A water fight in Chile's Atacama raises
questions over lithium mining
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[October 18, 2018]
By Dave Sherwood
SAN PEDRO DE ATACAMA (Reuters) - Earlier
this year, the world's two biggest lithium producers publicly celebrated
new deals with Chile's government that will allow them to vastly
increase output of the ultralight battery metal from the Atacama, the
world's driest desert.
U.S.-based Albemarle Corp and Chile's SQM operate just 3 miles (5 km)
apart in the remote Salar, a basin in the Atacama that is home to one of
the world's richest deposits of high-grade lithium. Lithium-ion
batteries are key components for most consumer electronics, from
cellphones and laptops to electric cars.
In celebrating the new contracts, the two companies said they were
confident they could significantly boost output without drawing more
than their current quotas of lithium-rich brine, or saltwater, that has
for millennia accumulated in pools beneath the Atacama. The rivals said
each had all the brine they needed for current and future production.
"I don't see any issue with our ability to get (the brine) ... today,
tomorrow and throughout the term of that agreement,” which ends in 2043,
Albemarle CEO Luke Kissam told investors in August.
But a Reuters review of filings with Chile's environmental regulator
shows Albemarle striking a different tone, expressing concern about how
much brine rival SQM had been drawing and the impact that could have on
future production from the area.
The true state of the Salar's water supply, both fresh and saltwater,
has become an obsession of lithium industry watchers because of the
area's huge importance in satisfying soaring global demand for the
powdery white metal. The area is the most cost-efficient place in the
world to mine the metal, and both SQM and Albemarle have staked much of
their future production on the Salar.
In the filings, which have not been previously reported, Albemarle
voices concern about a 2016 investigation by Chilean authorities that
found over a period of several years SQM sucked up more of the
lithium-rich brine from beneath the Salar than its permits allowed. (To
see document: http://bit.ly/2NLh61j)
In a March 2017 filing, for example, Albemarle said it was critical for
the authorities to determine how much SQM had overdrawn because that
could affect the availability of brine for other projects. (To see
That filing came a month after Eduardo Bitran, who was then head of
Chile's state development agency, Corfo, raised similar concerns about
the amount of brine SQM had been drawing and other infractions. In a
letter to the environmental regulator, Bitran wrote that SQM's actions
pose a "severe risk" to the ecosystem of the Salar and its brine
reserves. (To see document: http://bit.ly/2EtUrYi)
Chile's environmental regulator has said SQM made changes to how it
monitors wells without authorization, making it difficult to track the
impact of SQM's pumping on brine supplies. (To see document:
SQM has not confirmed overdrawing brine. But over nearly two years it
has filed four plans with regulators to bring its operations back into
line with environmental approvals, which, among other things, specify
how much brine SQM can pump. The first three plans were returned to SQM
by regulators for further revisions; the latest, filed in September, has
yet to receive a response.
Meanwhile, SQM has accused Albemarle of overdrawing brine at its mine
and questioned in a filing whether its rival's actions could have
repercussions on the availability of brine reserves in the Salar.
Albemarle declined comment when asked by Reuters whether that was
correct. (To see document: https://bit.ly/2EtVYxw)
Hydro-geologists and environmental chemists consulted by Reuters on the
filings said the back-and-forth between the miners underscores
widespread concerns over just how much brine is left and how long it
will last. They said the filings show that neither the Chilean
authorities nor the companies have a clear picture of the water
situation at a time when the miners have been given the green light to
Lithium analyst Joe Lowry said the filings had potential implications
for the global production of lithium, which has become one of the
world's hottest commodities.
"The lithium world is on pins and needles," he said. When it comes to
the Salar, "What is SQM going to be able to do, what is Albemarle going
to be able to do production-wise?"
In a recent interview with Reuters, Kissam, Albemarle's CEO, insisted
there was “no question” that there was enough water in the Salar to
maintain lithium operations. The company can produce 80,000 metric tons
of lithium annually in the Salar - roughly 36 percent of global demand
in 2017 - helped by technology it has developed that will allow it to
extract more lithium from the same amount of brine, he said.
[to top of second column]
Brine pools from a lithium mine, that belongs U.S.-based Albemarle
Corp, is seen on the Atacama salt flat in the Atacama desert, Chile,
August 16, 2018. REUTERS/Ivan Alvarado
He declined to comment on the concerns expressed by his company in
the regulatory filings about the area's water supplies. In one such
filing, Albemarle said its rival's compliance plan failed to
sufficiently address regulators' concerns and "raises doubts ...
about the sustainability in time of both companies' operations."
Kissam also said his company was currently using only the amount of
water allowed by regulators. “We´re not overdrawing. We´re pumping
at the rates well within our permits,” he said.
For its part, SQM, controlled by Julio Ponce Lerou, a reclusive
Chilean billionaire, says it already has all the brine it needs to
produce more lithium.
SQM declined to comment on its water fight with Albemarle. It said
in a statement to Reuters that its submissions to the regulator
spoke for themselves. But, it added, “Our conclusions indicate that
neither the environmental sustainability nor productivity of the
Salar de Atacama are compromised.”
For Mariana Cervetto, a hydro-geologist who has reviewed technical
aspects of the case for both Corfo, the state development agency,
and the local indigenous communities that surround the Atacama salt
flat, questions still outweigh answers.
“When people ask me, ‘Is the water going to run out?’ I tell them,
‘The truth is, we don’t know,” Cervetto said.
WELL OF DISCONTENT
The spat between Albemarle and SQM can be traced back to 2013, when
government inspectors arrived at SQM's installations and found
Native Algarrobo trees - hardy desert hardwoods that survive by
sending shoots deep into underground aquifers - were shedding their
leaves and dying.
The 23 dead trees represented one-third of those SQM had committed
to monitor. Like canaries in a coal mine, the health of the trees
was meant to act as an early warning signal of water problems. Two
years later, more trees were dying but SQM failed to notify
authorities, according to government inspection reports reviewed by
Reuters. (To see document: https://bit.ly/2Ov0a4p)
"If SQM is extracting more brine than it is permitted from the Salar,
that can have repercussions on the availability of reserves in the
basin for other projects,” wrote lawyers for Albemarle subsidiary
Rockwood Lithium Ltd in the March 2017 filing.
SQM hit back the following month. It wrote to the regulator saying
it was "outrageous" that Albemarle was presenting itself as a
defender of the environment when Albemarle had acknowledged
overdrawing water in 2008 and between 2010-2012. Albemarle declined
comment when asked by Reuters whether that was correct.
Corfo submitted a new study on the availability of water in the
Salar to the environmental regulator in March that found more water
and brine was leaving the system through pumping and evaporation
than was coming back in via rain and snowfall. (To see document:
In the filing, Corfo said, however, the study couldn't pinpoint
which of the copper or lithium miners operating in the Salar was to
blame for the imbalance. It said this uncertainty was reason enough
for regulators to take steps to restrict extraction. (To see
That process is now underway. Reuters reported exclusively in August
that Chile's water regulator was preparing restrictions on new water
rights in the Salar in part because of uncertainty over how much
extraction it can support.
(Additional reporting by Ernest Scheyder in Houston; editing by
Amran Abocar, Ross Colvin and Paul Thomasch)
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