Chile’s Lithium Industry May Need a Tech Upgrade

Alex Grant, Principal, Jade Cove Partners, San Francisco, USA

Alonso Barros, Ph.D. (Cantab.), Principal Attorney, Pachapuri Spa, Santiago, Chile

September 2020

This opinion piece was published simultaneously in English in the Financial Times (London, UK), and in Spanish in El Mercurio Inversiones (Santiago, Chile) on 9 September, 2020. The PDF of this op-ed is available here.

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Every five weeks, the equivalent of an entire London bus fleet takes to the road in China. (1) Ten thousand brand new electric vehicles built on batteries made using lithium and other chemicals, every month. At this incredible inflection in the global energy transition, it is no wonder that the socio-environmental impacts of lithium extraction in places like the Salar de Atacama in Chile have gained global attention. There, Sociedad Química y Minera (SQM) and Albemarle produce a third of global lithium supply from hypersaline “brine” waters under the salar’s salty crust. For the last three decades, they have extracted the lithium by pumping brine into large evaporation ponds where water is evaporated and impurities are removed before lithium chemicals used in batteries are made.

SQM and Albemarle have quite different histories of operation on the Salar de Atacama. Albemarle decided to significantly expand its operations in 2009, and underwent a stringent public environmental impact assessment before the project was approved 7 years later. Simultaneously, Albemarle procured its social license to operate by means of a professionally mediated process with the indigenous Lickanantay people of the salar. The same year as their environmental permit was extended, the Lickanantay reached a landmark agreement with the company. The contract governs a 3.5% royalty on sales of lithium products, and ensures that the original owners of the resource feel compensated for the wealth creation from under their feet.

SQM’s story has played out differently. In 2017, the salar’s communities lodged accusations of environmental wrongdoings against the company with the Superintendencia del Medio Ambiente (SMA, Chile’s environmental protection agency). SQM was accused of having extracted more brine than it was entitled to, allegedly causing environmental damage. Regardless, the SMA approved SQM’s updated environmental compliance program in 2019. Later that year, the salar’s communities appealed against the SMA’s decision to the Environmental Court of Antofagasta, which rejected the company’s compliance program citing “scientific uncertainties”.

The SMA and SQM took the case to the Supreme Court in appeal, but desisted on 12 August, one day before the hearings were supposed to take place. (2) This seemed like an effective win for the Lickanantay, but recent judicial developments suggest that SQM has taken the upper hand after reaching an agreement with the regulator in order to customize its compliance program and shirk sanctions. Not only has the SMA returned to the drawing board with SQM, but it is preparing a new, full-scale salar management plan with Albemarle and two copper miners. Now SQM finds itself negotiating both social and environmental licenses simultaneously.

The main concern captured in the litigation is that if brine is pumped from the salar too quickly and brine levels are allowed to drop, the brackish lagoons that stretch atop the brine on the salar’s Eastern edge could be destroyed. This could have disastrous consequences for these biodiverse marshes protected under the 1971 Ramsar Convention on Wetlands of International Importance. The lagoons of the Salar de Atacama are home to everything from oxygen-spewing stromatolites that transformed the planet’s atmosphere 3.5 billion years ago, to brine shrimp and plankton that sustain three different flamingo species.

Regardless of what the SMA does, the question mark under the salar remains: if brine levels drop below acceptable limits, SQM and Albemarle will need to slow or stop pumping brine. As long as this remains a threat that could materialize due to just a couple missed rain events, SQM and Albemarle will be hostage to the hydrogeology of the Salar de Atacama. This risk is much more near-term than most understand. In recent years, at least one of the companies detected significant enough brine level drops that pumping rate reductions were required. (3)

The environmental risk of brine levels dropping is a major business risk for both companies. Salar de Atacama brine extraction operators have two options to mitigate this risk. The first is to reduce brine pumping rates and upgrade above-ground processing technologies to increase recovery and produce the same quantity of lithium as they do now. This could involve the use of reagents to remove impurities in evaporation ponds, increasing lithium recoveries from 15-40% to 50-60%, but is not a guarantee that brine levels stay above acceptable limits. The second option is to extract lithium from the brine and to re-inject the barren brine back into the salar, an approach called direct lithium extraction, or DLE. Either option involves the extraction of less potash by SQM, but this may be a necessary trade-off in order to continue operating.

Making modifications to extraction technology may be the only way to manage the risk of operational disruption caused by brine levels dropping, and DLE may be the best way for both companies to expand without incurring severe environmental impacts. Importantly, DLE is a mature procedure. Livent, a U.S. company operating a brine project about 200km away in Argentina, has been using a DLE process in their operation for over two decades. If this type of technology works in Argentine salars, a similar version should also work at the Salar de Atacama. (4)

Considering the stakes at play, and because the salar’s communities will have it no other way, lithium chemicals must be produced with the highest social and environmental standards. While there has been progress in social terms with empowered communities reaping benefits directly, the hydrological risks persist at the Salar de Atacama. New technology is not a silver bullet, but it could play a major role in mitigating these risks. The global energy transition to renewables needs lithium without any question marks hanging over the impacts of its extraction. Only a robust DLE and brine re-injection model will be able to provide that at the Salar de Atacama.

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Alex Grant is Principal at Jade Cove Partners, a lithium extraction technology advisory based in San Francisco. Mr. Grant is a co-founder and former VP Technology of Lilac Solutions, a lithium extraction technology company which raised $20M from Bill Gates’ Breakthrough Energy Ventures. Mr. Grant has an M.S. degree in Chemical Engineering from Northwestern University.

Alonso Barros Ph.D. (Cantab.) is Principal Attorney at Pachapuri Spa, a Santiago-based legal firm representing indigenous communities in the north of Chile. Dr. Barros is Co-Investigator on a lithium research project with the UK’s Royal Academy of Art. His work was instrumental in getting lithium operator Albemarle to establish Chile’s first mining royalty scheme for indigenous communities.

Acknowledgements

Thank you to Henry Sanderson of the Financial Times and Marcos Barrientos Dörner of El Mercurio Inversiones for publishing this piece in their newspapers.

References

(1) World Economic Forum, 2018. China is adding a London-sized electric bus fleet every five weeks. URL.

(2) Dave Sherwood, 2020. Exclusive: Chilean regulator preps sweeping Atacama review as it abandons SQM legal battle. URL.

(3) SMA Snifa Portal, 2018.

(4) Ernest Scheyder, 2018. Albemarle's claim to unique lithium technology draws scrutiny. URL.