Chile Market Forecast 2015 and Current Lithium

Production
1. Market Status

a. Economic forecast

For 2015, we expect the Chilean

economy to improve its 2014
performance but growth will continue
to underperform with relation to the
5.5% average GDP of years 2010 to
2012.
An improvement in the global
outlook for copper will be closely
related to Chinas ability to revamp
its economic growth. So far, analysts
project copper prices within the $3/
to $3.2/ for 2015.
The Chilean Peso has depreciated
25% in 2014, what will increase the
competiveness of the economy .
A weaker Peso is likely to attract
foreign investment in fixed assets as
project costs are reduced in dollar
terms.
The government recently approved a
Tax reform that generated much
uncertainty during 2014. We expect
the additional certainty will feed into
new investment in 2015 as deferred
projects might commence execution.
Chiles
business
friendly
environment and reliable fiscal policy
will continue to attract foreign direct
investment.

Main Economic Indicators

201
3

2014
(f)

2015
(f)

GDP
Growth

4.1
%

1.9%

3.2%
4.0%

Inflation

1.8
%

Interest
Rate

5%

National
Income
Growth

3.4
%

1.3%

3.7%

Internal
Demand
Growth

3.4
%

-0.7%

3.0%

Fix Capital
Formation
Growth

0.4
%

-6.2%

1.9%

Exports
Growth

4.3
%

2.3%

4.7%

S&P Credit
Rate

AA-

AA-

AA-

4.8%

3.0%

3.0%
2.0%
3.0%

Source: Central Bank; OECD; Standard and

Poors

b. Government Policy

Government policy for 2015 will

focus in revamping the economy
through an increase in public
spending and a relaxation of
monetary policy.
Government
will
focus
its
investment
in
mining
and
infrastructure.
Central bank is expected to continue
to decrease the interest rate to help
reactivate the economy.

Chilean Mining Sector

The government will provide $2

billion to CODELCO (the stated
owned copper company) the allow
the execution of its 2014-2018 $23.5
billion investment plan.
The Ministry of Mining is leading an
analysis on red tape reduction for
mining
projects
focusing
in
decreasing the number of permits
and the expediting the permitting
process.
Government
is
reviewing
environmental regulation to avoid
the delay of mining projects.

Chilean Power Area

Government goal is to reduce in

30% the spot price of electricity and
the residential cost of power in 25%
in the next 10 years.
Also, 25% of power supply should
generated using renewable sources
by 2025.
A key milestone will be the 2016
tender for small clients.

Government is currently undertaken

a road show to bring new players
into the market to participate in the
tender.
Government is exploring to provide
sites with an approved EIA to
decrease entry barriers.
ENAP, Chiles stated owned oil and
gas company, will be funded with
$400 million to lead this process.
It is likely that Codelco could
transfer to ENAP its Luz Minera and
Energa Minera projects for the latter
to continue their development.
Government will decide early in
2015 how to proceed with the
interconnection of the countrys two
main grids; The SIC and the SING.

Chilean Infrastructure Sector

Government announced a $28

billion investment in infrastructure
for the 2014 2018 periods.
$10 billion will be developed through
PPPs.
The government is currently redefining the investments for 2015.

c. Lithium Global Demand 2014

e. Chilean Construction Market

Construction market is expected to

continue to slow down as a result of
project delays in the construction
and power sectors.
The
current
slowdown
has
decreased the fast wage inflation we
had seen in previous year in
construction, especially in mining
projects.
Anyway, wages will continue to rise
as the impact of limited skill worker
supply is still stronger than the
market slowdown.
The Chilean Construction Chamber
estimates a marginal decrease in
the
spending
in
productive
infrastructure in 2015 in comparison
to 2014.
The Chamber projects $18.9 billion
will
be
spent
in
productive
infrastructure in 2015, of which $8.1
billion will be spent in construction.
The
table
below
shows
the
disaggregation of this spending
across sectors.

Sector
Power
Forestry
Industrial
Commercial Real
Estate
Mining
Public Productive
Infra.
Ports
Other
Total

Spending in
Construction
(U$ million)
2014
2015
$1,373
$2,670
$0
$0
$542
$602
$1,331
$4,222

$835
$2,570

$712
$127
$75
$8,183

$810
$252
$149
$8,068

Source: Chile Construction Chamber

On the lithium demand side, exist

five major consumer countries or
regions, which is China's first with
35% of total consumption of about
150,000 t of LCE (lithium carbonate
equivalent) followed by Europe
(24%), Japan (11%), South Korea
(10%) and North America (USA and
Canada, 9%). Meanwhile, Asian
demands totalize more than half the
world total requirements.

d. Lithium Global Production Q2

2014

The US Geological Survey stood

behind Chile to Australia, which is
already almost at the same level of
production. China and Argentina
appear quite far back.
Chile continues to lead the global
production
of
lithium,
after
producing 13,500 tons in 2013. This
follows the 2014 Report on lithium
presented the US Geological Survey.
The document referred to the
increased global consumption of
lithium
by
the
expansion
experienced by the battery market,
both for communication equipment
and vehicles. The company stood
behind Chile to Australia, China,
Argentina,
Zimbabwe,
Portugal,
Brazil and the United States, except
that northern country does not
report figures.
Notably,
Chile,
Bolivia
and
Argentina, account for nearly 85%
of the reserves of lithium salt flats,
and 50% of total reserves of
lithium. Therefore they are known
as the "triangle of lithium" which
focuses on the border areas of the
three
countries.
The
main
applications
are
for
the
manufacture
lithium
batteries,
lubricants,
Ceramic
glass,
air
conditioning and others.

h. Lithium Top Producers

Chile,
which
tops
the
list,
production increased compared to
2012 by 13,200 tones to 13,500.
The main site is located in the Salar
de Atacama, in the Antofagasta
region and accounts for 27% of
world reserves.
Australia
increased
its
international presence, going from
12,800 tons in 2012 to 13,000; only
500 tons of Chile. Unlike Chile,
which derives its resources from
brine; Mine Talison Greenbushes
company is the leading provider in
this country with more than 25
years in operation.
China lowered its production as it
went from 4,500 tons in 2012-4000.
The Asian dragon discovered this
resource in 1987 and only exploits it
since 2004, in Lake Zabuye, in the
autonomous region of Tibet.
Argentina, fourth, produced in
2013, 3,000 tons, increasing by
2,700 tones from the previous year.
Its main deposits are salt lakes such
as Chile, located in the northeast of
the country.
Zimbabwe
has
an
annual
production of 1,100 tons, which
increased compared to 2012 when it
registered 1,060. According to the
Chamber of Mines of the country,
produced
for
60
years
and
concentrate a major mineralogical
Bikita reservation.
Portugal produces only 570 tons,
which increased 10 tons from 2012.
Brazil produced 150 tons; and the
United States has not disclosed its

f. Brine Extracted Lithium

Production

Half
of
the
world's
lithium
production is obtained from brines
extracted
from
salt lake areas in Chile, Argentina,
China and the US, totaling 89,920 t
LCE in 2012.
Currently, Chile leads this market
segment contributing two thirds of
the
Global production of primary lithium
compounds, followed by Argentina
(18%) and China (12%).
The two companies active in the
Salar de Atacama, SQM and SCL
(Albemarle
Corp.)
maintain
a
predominant share of 42% and 25%
respectively.

g. Other Latin-American Lithium

Producer Countries

South Korea, participates through

Kores (Korea Resources Company)
in projects in Bolivia and Argentina.
While lithium in Bolivia is in hands
of the state through the National
Evaporative
Resources
Management (GNRE) subsidiary
Bolivian state Comibol, this country
pursues a strategy of cooperation
with international partners, experts
in the field. In this context the GNRE
signed an agreement with a
consortium of Kores and Korean
steelmaker Posco for research,
installation and commissioning of
pilot plant cathodes in lithium
department of Potos.
In Argentina, Kores is present
through a consortium which holds
30% of Sal de Vida project of Galaxy
Resources.

i. New Technology for Lithium

Extraction being tested in Chile:

Chemical Extraction: South Korea's

POSCO has developed a technology
to extract the chemical form lithium
brine. This reduces the time of
extraction times and increases the
rate of recovery 80% -99.99%. The
same technology can also be used
to extract magnesium, calcium,
potassium
and
boron,
among
others, various sources brine.
Currently the company is operating
a pilot plant, with a capacity of 20
tpa lithium carbonate, in the Salar
de Maricunga with Li3 Energy.
Solvent Extraction (SX): Lithium
Bateman Projects, a division of
Bateman
Litwin
Group,
has
developed and patented process
LiSx
wherein the lithium is
obtained through extraction by
solvents from brines or after the
leaching of minerals (Fig. 7)
solutions.
The solutions are initially mixed
with an organic solvent in which
dissolved lithium ions. The organic
solvent is then separated from the
aqueous solution and with the
addition of a strong acid producing
lithium chloride is eliminated. The
clean solvent can be reused in the
process.