Chile’s new lithium strategy will push firms toward new technology

Lithium chemical producers are grappling with Chile’s recently announced National Lithium Strategy, which proposes creating a state-owned enterprise to negotiate with private firms for a stake in the country’s lithium resources. The government wants miners to use direct lithium extraction (DLE), a nascent technology that could be difficult to implement.

Chile, the second-largest lithium producing nation in the world after Australia, says it will respect existing mining contracts held by its two main lithium chemical producers, SQM and Albemarle, until they expire in 2030 and 2043, respectively. But government officials are already meeting with lithium companies to discuss details of the proposed strategy, which includes elements that would need approval from Chile’s Congress.

SQM and Albemarle currently use large evaporation ponds to concentrate lithium-rich brines before converting the brine into raw materials for batteries. DLE technologies avoid the ponds by removing lithium from brine using membranes or chemicals and then inject the spent brine back into the ground.

Some community and environmental groups worry that evaporation ponds lower the level of brine aquifers and damages nearby lagoons. Mining companies dispute those claims. Proponents of DLE say reinjecting brine could help maintain aquifer levels. However, DLE hasn’t been deployed at large-scale in Chile, and it’s not clear how reinjecting brine would affect local ecosystems.

Both SQM and Albemarlehave been exploring the use of DLE in Chile, in part because it can extract more lithium than conventional methods. Albemarle CEO Kent Masters told investors on a May 4 conference call that the company was already trying to advance DLE as quickly as possible and that Chile’s focus on the technology hasn’t changed that. He expects Albemarle will have to use DLE to continue operating in Chile after the company’s contract expires in 2043.

“Expansion and getting additional concessions will probably require us to use new technology and probably partner with the government,” Masters said. “We see that as an opportunity beyond our current concessions.”

In SQM’s most recent annual report, published a few days after Chile unveiled its lithium strategy, the company described the proposed policies as a risk to its business, noting that it creates uncertainty in the industry.

Like Albemarle, SQM has announced a plan to introduce DLE in Chile. In a press release published after an April meeting with Chilean officials, the company noted that its DLE technology aligns with the principles of the lithium strategy and that it expects to reach agreement with the government.

Some industry analysts are concerned that compelling mining companies to partner with the government could make lithium production more expensive in Chile and stifle investment, says Patricia I. Vásquez, a global fellow working on lithium at the Wilson Center, a think tank. But she’s optimistic that the government and private firms will find ways to work together.

“If the government wants everything . . . then no one is going to invest. But it can be done in a way that everybody wins,” Vásquez says. “There are different kinds of partnerships.”

Cameron Perks, principal lithium analyst for the market research firm Benchmark Mineral Intelligence, says requiring lithium companies to use DLE would be an even bigger hurdle than striking a deal with the government because the technology isn’t mature.

Perks adds that DLE may not achieve the environmental benefits the government is hoping for. DLE often uses more freshwater than conventional methods, a concern in the dry regions where lithium is extracted in Chile.

“DLE is something that has been looked at by the incumbents for decades,” Perks says. “It’s not going to be easy.”