SANTIAGO, July 1 (Reuters) -

Chile's state-run copper producer Codelco said on Tuesday it

has secured regulatory approval for a new lithium quota,

clearing one of the remaining hurdles to produce the battery

metal through its

joint venture

with miner SQM.

Chile's nuclear energy regulator CCHEN has approved extraction

of 2.5 million metric tons of lithium metal equivalent (LME)

from 2031 to 2060, Codelco said.

The approved amount could rise to 3.02 million metric tons

for the same three-decade period if the joint venture secures

environmental permits for expanded production.

If CCHEN grants the higher quota, it would allow for the

production and sale of up to 330,000 tons of lithium carbonate

equivalent (LCE) a year for the three-decade time span, Codelco

said.

The nuclear agency has authorized lithium quotas and

exports since 1979, when the military government of ex-dictator

Augusto Pinochet declared lithium "strategic" because of its

nuclear applications. The metal is now a key element of electric

vehicle batteries.

The Codelco-SQM deal, which will bring the state into

lithium production in Chile for the first time, still requires

two key elements before it can be finalized - regulatory

approval from China, and the completion of a consultation with

local indigenous groups. The deal required approvals from a

number of countries because of SQM's presence in international

markets.

A senior Codelco source told Reuters this week that it

expects both conditions to be met by September.

At present, Santiago-based SQM and U.S. firm Albemarle are

the only lithium miners in Chile, which is the world's

second-largest producer of the metal. SQM's current approved

quota for lithium production is due to expire at the end of

2030.