Determining the Price of Minerals：A transfer pricing framework for lithium

A transferpricingframeworkfor lithium IISD/OECD, 2024. This publicotion is licensed under o Crective Commons Attribution &QJicence (CC-BY 4.O) Nothing in this license shall be construed cs g waiver of the privilegesand immunities that the QECD enjoys os an internotionol orgorisation. This work is published under the responsibility of IISD and the Secretcry-General of the OECD. The opinions expressed and orguments employedherein do not necessarily retlect the ofncigl views of the Membercountries of the OECD or the IGF. IISD HEADOFFICE 111 Lombard AvenucSuite 325Winnipeg, ManitabaCanoda R3B OT4 The nomes and representation of countries and territories used in thisjoint publicaition follow.the practice of the OECD. This document, as wellgs gny dota and map included herein are without prejudice to the stotusof or sovereignty over any territory, to the delimitotion of internationclfrontiers and boundaries and to the name of any territory, city or crea. IISD.orgsmau'osllX IISD This proctice note hos been prepared under a program of cooperotionbetween the Orgcnisotion for Economic Co-operation and Developmont(OECD) Certre fer Tox Policy and Acministrotion Secretoriat ond theIntergovernmental Forum on Mining, Minerals, Metals and SustaingbleDevelopment (IGF) as part cf α wider effort to address the challengesdeveloping countries are facing in rcising revenue from their miningsectors, porticularly on the topic of rrinerul pricing. It complementspractice notes on top-priority tox issues focing developing countries. IGF/IISD OTTAWAOFFICE 123 Sloter StrectOttawa, CntarioCanada K1P 5G4 The OECD's work on this publicotion was co-funded by the governmentsof Germany, Ireland, Japen, Luxembourg, the Netherlands, Nerway, SpainSweden, Switzeriand, the United Kingdom, and the Europegn UnionThe IGF's work on this publicolion wes: [urded uy Lhe Governrnent ofthe United Kingdom's Foreign, Commonwealth and Development Cffice(FCDO). Its conlents: are the sele responsibility of the IGF and OECDand do not necessarily reflect the views cf the governments funding thepublication or the European Unior IGFMining-orgX@IGFMining IGF ABOUTTHEAUTHORS Joqueline Toquiri, Policy Advisor, Tax and Extractive Industries ct IGF Thomos Lossourd, Senior Policy Advisor, Tax and Extrgctive Industriesαt IGF OECD HEAD OFFICE 2, rue Andre Pascal75775 Paris Cedex 16 OECD.orgX@OECD Andrew Viola, Senior Advisor, Transfer Pricing and Extractive Leadotthe OECD ACKNOWLEDGEMENTS The outhars would like to thonk Daniel Jimenez, Alejandro Echeverrio,and Martin Sdez from iLiMorkers; the Govermment of Argentino; andprice-reporting agencies Argus Mecio, Asion Metols; Benchmork MineralIntelligence. Fastmarkets, Shanghoi Metol Market, and S&P GlobolCommodity Insights for their contributions.to the reseorch. OECD: https:/vowwoecd.arg/en/about/programmes/beps-in-mining.htmlIGF: wowigfrnining.org/firancial-buusfits/ TABLEOFCONTENTS Framework: Using the comparoble unicontrolled price method to determine the price ofminerals sold Applicationto Lithium.3 Lithium and Market ConditionsPhysicol Characteristics of Lithium Deposits4Lithium ProductionProcesses-Conventionalroutes,9Lithium Production and Reserves..13Lithium Pricing Fundamentals.15Components for an Agreement for the Sale of LithiumDetermining the Price of Lithium.21Lithium Price Indices.22Comporability Adjustments...33 AppendixA.Sourcesof InformationforLithium.41 List of Figures Figure 1 The world's largest producing lithium brine deposit, Salar de Atacama, Chile.Figure 2. The world's largest producing lithium minerals deposit, the Greenbushes Mine,Australia.8Figure 3. Lithium production process from brinesprocess diagram..10Figure.4,Lithiumproductionprocess fromminerals-process diagram..12Figure 5. 'Lithium Tree: Sources and destination of lithium chemicals.13Figure 6. Electric vehicle sales per region (lost 3 months [LTM]) from 2017 to 2023.15Figure 7. Argus Media lithium prices.24Figure 8. Asian Metals lithium prices.26Figure 9. BMI lithium prices.28Figure 10. Fastmorkets lithium price assessments..30 Listof Tables Table 1, Lithium resources by country (tonnes of contained lithium)5Table 2. Sourccs and chcmical composition of lithium minerals,1Table 3. Lithium production and reserves (in tonnes of contained lithium).13Table 4. The eight biggest lithium producers at mine site level (in kilo metric tonne[kMT] LCE in 2023..14Table 5. Incoterms in lithium contracts.19Table 6. Argus Media lithium prices.23Table 7. Asian Metal lithium prices..25Table 8. Benchmark Mincral Intelligence lithium prices.27Table 9. Fastmarkets lithium price assessments..29Table 10. S&P Global Commodity Insights Platts lithium prices..31Table 11. SMM lithium prices (all price ranges including VAT)..32Table 12. SMM lithium prices on September 28, 2023. Introduction AboutThisSchedule This minerol pricing sohedule complements the practice note Determining the Price ofMinerals: A Transfer Pricing Framework (Viola