Chile, the world's second-largest lithium producer, has finalised a major state-backed deal designed to significantly increase its output of the critical battery metal, setting the stage for intensified global competition.
A New Era for Chilean Lithium
State-owned copper giant Codelco and leading lithium producer SQM have cemented a landmark joint venture, creating a new entity named NovaAndino Litio SpA. The partnership, confirmed in a statement over the weekend of December 27-28, 2025, merges Codelco's Minera Tarar SpA with SQM's SQM Salar SpA.
This strategic move hands the Chilean government direct control over one of the planet's richest lithium reserves in the Salar de Atacama. As part of the arrangement, SQM transferred all its mining concessions in the Salar de Maricunga to Codelco.
The new venture will oversee all lithium exploration, production, and sales in the Salar de Atacama until 2060. It ensures the continuity of existing contracts with Chile's development agency, Corfo, and will manage new agreements effective from 2031 onward.
Strategic Implications and Global Approval
The deal is a cornerstone of President Gabriel Boric's national strategy to increase state involvement in key lithium assets while ramping up production for the global clean energy transition. The companies stated the partnership will have a positive and material impact on Codelco's 2025 financial results.
A crucial final hurdle was cleared in November 2025, when Chinese regulators granted their approval. This green light was conditional on the companies honouring existing commercial commitments and continuing to supply Chinese customers on a "fair, reasonable and non-discriminatory" basis.
Western Australia's Lithium Industry in the Spotlight
This development in Chile directly concerns Australia, which is the world's largest lithium producer. The vast majority of this production, virtually all of it, comes from hard rock mines in Western Australia.
The Chilean player SQM has deep ties to the WA sector. It holds a $2.6 billion joint venture called Covalent Lithium with Australian conglomerate Wesfarmers. This 50/50 partnership operates the Mt Holland mine in the Wheatbelt and a lithium hydroxide refinery in Kwinana.
Furthermore, SQM has partnered with mining magnate Gina Rinehart to develop the Andover lithium project in the Pilbara. This followed their $1.7 billion acquisition of Azure Minerals in late 2023.
The extraction methods differ starkly between the two leading producers: WA relies on hard rock mining, while Chile uses evaporation ponds to process lithium-rich brine.
A Volatile Market Finds Footing
Lithium producers navigated a turbulent 2025. The price for spodumene concentrate, the material mined in WA, began the year around $US820 per tonne, dipped below $US600/t by June, before rallying strongly to finish above $US1200/t.
Industry analysts view approximately $US1000/t as the rough benchmark where WA's lithium industry becomes broadly profitable. The second-half price surge was driven by China revoking several lithium mining permits as part of an environmental regulatory cleanup, coupled with sharply rising demand for lithium in energy storage systems like the Tesla Powerwall.
Chile's move to consolidate and expand its state-controlled lithium production marks a significant shift in the global supply landscape, ensuring the competition to power the world's electric future remains fiercely contested.
