CESCO - INTERVIEW: Codelco to play small role in lithium, but big believer in EVs, chairman says

Codelco will play a small role in the lithium market and has no plans to compete with some of the world’s giants in the field, according to the chairman of the Chilean state-run copper producer.

Enthusiasts should “curb your enthusiasm” for Codelco’s involvement, Oscar Landerretche said, adding that the company was in no immediate rush to develop its two lithium projects in Chile’s northern region of Atacama.

“We’ve been going at our own pace, evaluating the projects, inviting people in, going at a responsible pace,” he told Metal Bulletin in an interview during the annual CESCO industry week in Santiago, Chile.

“I’ve tried to be very clear saying we have two salt lakes in the north of Chile but they’re not as large as the major salt lakes in Chile, Argentina or Bolivia, so Codelco will – if these projects mature – become a player in lithium but nobody should expect us to become the major player. There’s no way that’s going to happen,” he said.

There have been more than ten expressions of interest in developing the Codelco projects, which are at a very early stage of exploration and development. But Chile, which has the world’s second-largest lithium reserves, currently places the material in the same category as uranium and is yet to approve rules governing investment.

Demand drivers
Landerretche said he is a believer in the electro-mobility boom including growth in the use of electric vehicles (EVs), which is adding to demand for battery materials containing lithium, copper and cobalt.

“I really do buy into the electrical revolution. I’m not sure I have a position on the timing, but it’s coming; it’s obvious, it’s going to happen. I’m not an expert in the auto industry but it’s very clear that it’s inevitable and electro-mobility is the thing of the future,” he noted, adding that the technology was already working successfully.

“We’re going to transition to a more electrical, solar, wind and wave-powered world, and that is very good news for copper, as well as lithium,” he said.
He also noted that the recovery in the western economies following the turmoil of the global financial crisis of 2008-2009 was a bullish factor for copper demand growth, as well as the fact that China, the world’s largest copper consumer, had managed to continue its economic growth without any major problems.

“China has shown itself to be extremely able at managing the financial transition of its economy. It has shown an amount of macro-financial, Keynesian skill which I have never seen,” he told Metal Bulletin.

“China is amazingly good at its particular combination of institutions, financial regulations and semi-monetary policies. It’s really amazing and good for the world that China didn’t have its Argentina moment, which is what everybody expected, and it’s one of the reasons why copper prices have recovered faster than expected,” Landerretche said, referring to Argentina’s financial crisis at the end of the 1990s.

“If you grab these three trends, they’re all feeding into copper. When you have three motors, one or two can fail. The prospects for copper are pretty healthy and my view is if mining companies stick to their long-term perspectives with responsible long-term views, it’ll be very good for them,” he added.

Lessons learned

The tough lessons learned from the collapse in copper prices and the subsequent push to cut costs, reduce debts and increase productivity are still fresh in the minds of mining company management teams, according to Landerretche.

This is in part because there has been little change at the top for management who steered firms through these difficult times, and also because shareholders continue to place pressure on miners. But this situation won’t last forever, he warned, with cost pressures already having to be managed while growth is being reactivated through the copper supply chain.

“If we go into another super cycle that lasts many years, I’m sure that things will be relaxed. That’s just the creative destruction way of the world. But I do believe there were lessons and I believe companies are currently being more careful, more conservative, and that’s good for everybody, because it’s going to be a more sustainable and better business,” Landerretche said.

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