SANTIAGO, May 31 (Reuters) -

Chilean state miner Codelco and the world's No. 2 lithium

producer SQM struck a pivotal deal on Friday over a

joint venture that will reshape the Andean country's lithium

sector and give the state a front-line role in developing the

key electric vehicle battery metal.

The new entity will let SQM boost output through 2060 in

the Salar de Atacama, one of the world's most prized areas for

extracting lithium.

Majority control, though, will go to Codelco, marking

the copper giant's first lithium venture as it takes on a

state mandate

to spearhead the government's entry into the industry.

Several hurdles remain to finalize the partnership.

"Just as we have contributed to making Chile the world

leader in copper production, we will now contribute to making

our country a leader in the production of lithium, another

mineral critical to the energy transition," Codelco Chairman

Maximo Pacheco said in a statement.

Chile is the world's second largest producer of lithium

after Australia, thanks to output from SQM and Albemarle

.

The global shift toward EVs has created a rush by

automakers and others for more supplies of the ultralight metal.

Boric and others in the government frame their lithium strategy

as intrinsically linked to the global fight against climate

change.

The deal follows months of complex negotiations between

the two companies, as well as

protests by Indigenous communities

and challenges from a major SQM shareholder.

SQM shares rose 0.6% following the announcement.

Analyst Cesar Perez-Novoa of BTG Pactual said the

announcement cleared away the uncertainty of the talks.

"We expect positive share reaction for the stock as

negotiations, along with lithium prices, have been an overhang

over share performance," he said.

The planned 2025 start of the partnership will depend on

Chile's financial regulator rejecting a request from China's

Tianqi Lithium, which holds about 20% of SQM's

shares, for shareholders to vote on the joint venture.

SQM maintains only a board vote is needed.

Goldman Sachs warned on Friday that investors should focus

on whether Tianqi will seek legal action to block the

partnership agreement, which it said is "not a stellar deal" as

SQM is set to become a minority shareholder of a state-owned

enterprise.

Tianqi did not immediately respond to a request for

comment.

The deal also requires approvals from Chilean and foreign

authorities and a consultation with local Indigenous communities

in the Atacama salt flat.

The deal, first outlined in December, calls for Codelco to

oversee general management as of 2031, and says board members

cannot have already served more than a decade on the board of

either company.

The agreement also allows SQM to lift production by

300,000 metric tons of lithium carbon equivalent (LCE) through

2030, while aiming for annual output of 280,000-300,000 tons

through 2060.