Shares of two of the world's biggest lithium miners, Sociedad Quimica y Minera de Chile (NYSE:SQM) and Albemarle (NYSE:ALB), fell sharply Friday after Chile's President Gabriel Boric unveiled plans to create a state-owned company to develop the country's lithium resources.
Boric said state-owned Codelco would hold talks with SQM (SQM) and Albemarle (ALB) to negotiate a deal for the state to take a stake in their operations before their contracts expire.
SQM (SQM), whose contract to extract lithium in Chile's Atacama salt flat expires in 2030, is most at risk; Albemarle (ALB), whose deal does not come due until 2043, said it expects "no material impact" on its operations for the government's plan.
SQM (SQM) closed Friday -18.5% and hit a 52-week low $60.21, while Albemarle (ALB) ended -10% and touched a 21-week intraday low $171.82.
Only SQM (SQM) and Albemarle (ALB) operate in Chile among U.S.-listed companies, but some other lithium names also fell on fears that other countries could follow Chile's path; Livent (LTHM) -5.4%, (SLI) -2.8%, (LAC) -1.3%.
ETF: (NYSEARCA:LIT)
Under Chile's new lithium development policy, SQM (SQM) has two choices: Keep full control of its operation for the rest of the current contract and risk losing it when it ends, or let the state take a majority stake with the understanding that it could keep operating longer.
Further complicating SQM's (SQM) decision: Chile will have two changes of government before 2030, which could mean a new lithium policy.
Albemarle (ALB) faces a similar choice, but it has 20 years left on its contract and is far less reliant than SQM on a single - albeit massive - salt flat in Chile.
While most commercial lithium extraction is from salt-flat brines and mineral ores, Seeking Alpha contributor Trend Investing explores who is leading in the race to achieve successful direct lithium extraction.