Chile Project Spotlight – Laguna Verde Lithium

Chile is the world’s second-biggest lithium producer, but it continues to fall behind Australia who is ranked first. With new projects moving forward in Argentina, Chile is even at risk of losing its second-place spot.

The main issue is that while demand has increased over the last few years, investors have looked at jurisdictions such as Argentina which have more clear guidelines to how projects can move from exploration to production. This has created a rush of new entrants and investments in the Argentinean lithium sector, while Chile continues with the only 2 market players – SQM and Albemarle.

The good news is that this could change with a recent announcement from CleanTech Lithium.  The company has recently announced results from its Laguna Verde Scoping Study, that has confirmed the project’s strong economics and environmental, social, and governance credentials.  Although there is still a way to go, CleanTech Lithium could be the first new producer with what looks like a very healthy project.

Albemarle and SQM are the only lithium players with producing assets in Chile.  

Albemarle inaugurated its US$500 million La Negra III/IV plant this last June, which is billed as one of the most modern chemical conversion plants in Latin America. It will double companies’ production to approximately 80,000MT of lithium carbonate per year.

SQM produced 120,000t of lithium carbonate in 2021 and is expected to increase production to 180,000 mt/year of lithium carbonate and 30,000 mt/year of lithium hydroxide, a threefold increase from its output in 2018.

Earlier this year, the company announced a new expansion which will increase production to 210,000 mt/year of lithium carbonate and 40,000 mt/year of lithium hydroxide starting in 2023.

CleanTech Lithium

CleanTech Lithium has the Laguna Verde and Francisco basin projects. Drilling and brine assays results and lithium extraction test-work confirmed battery-grade lithium (99.9% lithium carbonate). The current resource estimate is 1.2Mt of lithium at a grade of 246mg/l. Francisco basin drilling registered lithium grades of 375mg/l and 694mg/l. 

Laguna Verde Project

• The Laguna Verde project is located in the northern Atacama Region of Chile at an altitude of over 4,300m above sea level.  The project area is located 275km east of Copiapó and is located near infrastructure.
• The project will produce 20,000 tonnes of battery grade lithium carbonate for an operational life of 30 years based on current measured resources.
• The project will have an estimated operating cost of US$3,875 per tonne of lithium. The study assumed a long-term lithium carbonate price of $22,500 per tonne from 2027 onwards.
• The study includes an estimate of US$383.6 million of capital expenditure to develop the mine, using SunResin Materials’ sustainable direct lithium extraction (DLE) technology.
• A total of twenty-three extractions wells have been considered in the study. The extracted brine will be transferred to a tank to be mixed prior to being fed into the first stage of plant processing, which is the DLE adsorption columns. The spent brine from the adsorption process, which is the brine with lithium removed, will be reinjected into the salar basin through deep wells, in areas where the mineral resource will not be affected by dilution.
• The study notes that the Laguna Verde project will use renewable energy for power supply through contracting a supplier of renewable energy via a Power Purchase Agreement (PPA). A new 110KV high voltage line of approximately 100km will be extended to the project site.
• Water supply for the process is to come from wells drilled within the Laguna Verde basin and from the recovery of water in the concentration stages of processing.  Total water supply of 66 l/s will be required in the production phase,
• The project is estimated to require 222 personnel supporting the operation of the project.  The project is expected to be operational by 2026.

Next Steps

• CleanTech Lithium will now start its pre-feasibility study for the project, commencing immediately and targeting completion by the second half of this year.
• In addition, the company also plans to construct a pilot plant with the capacity to produce 1 tonne per month of battery-grade lithium carbonate and lithium hydroxide.
• The DLE unit for the pilot plant was ordered from SunResin’s Belgium facilities in December 2022 and its assembly and commissioning are scheduled for the end of the second quarter of 2023. The downstream processing stages for the pilot plant to produce lithium battery products are in the final stages of specification.

Conclusion

For Chile to remain a leader, it is needs to find ways to increase production which will require significant investment. For investors to see past the complex laws around lithium in Chile, the country needs a company such as CleanTech Lithium to bring a project from exploration into production. This will provide the confidence needed to hopefully kick start new exploration.

It is important to clarify that even with this recent announcement, there is still a long way to go before we can officially say that there is a new market player in the Chilean lithium industry. The most important steps that still need to happen is environmental approvals and signing a Special Operation Contract for Lithium (CEOL) with the government. These two steps could either accelerate the project or kill it in its tracks. Something we will need to keep an eye on as we move forward in 2023.

Ax Legal is an advisory firm that works with foreign companies in Latin America. Our team of legal and commercial advisors have a distinguished track record of helping foreign technology and services companies to grow and operate in Latin America. Over the years, we have worked with starts up, mid-size businesses, and publicly listed companies. The one common factor that connects our clients is that they are leaders in their field, providing innovative technologies and services to the industrial sectors.

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