Chile Lithium Production

Chile produces around 12,000 MT of Lithium (around 63,876 MT LCE) according to USGS study for 2016. Yet considering that countries’  two only producers push for substantial increases of their production quota – figure can be much higher (current production quotas for both producers amount to 128,000 MT of LCE per annum). In 2016 Chilean exports amounted to about 79,500 tons LCE, bringing USD 589 million in revenue.[1]  On global market Chile takes 2nd place as a Lithium producer as far as market share is concerned (Australia 35%, Chile 34%). Chile also takes first place of market share as Lithium Carbonate producer, as Australia is biggest exporter of Lithium as a concentrate (Spodumene).

Chile is a part of Lithium Triangle along with Bolivia and Argentina where 70% of world’s Lithium reserves are placed.

Chile’s Salar de Atacama reserves are about 7,5 million tons (40 millions LCE) making the country the richest in economical proven reserves.[2] Chile is also producing Lithium at the lowest cost.

“Salar de Atacama, located 55 km (34 miles) south of San Pedro de Atacama, is the largest salt flat in Chile. It is surrounded by mountains and has no drainage outlets. To the east is enclosed by the main chain of the Andes, while to the west lies a secondary mountain range of the Andes called Cordillera de Domeyko.

The barren lands of Salar de Atacama, a dried bed of the ancient Chilean lake 700 miles north of Santiago is one of the dirtiest places on Earth. Nothing ever grows here. It is a wasteland laid out with sparkling salt-encrusted rocks that resemble cow pies. Annual rainfall on the salar (from Spanish – “salt lake”) rarely tops a few millimetres. High altitude of 1.4 miles above sea level combined with cloudless skies incapable of reflecting the punishing rays of solar radiation may damage exposed skin in minutes.

Humans would keep clear of the Salar de Atacama was it not for the precious brine that lays 130 feet below lake’s surface. The brine looks like slushy, dirt-stained snow when first pumped from the ground. But when the water in the brine slowly evaporates when left under the desert sun, it leaves behind a yellowy mineral bath that could be mistaken for olive oil.”[1]

Albemarle has two production sites in Chile – plant system to produce the lithium brine at the Salar de Atacama and the plant at Antofagasta, at the industrial region “La Negra”. Albemarle has acquired Rockwood Lithium that operated sites in Chile and a brand Rockwood Lithium has been discontinued.

In 1984, Albemarle began to produce lithium carbonate at La Negra facility on the basis of natural brines from the Salar de Atacama.

In 1998, a lithium chloride plant in La Negra was brought on stream. Lithium chloride is a very hygroscopic salt and used in fluxes, humidity control, and zeolites. It is a raw material required for the electrolysis of lithium metal.

Production capacity has been expanded there since then and further expansions are in process to meet the needs of the growing markets.

Albemarle’s mine is located at the Salar de Atacama. The surrounding conditions are ideal for the production of lithium carbonate on the basis of natural brines from the Salar.

Potash, for the manufacture of fertilisers, is also recovered at the Salar. In 1998, a lithium chloride plant was brought on stream. Production capacity has been expanded there to secure long-term supply in the growing markets for lithium. Future expansions are already in process and will be realized within the next years.[2]

Albemarle said that it has developed a novel technology that would allow it to increase annual lithium production in Chile on a sustainable basis to as much as 125,000 metric tons of lithium carbonate equivalent without requiring additional brine pumping at its facility in the Salar de Atacama.

The company has already asked state development agency CORFO to raise its lithium production quota to 125,000 tonnes annually from the current 80,000-tonne-per-year limit.

“There’s no reason to object to this request, given the contract we have, this means royalties, more fiscal resources, more investment.” stated Eduardo Bitran, head of the South American country’s CORFO state development agency.

With the understanding that this new technology is commercially viable, Albemarle will build a new lithium carbonate production plant at the beginning of the next decade,” the company said in a statement.

The expansion plan would be rolled out once current projects are completed and operating at full capacity, the company added. If the plan is approved, Albemarle’s investment in Chile would reach $1 billion over the next five years[1]

Sociedad Química y Minera de Chile (SQM) is a Chilean chemical company and a supplier of plant nutrients, iodine, lithium and industrial chemicals. SQM’s natural resources and its main production facilities are located in the Atacama Desert between Chile’s I and II regions.

Company began mining lithium in the 1990s. SQM, or Soquimich as it is colloquially called in Chile has over 44 sq km of evaporation ponds. SQM was founded in 1968 from a joint venture between a nitrate miner and a Chilean government agency, Corfo, with the aim of exploiting the Atacama’s nitrate deposits. It was subsequently nationalized. Yet when Pinochet came to power in 70’s it was again privatized along with other national companies.

Pinochet appointed his son-in-law and member of SQM board – Julio Ponce Lerou, as president of the agency overseeing privatisation process. Subsequently Ponce acquired shares in SQM. “Ponce still owns much of the business through a cascading series of holding companies, and is listed on the Forbes rich list with an estimated net worth of $1.4bn. In late 2014 he was fined almost $70m by the Chilean securities regulator for illegal share trading, with the regulator accusing him and three other executives of abusing their position of power over SQM. He is contesting those charges, but stepped down as chairman of the company in April” according to Financial Times.

Chilean administration also threatened to revoke SQM’s lease to the lithium and potassium deposits in the Atacama, alleging that the company has underpaid the royalties due to the state under the terms of its contract.  While SQM claims it has not committed any errors.

Eduardo Bitran, the head of the government’s economic development agency Corfo, said: “I think the most difficult problem now . . . is the big problem with SQM, in terms of the fact that they have been playing complex games in the Chilean political system”.

Lithium was declared a “strategic mineral” in Chile in 1979, since an isotope of the metal is used in nuclear fusion. The label stands to this day, despite the fact that the nuclear industry now uses only a miniscule amount of lithium and that USA stopped to label Lithium as strategic metal in 1998.

Yet that regulation implies that the government has full rights to the lithium in salars, which it can only lease out to companies. No new company received a concession for the last 20 years.

It is starkly different for other minerals for mining of which companies can obtain concessions that give them direct rights over the minerals in the ground. Government also restricts the total amount of lithium that companies can produce through a quota; SQM can’t extract more lithium than it agreed for in the terms & conditions of its lease dating back to 1993 (SQM quota is 48,000 MT of LCE per annum until 2030). Nevertheless SQM announced its plans to extend its capacity for Lithium production from 48,000 MT of LCE to 63,000 MT of LCE per annum. Hence it will reach its total production limit of around 1 million MTs of LCE before the lease concession from Corfo runs out in 2030.

Therefore SQM is pushing for increase of its quota. Yet the market commentators do not believe the approval will be granted unless dispute over royalties will be solved and Mr. Ponce will withdraw from ownership.

In 2014, Chile’s President Michelle Bachelet ordered a creation of National Lithium Commission, which was considered as a step toward opening Chile for new entrants into Lithium Mining business. However the commission maintained lithium’s status as a strategic mineral and recommended that the state develop the resource together with private companies. Since then Chilean government has tried to cooperate with the state-owned copper miner Codelco regarding the development of lithium deposits. Reportedly that initiative has not met with much interest from the side of Codelco. Other sources state that Codelco is looking to enter the lithium business and is scheduled to announce a partner in the coming months to develop projects.

Patricio de Solminihac (SQM’s CEO) stated: “We are producing more this year, but our main constraint is the limits that we have from the government in our rent agreement. I think that Chile has to decide what they think is best for the country[..].”

Chile similarly to its neighbours tries to move up the value chain. Its plans are even more ambitious and beyond production of batteries include production of EVs. China delegation has paid a visit to Corfo this year to discuss a potential for this initiative. While MTL Shenzen Group, Vision Group y Kanhoo Group (Chinese and Korean investors) plan to open battery production plant in the country as soon as second half of 2018.

Despite current unfriendly regulatory framework Wealth Minerals is acquiring new assets in Chile counting on the changes in the near future. It has acquired already 81,454 ha in Chile (having already more land than Albemarle) including assets adjacent to SQM in Atacama. Wealth has been also granted an option to acquire a stake in Seven Salar Project. “The Seven Salars Project is one of the most important large-scale lithium brine projects in Chile. The property includes the Salar de La Isla, believed by many to be Chile’s second largest lithium deposit and where 68 shallow drill hole samples returned an average lithium grade of 863 mg/l,” claimed Hendrik Van Alphen, CEO, Wealth Minerals, Canada.

It is also worth mentioning that Corfo is sponsoring a study about opportunities for local development in the lithium value chain in electronics and thermal storage for solar energy.

The idea is to promote research and productive programs where universities, research centers and national and international companies come together.