The role of PPPs in the future of Chile's lithium industry

Chile's lithium potential requires clear direction from the government to ensure its development, said Loreto Leyton, executive director of Fundación Chilena del Pacífico, in a webinar on the future of the sector.

Global demand for lithium is predicted to grow six times by the year 2030, due to decarbonization goals and electromobility. 

The Gabriel Boric government plans to create a national lithium company, to implement a state policy for the governance of salt flats and set up a lithium research center, forming public-private partnerships.

The main purpose of the company will be the adoption of new technologies for the extraction of lithium, creating added value and encouraging R&D, said Leonardo Valenzuela, deputy director of mining contracts in the strategic affairs department of development agency Corfo.

With 9.2Mt, the Salar de Atacama salt flat in northern Chile has 37% of global lithium reserves, according to Leyton. Corfo leases areas of the salt flat to SQM and Albemarle – the only lithium producers in Chile.

When asked by BNamericas, Javier Silva, SQM's sustainability manager, said both his company and Albemarle demonstrate that the public-private approach works and there is a good opportunity to replicate the model in other salt flats in the country.

Chile has more than 50 salt flats and geological studies indicate the presence of brines with concentrations of lithium of up to 2,000ppm, said Juan Carlos Barrera, VP of Energy X's lithium unit for South America.

Both North Carolina-based Albemarle and Chile’s SQM are carrying out pilot tests in the Atacama salt flat with new technologies for the direct extraction of lithium that involves less use of continental water and chemicals, and increases productivity, the webinar was told.

SQM has a goal of reducing brine extraction by 50% by 2030. The latest expansion at its lithium carbonate production plant in 2021 increased capacity to 120,000t and this year the expectation is to reach 180,000t, Silva added.

Albemarle opened its La Negra III chemical plant to double production to more than 85,000t/y of battery-grade lithium carbonate and reduce water consumption by 30%. By 2026, the company expects to use 100% desalinated water in its operations, said Ignacio Mehech, VP of external affairs at Albemarle Chile.

But lithium demand will continue to grow and global supply will be very tight between now and 2026. "Lithium [supply] may be a limiting factor in electric car penetration rates," Barrera said.

In 2021, lithium prices rose more than 400% and there are no signs that they will go down, says a report from World Energy Trade.

Silva said that since 1994 SQM has contributed US$2.2bn to Corfo, and in the first half of 2022 the company has already contributed US$1.42bn in leasing payments.

The contractual obligations of SQM and Albemarle with Corfo consider payments ranging from 6.8% to 40% of operating profit depending on the price of lithium.

Regarding the public-private proposal of the Boric government for the exploitation of lithium, Mehech said the mining industry was born in the country under this model so there should be no reason to worry about following that path. But he insisted on the need for a clear policy.

BNamericas also asked about the possible impacts of the government’s proposed mining royalty reform, in case it is decided to include a new tax on lithium in a bill that is currently in the senate.

The SQM official said it was not clear if it would be an additional tax to what they already pay for leases, payments for which are high. And "we will have to see if it will be an incentive for the appearance of new companies in the sector," added Silva.

In the technological aspect, the new alternatives for lithium extraction that Albemarle and SQM plan to incorporate mean they will allow no longer need to produce lithium carbonate to generate lithium hydroxide, making production more efficient and allowing a purer product, said Barrera.

"With this technological revolution, Chile has a tremendous opportunity on the global path to electromobility and decarbonization" but only a good state policy will allow Chile to regain the number one position in lithium production, he said.

Chile is the world’s second largest producer of lithium after Australia, which accounts for 46% of global output. The South American country produced 162,477t of lithium compounds in 2021. 

Fundación Chilena del Pacífico is a foundation that promotes Chile’s insertion in the Pacific Basin.