Technology to Improve Lithium Extraction – The SQM Example

Demand for Lithium is expected to increase exponentially over the next few years. Confidence in the price of lithium has been growing lately which is a change from 2018 when the prices retracted considerably. Fast forward to today, demand is growing, and pricing are increasing again.

Lithium from hard rock mining and brines both have their advantages and disadvantages. Lithium produced from brines tend to be more favorable from a cost perspective and of higher purity than traditional hard rock mining methods. The most relevant brines are typically found in Chile, Argentina, and Bolivia. Also known as the lithium triangle.

Chile has been a major producer of lithium and its derivatives for some time. It was overtaken by Australia as the world’s top lithium supplier in 2017. Argentina is advancing a large project pipeline is expected to overtake Chile is in the next few years.

Although Chile has been slow to grow its production, the two companies with operations are finally increasing their production – US-based Albemarle and Chilean SQM. This has not been an easy road for either company.

Criticism and Environmental Impact

Water Concerns – There have been studies showing a deficit in water due to overdrawing of aquifers. That is, there is more leaving the salt flats then what is receiving.  This has created pressures on companies to reduce water usage. Lithium brines are top of the list for water usage in the Atacama Desert. It has not helped that local Chilean producers have received environmental penalties for pumping more water than their permits allow.

Disputes with the State – Both SQM and Albemarle have contracts with the state agency, CORFO, that allow them to produce lithium in Chile. Both companies wanted to increase production but had disputes with the government over changes to their contracts which would require increasing royalties, providing a certain percentage of their lithium production to be sold at discounted prices, and water usage. Both disputes have been settled but it delayed projects that would have allowed both companies to substantially increase production.

Moving Forward – Increasing Production

With contract disputes now in the rear-view mirror, SQM and Albemarle have been able to advance with their projects to increase production.

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 help the company reach its goal of producing approximately 80,000MT of lithium carbonate per year.

As part of the investment, a new thermal evaporator was installed, which reduces the amount of freshwater used per metric ton during the process at La Negra. The technology is expected to reduce water consumption by up to 30% per metric ton.

SQM has started increasing 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.

Brines are important source of lithium. Even with projects completed and new production coming online, both companies have water usage at the front of their minds. The industry has had a lot of negative media publicity and future increases to production our dependent on reducing their water usage.

How is water being reduced in Chilean Operations – SQM Example

SQM has committed to reduce consumption of continental water, reaching a reduction of 40% by 2030 and 65% by 2040. In Salar de Atacama, SQM’s brine extraction will be reduced by 20% immediately and by 50% by 2030.

SQM recently announced its Salar Futuro Plan which will require $1.5 billion to cut its extraction of brine in half by 2030. The plan will modernize its process of evaporation and brine extraction through technology advancements and adopt the use of seawater via a desalination plant.

Advanced Evaporation Technologies (TEA) – To reduce the time needed to evaporate the water, SQM will rely on technology that will help speed up this process. No details as to which technology will be used at this point but the goal is to reduce the overall water usage required in the evaporation ponds. Our bet is that SQM is referring to crystallization plants.

Direct Extraction of Lithium (DLE) – Direct Lithium Extraction can include a variety of technologies to directly exact the lithium. Processes such as using adsorption that enable lithium bonding, ion exchange, and solvent extraction. The company is already piloting several different technologies. The risk at this stage is that no DLE technologies have been proven at scale. This means SQM will need to take this technology from a pilot to full production.

Desalinated Seawater – Similar to other mining projects in the Northern Chile, SQM plans to use desalination to provide its facilities and production processes with fresh water. The company says its planned desalination plant will provide water with high-saline concentration for its nitrate and iodine plants as well as water to replace freshwater lost through evaporation during the production process.

Online Monitoring – SQM has designed and implemented an online system that allows them to deliver information on their water extraction, net brine extraction, and that works as a means of verification for authorities and interested parties, regarding compliance with extraction obligations, based on established operational rules. SQM is taking steps to provide visibility of its operations.

Renewable Energy – Beyond water, the company is focused on its overall environmental impact with the goal of becoming carbon beautiful by 2030. New technologies incorporated into the company’s production processes will require high levels of electricity.  SQM will build a solar facility with thermal storage using SQM solar salts to store heat that can be used during the nights.

Conclusion

There has been a lot of media attention about the impact that lithium produced from Chile has on the local ecosystem. SQM and Albemarle have had their fair share of problems that have not helped this perception.

Even with these issues, both companies have figured out a path forward that gives a balance between the environment and a full functioning lithium industry that creates jobs and supplies the world with a mineral that it needs to decarbonize.

SQM has increased its production capacity of Lithium Carbonate and Lithium Hydroxide from 48,000 tons per year to 180,000 tons in the last 3 years. Despite its reduced brine use, SQM projects an annual production of lithium carbonate equivalent of between 220,000 and 250,000 tons.  It has been able to achieve growth while embarking on an aggressive strategy to reduce its water usage and footprint. A very impressive change from only a few years ago.

Operating brines in Chile that are looking to expand production is pushing companies to test new technologies which will ultimately benefit the industry.  There are clear economic and environmental motivations to help new technologies reach commercial production scale in Chile since the growth of the industry depends on it. As these new technologies mature, they will be highly useful in other projects both locally and internationally.

The world is going to need to lithium and South American brines are the most accessible. Companies will need to navigate the environmental impacts of water usage and technology will be the key to doing so. Chile is the testing ground and there are many eyes watching to see if it can accomplished.

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.

To better understand how we can support you in the Region, please contact Cody Mcfarlane at cmm@ax.legal