1979 mining concessions that grant its holder the right to exploit lithium or other metallic minerals within their area (“pre-1979 Metallic Concessions”);
- directly by the state or its enterprises (e.g., Corporación Nacional del Cobre de Chile (CODELCO) or Empresa Nacional de Minería (ENAMI)); or
- by private or public entities through Special Contracts for the Operation of Lithium Deposits (CEOLs) awarded on a case-by-case basis by means of a Presidential Supreme Decree, or through administrative concessions.
CORFO, a state agency, is the owner of all pre-1979 Metallic Concessions in the Atacama salt flat, one of the richest globally. CORFO’s concessions have been exploited by two leading private companies for the past decades: Novandino (formerly SQM) and Albemarle (formerly Rockwood). Novandino and Albemarle’s operations in the Atacama salt flat are the only active lithium projects in Chile and constitute the backbone of the national lithium production. Each company has an independent operation, based on long-term lease contracts with CORFO (“CORFO Contracts”).
Until recently, Chile’s productive potential in other salt flats remained stalled, while global demand for lithium was on the rise together with its price forecasts and the production scale of competing jurisdictions (i.e., Australia and China). This situation called for a long-term state strategy to effectively unlock the country’s production capacity and ensure state participation in it, without shying away from private investment.
In May 2023, the Chilean government launched the National Lithium Strategy (ENL), setting forth an action plan to increase lithium production in the short term, enable the state’s participation in strategic sites through public–private partnerships, promote private exploration and exploitation in other salt flats, and achieve a sustainable development. The ENL expressly confirmed that SQM’s and Albemarle’s rights under the CORFO Contracts would be respected in full.
The ENL classified salt flats based on their strategic value. The Atacama and Maricunga salt flats were designated as “strategic”, requiring the state to hold a majority stake in the public–private partnerships to be formed to operate them, while the remaining “non-strategic” salt flats would be subject to a more flexible regime, without requiring a state controlling interest.
The results of the ENL are already in sight. In December 2025, CODELCO and in SQM formed Novandino, a joint venture vehicle holding all SQM’s lithium-related assets in the Atacama salt flat (contributed by SQM), and a new CORFO Contract to exploit CORFO’s concessions until 2060 (contributed by CODELCO).
In addition, in May 2025, CODELCO signed a partnership agreement with Rio Tinto to form a joint venture vehicle to exploit the Maricunga salt flat under a CEOL that expires in 2061. The formation of the joint venture vehicle is expected to occur in 2026.
Also, in September 2025, ENAMI signed a partnership agreement with Rio Tinto to form a joint venture vehicle to exploit the Altoandinos salt flat under a CEOL that expires in December 2060. The formation of the joint venture vehicle is expected to occur in 2026.
CODELCO holds a majority stake (approximately 51%) in the joint ventures formed (or to be formed) for the Atacama and Maricunga salt flats. On the other hand, ENAMI will hold a minority but relevant stake (approximately 49%) in the joint venture to be formed for the exploitation of the Altoandinos salt flat.
This tiered approach reflects a pragmatic view: maintaining sovereign control over the most valuable deposits while opening the door to more diverse partnership models elsewhere. Market-standard governance arrangements were inked for each joint venture, establishing an adequate balance between the majority and minority shareholders’ rights and obligations.
The state’s access to the proceeds of these operations is robust and obtained from diverse sources:
- dividends received by CODELCO and ENAMI as shareholders;
- regular payments received by CORFO and the Ministry of Mining under the CORFO Contracts and CEOLs, respectively; and
- general and special taxes to be paid by the operators.
Outside the Atacama salt flat, the CEOL has emerged as the legal instrument to implement the ENL. Unlike mining concessions, granted by courts on a first-come basis, CEOLs are negotiated directly with the Ministry of Mining and formalized by a Presidential Supreme Decree. The terms and conditions of each CEOL are negotiated on a case-by-case basis, including geographic scope, term, extraction quotas, economic obligations, and so on.
To date, CEOLs have been awarded to state companies CODELCO and ENAMI for the Maricunga and Altoandinos projects, and to private actor Quiborax in El Águila Plant. Other CEOLs are currently in progress with private entities, including Wealth Minerals and Coal India Limited in Ollagüe; Llamara Group in Quillagua; and CleanTech Lithium in Laguna Verde.
How ESG is reshaping mining joint ventures
ESG commitments are no longer a compliance layer added after a deal is structured. They are embedded in the contractual architecture from the outset. The CORFO Contracts and CEOLs include binding commitments to test new technologies (e.g., direct lithium extraction), reinject brine to the salt flat, decrease water usage, monitor hydrogeological balances, and contribute to local authorities (e.g., municipalities and regional governments) and Indigenous communities.
Under these structures, the state’s participation can function as a built-in ESG enforcement mechanism: the state (as partner) has both a commercial interest in the project’s success and a policy mandate to ensure ESG standards are met. In a sector where international investors increasingly demand ESG traceability, this integrated model may prove to be a competitive advantage for Chilean lithium.
In addition, lithium projects in Chile undergo a thorough environmental impact assessment through the Environmental Impact Assessment Service and a consultation process when Indigenous communities are directly affected by the project. The ENL also mandated the creation of a “Network of Protected Salt Flats”, aiming to shield at least 30% of Chile’s salt flats from mining activity by 2030.
Water scarcity and the desalination shift
The 2022 reform to the Water Code tightened the legal framework for water usage by strengthening public interest priorities, imposing limits to new water use rights, prohibiting new rights in overexploited aquifers, and reinforcing the state’s powers to restrict extractions. This regulatory pressure, combined with physical scarcity of the dry northern regions, has driven a structural shift: mining companies are increasingly building their own seawater desalination plants to secure a stable water supply independent of continental sources and third parties’ supply.
Recent data from Chile’s Copper Commission confirms the trend: in 2024, seawater accounted for approximately 40.7% of total water consumption in copper mining, and its share is projected to increase to around 67.6% by 2034. In contrast, continental water consumption is expected to decline significantly, from approximately 10.9 m³/s in 2024 to 6.7 m³/s in 2034, reflecting a progressive substitution of freshwater sources. The move to desalination stems from an adaptive strategy to address structural water scarcity and carries environmental benefits, relieving pressure on fragile highland aquifers and agricultural water supplies.
Large mining companies implementing this solution include BHP (Escondida), Teck (Quebrada Blanca), Antofagasta plc (Los Pelambres) and CODELCO (Northern District), among others. In some cases, mining operators have also committed to supplying desalinated water to nearby communities, creating shared infrastructure that benefits both the project and the surrounding population.
In May 2026, the seawater desalination law was enacted (“Desalination Law”). The Desalination Law creates a comprehensive legal framework for desalination, including a National Desalination Strategy (to be prepared and updated every six years), a new desalination concession regime granted by the state, and a new legal easement for desalination that would allow concession holders to route water pipelines, pumping stations, and associated infrastructure across third-party lands (paying a fair compensation for such use of lands). The Desalination Law’s timing is impeccable, providing a much-needed regulatory certainty to scale up desalination infrastructure across Chile’s mining regions, further decoupling minerals production from increasingly scarce continental water resources and opening a new chapter in how mining and water governance intersect in a water-stressed environment.