This is what lithium mining
looks like in Chile. Here in the Salar de
Atacama, in a region of the world known as the Lithium
Triangle, nearly one third of the world's lithium is
produced from brines. So from this plant here, how
many electric vehicles are you powering? Today about 50,000. And we should be able to
get up to 75,000 EVs every single year. With demand for electric
vehicles and the lithium-ion batteries that power them
at an all-time high, Chile's vast salt flats have become
a vital national resource. They contain the largest
and some of the highest quality lithium reserves in
the world. This, the Salar de Atacama,
represents the best lithium brines in the world because
it has about 2,000 parts per million of lithium
concentrated in it. This is also the most
cost-effective place to produce lithium in the
world. In the brine mining process,
extremely salty water from an underground reservoir is
pumped to the surface and evaporated in large,
extravagantly colored ponds, leaving high concentrations
of lithium behind. The demand for it is
skyrocketing. The price of it is skyrocketing. And the
capacity that Chile has to exploit this resource is
almost limitless. But Chile is actually losing
market share to Australia, where lithium is mined from
hard rock, and Argentina, where the country is
welcoming international investment. Many say that
Chile must act fast to ramp production before other
countries beat them to it or new battery tech is
developed. It's not clear how big a
window of opportunity Chile has to take advantage of
this white gold. Now Chile's president,
Gabriel Boric, has announced a long-awaited state-led
plan for the development of the country's lithium
industry, in which private companies will be required
to partner with the government to further
develop the country's vast resources. Lithium stocks
slumped on the news as many fear that the plan will
deter private investment. When you are asked to make
the investment, to take all the risks but without
control of the profits and without control of the
company, that's not the way people used to do business. But Boric has a lot of
considerations to balance, as the effect of brine
mining on ecosystems and water supply is a constant
concern and open question, as there's just not enough
research to fully understand its impacts. Chile's
indigenous communities, though, have traditionally
opposed mining. I know that lithium is
necessary for the world, but at the cost of drying up
our land, our place. The salt flat is like a
great tree of life for us. It is like a heart where
all the surface and underground waters flow
into our little overheated sea and it is being
affected. There are only two lithium
companies operating in the country today, North
Carolina-based Albemarle, the largest lithium
producer in the world, and SQM, the second largest
producer. CNBC visited Albemarle's
lithium plant in the Salar de Atacama, where we spoke
with the company and community members alike
about this pivotal moment in Chile's history. Mining has helped drive the
Chilean economy for centuries. The country is
by far the largest copper producer in the world,
producing 29% of the global total. But as of late,
Chile's lithium industry has taken center stage. In 2022, the exports of
lithium were around $7.7 billion, which is more than
eight times the exports that we had during 2021. That's not because Chile is
exporting that much more lithium, but because the
price of the metal rose so high last year. Here in the
salt flats of northern Chile, near the border with
Argentina and Bolivia, lithium has been mined
since the 1980s, before lithium-ion batteries were
even commercialized. So in the '80s, lithium was
used primarily, it's used in greases to make the grease
more viscous. It's used in ceramics. It's used in glass. It's
used as a medicine as well for bipolar and for
depression. Today, where the demand is
really coming from is from electric vehicles. Your
smartphone uses several grams of lithium and an
electric vehicle battery uses about 60 to 80 kilos
of lithium. Extracting lithium from
brines is a fairly straightforward but lengthy
process. First, mineral rich brine
is pumped to the surface. Once it's at the perfect
point, chemically speaking, then we'll pump this brine
from here over to pond 15, which is the first pond of
our 15 ponds. As the brine moves through
all the ponds, a variety of other salts precipitate
out, leaving behind increasingly large
concentrations of lithium. Here at Albemarle's Salar
Plant, it takes about 18 months for the brine to
reach 6% lithium concentration, after which
the liquid is transported over 150 miles via truck to
Albemarle's processing facility in Antofagasta,
which we also got the chance to visit. Typically, we send between
about 24 and 30 trucks every single day. Here, lithium is further
purified into battery-grade lithium carbonate, which
looks and feels just like powdered sugar. Chile was
the largest producer of lithium until 2017, when it
ceded the top spot to Australia, where the
country has acted quickly to ramp up production. In
2022, Australia produced about 47% of global lithium
supply, while Chile produced about 30%. Now some people are even
talking about Argentina taking away the second
position that Chile has now as the world's second
largest producer of lithium, because Argentina has all
these projects in the pipeline. While Argentina has thrown
open its doors to foreign investment, Chile has not. Though the country is
typically viewed as one of the most neoliberal,
free-market economies in the region, lithium in Chile is
heavily regulated. That's because former
dictator Augusto Pinochet categorized it as a
strategic resource in 1979 due to its use in nuclear
weapons, allowing the government to restrict its
extraction. Albemarle and SQM partner
with CORFO, the Chilean economic development
agency, to develop lithium resources, while the
Chilean Nuclear Energy Commission oversees quotas
and exports. Up until now, companies
could theoretically apply for a special license to
mine on their own, but this has never been granted and
no new lithium mines have been opened in decades. Albemarle and SQM are the
only games in town. Those companies pay high
taxes and royalties. They have to sell a certain
amount of what they produce domestically at below
market rates to subsidize other industries that may
develop that use this resource. So it's a very
heavy hand of the state and a great reluctance to allow
other players to enter the sector. We're paying the highest
commission in the world to extract lithium here in the
Salar de Atacama. So 2022, we will have paid
the Chilean government over $600 million in commission. Though many in the business
community aren't exactly thrilled by President
Boric's new plan for a state-controlled lithium
industry, the new framework will likely provide private
players with more opportunity to enter the
market and explore resources beyond the Atacama and has
existed in decades past. It's helpful that it looks
like Chile will be welcoming new investment in its
lithium sector and that it is now formally in favor of
new projects. And we haven't seen new
projects in a very long time, despite the massive
reserves of lithium that Chile has. In that sense,
it's a positive development. The new, long-delayed
national lithium policy represents a compromise of
sorts between the two wings of President Boric's
governing coalition, which is divided among leftists
who hoped to see full nationalization of the
industry, and a more free-market wing that
wanted to see private industry take the lead. Our challenge is for our
country to become the main lithium producer in the
world, thus increasing its wealth and development,
distributing it fairly at the same time as we protect
the biodiversity of the salt flats. Boric himself is a leftist
who took office last year. At 37, he's one of the
world's youngest leaders and environmental and climate
issues were central to his campaign. The plan he
presented calls for the creation of a Chilean
national lithium company, which will partner with all
private companies looking to enter the sector. A lot of people referred to
it as a nationalization of the resources. I don't
think that's quite true, but certainly it's a bigger
role for the Chilean government than the private
sector would like the Chilean government to play. Cruz says that the initial
impression was that the state would take a majority
share in these public-private
partnerships, but the administration has since
walked that back. The ministry explained that
when they are talking about control, it's not
necessarily to own 50% or more of the company, that
there are other ways to have control, like shareholders
agreements and and so on. We were also explained that
this control is only in those projects that the
government will define as a strategic project, so it's
not something that will be for all the joint ventures
for the exploitation of lithium. What exactly constitutes a
strategic project remains to be seen. The new policy
does honor the existing mining contracts that
Albemarle and SQM have with the government though,
which expire in 2043 and 2030 respectively. But Boric says that he
plans to negotiate with the two companies for the state
to take a stake in their operations before their
contracts expire. SQM is reportedly set to
begin talks with the government in the next few
months and is investing $2 billion into sustainable
technologies to meet the new plan's environmental goals. The company did not respond
to requests for comment. Albemarle said in a
statement that, "We expect no material impact, as the
Chilean government made clear it will fully respect
existing contracts." The company said they will
continue to collaborate with the government moving
forward. And when we spoke with Lenny-Pessagno in
January, she said that Albemarle supports a
public-private partnership. We're incredibly supportive
of the Chilean government's aspirations to develop this
national lithium company. We're also quite interested
in partnering with them because, of course, we've
got more than 40 years experience here and
certainly know how to work with brines. The new policy won't go into
effect immediately. First, it has to be
approved in Congress, where Boric has struggled to pass
legislation. His party doesn't have a
majority, and Congress recently shot down his
major tax reform bill. That blow came on the heels
of Chilean voter's overwhelming rejection of a
progressive new constitution last year. Chile's mining minister
acknowledges that it will take years to get the
national lithium company up and running. So in the
meantime, two existing state owned companies will be in
charge of handling all new lithium contracts, copper
giant Codelco and minerals company Enami. Boric also
wants Chile to move beyond just lithium extraction and
invest in downstream processing for the battery
supply chain. They do not merely want to
export the natural resource, which has been the economic
history of Latin America. Chinese EV giant BYD plans
to build a $290 million cathode manufacturing
facility in Antofagasta, and CORFO has given the company
preferential prices on lithium carbonate, the
input used to make cathode material. But some analysts
think that it's too soon for Chile to move into
downstream production, given that the EV industry in the
country is practically nonexistent. We didn't see
a single electric car when we were there. In 10 or 15 years when
there's battery plants all over the world, and a more
well-developed supply chain and EVs everywhere, it'll
make sense to be making batteries on every
continent. Right now it doesn't. Chile's raw lithium is of
great strategic importance to the U.S. though, which
has a free trade agreement with Chile, but not
Argentina. The U.S. has determined that
it needs to have a domestic battery and electric
vehicle industry, and it's not going to have one
unless it gets access to plentiful supplies of
affordable lithium. And right now its best bet
is to get that lithium in places like Chile. Unfortunately for the
United States, it's not the only country that's
realized that. And the Chinese are
investing heavily in places like Argentina and Chile to
get their hands on lithium, to produce their own
batteries and electric vehicles. And so this great
power competition between the United States and China
is really playing out in the lithium sector in Chile's
Atacama Desert right now as we speak. And Chile's new policy could
end up being favorable to the Chinese, as Cruz
expects that the country's state-owned companies will
be some of the first new entrants into this market. It's not a secret for
anybody that many Chinese state-owned companies are
interested in the lithium, and probably they will be
the first to jump in, because when you have a
state-owned company with an economy like China, they
are not looking for immediate profits. They are more patient. But as with so many mining
projects, domestic and abroad, calls for rapid
expansion often drown out the voices of local and
indigenous community members who are wary of the
environmental and social impacts of mining on their
ancestral lands and way of life. In Chile, Atacameños,
also called Likanantaí, are an indigenous people whose
history in the Atacama region dates back to around
500 BC. I am a descendent of a
Likanantaí family. How have you seen the area
change over the years? Well, mining has intervened
in all ecosystems, right? In the cultural sphere, our
own culture, our heritage, tends to
disappear. And from the social point
of view, money has greatly fragmented my community. The Atacama Indigenous
Council represents 18 communities around the
Salar. It has an agreement with Albemarle in which
3.5% of Albemarle's revenue from its Chilean operations
go to the council, to be used in any way that it
sees fit. Some communities have
struck agreements with SQM as well. This 3.5% of sales of
lithium carbonate, there's nothing like that in the
world. We work with the University
of Queensland who's done a study of 50 such
agreements. A typical agreement is half
a percent to 1%. But Ramos has seen the money
sow division in her community. But what the end result has
meant is that this money, this 3% aid, further
divides my community. And seeing us become so
vulnerable to an economic system that is not ours,
you have to forget your worldview, your laws, your
word, right? And seeing that world so
Western, so material, but without spirit. This is not
spiritual at all. For indigenous farmer
Cristian Espíndola, it feels like his community is being
used for greenwashing campaigns. The mining companies are
occupying our identity to show a clean image to the
world for the extraction of lithium water, which is not
the case. Chile is in the midst of a
decade plus megadrought, and many locals believe that
brine mining in the Atacama Desert is exacerbating the
problem. Albemarle emphasizes that
brine is different from freshwater, since it's too
salty to either drink or to use in agriculture. Yet
many remain concerned that evaporating so much brine
in one of the driest areas on earth is having an
impact on freshwater availability and the
surrounding ecosystem. So we're talking about I
don't know, it's an immense, millions of liters of water
that evaporate every day. And that's have an effect. I mean, we cannot say that
[doesn't] have any effect when it's part of the water
cycle. So it's impossible to say
that [doesn't] have any effect. What directly? How? It's something that
have to be I think understand and researched
even more. In response, Albemarle
points to a study led by researchers at the
University of Massachusetts, Amherst, which concludes
that the entire lithium mining process in the Salar
de Atacama accounts for less than 10% of freshwater
usage in the region, and that evaporating brine does
not lead to diminishing reserves of freshwater
either on the surface or underground. The study was
funded by BMW, which is ramping up its electric
vehicle production, and BASF, a European chemicals
company, raising questions of conflict of interest for
some. But what everyone agrees on is that more
research is needed. And the new lithium policy
includes the creation of a public research institute
for lithium and salt flats that could dig into
questions like these. As a microbial ecologist,
Dorador also studies how mining is impacting the
diverse microbiology of the region. Her research
indicates that lithium mining has led to the death
of microorganisms that are key for scientific research
and vital to the broader ecosystem. If we are thinking about
life, we have to include everything, and microbial
life are the dominant type of life on the planet.
Because everything is related. From this perspective, she
doesn't see Boric's plan for a state-led lithium
strategy as relevant to her concerns. Because the point is, we are
still pushing the extractivism as the main
way to develop economy. For most people, I think
they're very affected when they see pictures from the
Amazon, how the deforestation has
increased. And nobody really cares
about what happens here. Boric says that
strengthening social and environmental
sustainability is a priority for the administration
though, and wants to open a dialog with Indigenous
community members. All this development will be
with the participation and involvement of the
communities surrounding the mining sites, understanding
of course the concern that this news could generate in
the communities. I want to promise you that
the first milestone in this process will begin with a
direct conversation between the Atacama People's
Council and myself. There are no easy answers
when it comes to balancing the various interests at
play. And though Boric has laid out a general strategy
for the country's lithium industry, much remains to
be seen. How big a role will mining
play in the future of Chile's economy? How will
it balance social and environmental
considerations, including water use? How much will it
demand that the lithium produced in Chile, as well
as the copper, is used domestically for green
energy industries versus sent abroad to be
industrialized in countries like the United States or
in places in Europe? These are tough decisions
and they're policy decisions. And I think
right now, Chile is still struggling with what kind
of economy it wants to have. Many are still anxiously
awaiting more specifics on the national lithium
strategy and how much control the state will
actually exert. The devil is in the details. The main problem here is
that we are losing time. We were awaiting for a
sound policy with answers and not something this
blurry that is only creating more questions. And time is short. Chile has a small window of
opportunity, which is, what, ten years? 15 years? That's because as battery
recycling technologies improve, less
lithium-intensive battery chemistries are explored
and other countries ramp up production, the need to
vastly expand lithium mining in Chile will not last. Of course, that's welcome
news to the many that view the mines as an unwelcome
intrusion. I have always dreamed that
the scientists create, that they develop something
better than lithium and leave us alone. In the meantime though,
companies like Albemarle and SQM are working to maximize
efficiency at their existing plants. The fastest way that you can
make significant change is by really what we call
sweating the assets, right? So we doubled the capacity
of our conversion facility in Antofagasta. We've built
a Salar, we're completing construction of the Salar
Yield Improvement project, which will allow us to
increase production by by 30%. And Lenny-Pessagno is
looking forward to a promising, but commercially
unproven, technology called direct lithium extraction,
or DLE, which Chile's mining minister said will be
required for all new lithium mining projects. With this
tech, lithium is chemically separated from the brine,
and that brine is then reinjected back into the
earth, expediting production, increasing the
amount of lithium recovered, and reducing environmental
impacts. Some claim that what now
takes 18 months with evaporation ponds could be
done in a matter of days with DLE. This process
could actually use more freshwater though, which
has Albemarle looking towards desalination. And so as part of this new
era of lithium, we're working with the same
company that's going to bring the desalinated water
to our La Negra chemical conversion facility to
bring a desalinated water pipeline here into the
salar. And that's going to allow
us to change technologies. There's a lot on the line
and a lot to consider as the company and the country at
large prepare for a new era in the Chilean lithium
industry. I think Chile is trying to
find a middle ground here. There are countries that do
want to control every aspect of this industry. There are
others like Argentina taking a real hands off pro-market
approach. I think Chile is trying to
protect the environment, protect local communities,
be a player in the industry while still attracting
investment and making sure there's enough private
money around so that the industry can expand rapidly
to meet demand. It's not clear it will
succeed, but I think that's a fairly reasonable,
logical approach.
