Author: Diego García Bozzo
Chile has more lithium reserves than any other country, and is the second-largest producer of lithium after Australia. The country is ramping up its production to help meet the world’s rocketing demand for this critical mineral, and it recently revised its rules for how lithium from the country’s many salt flats, also known as salars, will get to market.
On April 20, Chilean President Gabriel Boric announced a new National Lithium Policy, aimed at establishing the Empresa Nacional del Litio (National Lithium Company), or ENL. If approved by the Chilean Congress later this year, ENL will participate across the entire lithium production cycle, from resource identification and extraction to processing and industrial use, such as battery cells and recycling. ENL will encourage technology innovation across all stages of the lithium supply chain. With the lithium race heating up, this policy would institute some important guardrails.
A measure of preservation
First, because mining activity could have significant impacts on surrounding ecosystems, a Protected Salars Network would be established to ensure no mining activity would take place in those selected salars. In the usable salars, technologies that minimize environmental impacts during the lithium recovery process will be mandatory. Direct Lithium Extraction (DLE) processes with brine reinjection, for example, could become a favored technology for lithium extraction.
Second, indigenous groups will have greater input in mining decisions. Nearby communities will be consulted and their proposals considered in order to diminish the impact of mining operations on their land.
Along with the ENL, Chile’s new policy also creates a public research and development institute for lithium and salars to improve extraction processes, production, value addition, applications and recycling. Understanding how to better protect salar ecosystems is also a goal.
Impacts to current and future lithium operations
Given the strategic importance of the Atacama salar, it will receive special treatment. The Chilean state will seek to participate in the current operation of this asset through agreements with the two companies that are currently active in this region, SQM and Albemarle. While the Chilean Congress considers the creation of ENL, Corfo, the state company that manages lithium reserves, will order Codelco — a state mining company and the world’s largest copper producer — to negotiate how the state will participate in SQM’s and Albemarle’s activities before their contracts expire in 2030 and 2043, respectively. Regardless of the result of these negotiations, the state will honor the existing contracts with SQM and Albemarle.
While the creation of ENL is under review, the state’s existing mining companies, Codelco and Enami (a national mining company, which focuses on small- to mid-sized mines), will represent the Chilean government in the lithium industry. They will be tasked, along with ENL, to collaborate in public-private partnerships to develop new lithium assets from exploration and extraction to add value to this critical mineral.
Codelco will be initially focused on negotiating the state stake in both active operations from the Atacama salar, and would control any new public-private partnership operating there. Enami, in turn, will be in charge of partnering on new exploration and exploitation contracts. Private companies will bid on projects and choose which state-run company to partner with.
In “strategic value projects,” the majority stake in the public-private partnership would be the state. No further details have been provided yet to specify what assets would be considered strategic value projects.
Mangrove Lithium’s Take: Closing the Gap Between Supply and Demand
Far from being a radical departure from how Chile or other countries manage natural resource extraction, public-private partnerships can be found throughout the world, from toll roads to state parks. It’s also typical for government agencies to determine which resources can be extracted and regulate the private companies that do it.
The National Lithium Policy would make Chile’s lithium resources more accessible to the private sector. Until now, the state has closely guarded its lithium reserves; the 1982 Organic Constitutional Law on Mining Concessions identified lithium as a strategic resource for its possible applications in nuclear weapon manufacturing. Only SQM and ALB have been licensed to access it. The new policy unlocks Chile’s lithium reserves and aims to retain part of the mineral’s value in the country through the development of products with higher added value — a model that could have been applied to the country’s other natural resources in the past.
Last month’s headlines about “nationalization” were misleading. While it’s true that the state seeks some of the revenue, it’s the private sector that will access the resource and add value to it. Under the new policy, the state would take a major stake in strategic value projects, though how the state defines them is currently unknown. One possible candidate for that designation would be the Maricunga salar – the only lithium asset with relatively advanced projects, aside from the Atacama salar. In the Maricunga salar there are three projects in different stages of development, carried out by Codelco, SIMCO and Minera Salar Blanco, independently. The two private companies, SIMCO and Minera Salar Blanco, would be the logical choices to partner with state-run Codelco if the Maricunga lithium deposit gets the strategic-value designation, but nothing has been announced yet.
The state may not have major stakes in the operations of lithium assets that do not get the strategic-value designation. Though time will tell what is considered such a project, one thing is certain: the state lacks the infrastructure and expertise to develop and operate lithium assets on its own. It needs the private sector. As the details of the new policy get fleshed out, the state knows that there must be real incentives for the private sector to bring its assets to the table.
As the best brine asset in the world, the Atacama salar warrants its own set of rules. The combination of its size, high concentration of lithium and relatively low magnesium/lithium ratio, added to the current use of solar power for evaporation processes, means low operations costs. Atacama is located in one of the sunniest, driest places on the planet, meaning that extraction activities could potentially be solar powered. Having in mind the existing attractiveness of exploiting this excellent lithium asset due to deposit quality, there may be incentives for both companies, SQM and Albemarle, to let the state in on the action now. Such an incentive, for SQM, could be to secure its operations past its current 2030 contract, whereas Albemarle could potentially strike a deal that increases its current extraction quota. Regardless of how negotiations go with these companies or any new company that wants access to Chile’s lithium resources, all parties should benefit.
Additionally, the state would not mandate the use of any specific technologies, since it will be outcome-focused. Mining Minister Marcela Hernando said in a recent interview that the state will regulate based on whether a project would achieve the desired outcome, bearing in mind the impact on biodiversity. Hence, companies need not adhere to a directive to use a technology that could potentially be a bottleneck, like DLE, which hasn’t yet been deployed on a commercial scale.
Overall, the new policy offers a framework and access that have not existed until now. As a key factor in the transition away from dirty fuels, lithium extraction must rapidly expand to meet the demand. The National Lithium Policy could unleash a critical resource the world needs now to realize tomorrow’s clean energy future.
Mangrove Lithium’s on-site refining technology can help Chile to maximize value from its lithium resources.
Mangrove’s lithium refining technology is a natural fit for developing Chile’s lithium assets.
- Our modular, scalable platform exceeds Chile’s sustainability standards. No reagents are needed, byproduct acids can be recycled, and our entire process can be solar powered because it relies on an electrochemical process.
- Mangrove adds value to extracted lithium by converting lithium concentrate into complex lithium chemicals such as lithium hydroxide, achieving battery-grade specification. This would allow Chilean producers to sell directly to different battery markets.
- The additional value generated for processing lithium would be captured by Chile instead of other regions, such as Asian markets, where refining is costly and energy-intensive.
- Mangrove’s technology can boost project viability for all of Chile’s potential brine deposits because it reduces OPEX and avoids CAPEX, unlike conventional processes. Lithium chemicals production could ramp up quickly to meet global demand.
- Mangrove can partner with DLE companies to develop Chilean brine assets to achieve sustainable operations.
- Chile could also retain value by refining lithium on site at battery recycling facilities, closing the loop on a circular lithium economy.