By Rosalba O'Brien and Felipe Iturrieta
SANTIAGO (Reuters) - Chile will hold a tender in April to encourage companies to use its vast lithium resources to move it up the value chain with cathode or battery production, the head of the country's development agency told Reuters on Tuesday.
It is pressing ahead on deals with international firms as relations remain bitter with local lithium producer SQM (SN:SQM_pb), where royalties arbitration is expected to take at least another year, said Eduardo Bitran, executive vice president of Corfo, which manages Chile's lithium leases.
The price of lithium, a rare bright spot in commodities, has rocketed in recent years and is expected to continue to rise alongside demand. Lithium plays a small but essentially irreplaceable part in powering electric car batteries.
The tender to develop value-added lithium technology in Chile should conclude by November with two Chinese companies and a Korean associate having shown interest, Bitran said in an interview late Monday
The government's transparency website shows representatives from battery maker Vision Group and rare earths firm Kanhoo met with Bitran last November to present a proposal "for a lithium hydroxide plant and a lithium battery plant" in Chile.
"To make value-added products in Chile will be huge," Bitran said. "It allows us to create a significant industry."
Chile currently exports high-grade lithium carbonate but the process of turning it into cathodes and batteries takes place elsewhere.
Companies bidding in the tender will have access to cheaper lithium. Corfo recently signed a deal with world lithium leader Albemarle to allow it to boost output at its Salar de Atacama facility.
As well as the state receiving royalties, some of that production will be sold at a preferential price within Chile, to encourage investment.
That should be the model for future deals, Bitran said.
"For the Salar de Atacama we have established the floor," he said. "These are the minimum terms for any future agreement."
The deal covers about a quarter of the Salar with the rest leased to SQM under a pre-existing contract that Corfo wants to terminate early, alleging SQM has underpaid. SQM maintains it has fully complied with its contractual obligations.
Bitran has been a critic of SQM, which was privatized under dictator Augusto Pinochet in the 1980s and still is controlled by his former son-in-law, Julio Ponce.
"We want to normalize the situation," Bitran said. "We want a company that could be a good partner. That could be SQM but with its current controller that will be impossible."