A friend of mine who works at the German Mineral Resources Agency has visited Chile three times over the past year, this is unprecedented, said Iris Wunderlich, Project Leader Mining & Sustainability of German Chamber of Commerce in Chile.  

Lithium has emerged as a necessity for modern living, critical to the batteries that power our mobile phones, vacuum cleaners, electric cars and other electronic devices. The electric vehicle revolution has turned the element into one of the world’s most sought-after commodities, pushing its price up 20-fold at one point over the past three years before a more recent tumble.

Chile produces nearly 30 percent of the world’s lithium, and that country along with Bolivia and Argentina are estimated to have more than 53 percent of the world's lithium resources, turning the “Lithium Triangle” spanning the three South American countries into the new Middle East. 

“A friend of mine who works at the German Mineral Resources Agency has visited Chile three times over the past year. This is unprecedented,” said Iris Wunderlich, the project leader for Mining & Sustainability at the German Chamber of Commerce in Chile.

Potential nationalization

Despite its resource wealth, Chile has one of the highest levels of inequality among OECD countries, with an income gap that is about 65 percent higher than the OECD average, and public safety has gotten worse since two major riots broke out in 2019.

The country’s economic inequality may only widen as motorists everywhere gravitate toward electric vehicles and lithium prices soar. But Chile’s new left-leaning president Gabriel Boric pledged after taking office in March 2022 that he would create a national lithium company, ostensibly to keep more of the profits from the silvery-white metal at home.

The idea was timely given that in 2022, lithium overtook copper for the first time as Chile’s most valuable export commodity, accentuating its importance.

The world’s biggest lithium salt flat

Because of its lithium reserves, Chile, which has a smaller population than Taiwan, will have a huge say in the future of the 350 million electric vehicles expected to be produced by 2030. 

A CommonWealth journalist ventured 35,000 kilometers from Taiwan to the Atacama Desert, the world’s driest non-polar desert located about 35,000 kilometers away from Taiwan, to see the lithium extraction operation in the Salar de Atacama of the world’s biggest lithium producer, SQM S.A.

(Source: Sofía Yanjarí)

The company accounts for more than 20 percent of the globe’s lithium products and supplies the lithium carbonate used in one out of every five electric vehicles worldwide.

Much of its lithium comes from Salar de Atacama, the salt flat considered to be the biggest source of lithium worldwide, with a concession area of 820 square kilometers, three times the area of Taipei City. 

(Source: Sofía Yanjarí)

SQM is also the biggest global supplier of iodine and potassium, and lithium carbonate actually started off as a byproduct of the production of potassium chloride, noted SQM hydrogeologist Corrado Tore.

Battery manufacturers began purchasing lithium from SQM about 20 years ago, Tore said, but now he welcomes guests and investors almost every week. The most anxious among them have been German car manufacturers, who are in a bind because “they have no other options. So far, they have only been able to rely on China, South Korea, and Japan for the critical raw material,” he said.

From brine to your EV: an amazing journey

Lithium’s amazing journey begins in a brine aquifer far below the salt flats. The brine is pumped to the surface and then evaporated in shallow, open-air ponds. As the water evaporates, it gets pumped from one pond to the next, with the concentration of lithium rising from 0.18 percent in the first pool to 6 percent in the fourth pool, by which time it has taken on a yellowish-green tint.

The process to get the concentration to 6 percent, the threshold needed for the brine to be sent to the refinery, can take from a year to 18 months.

(Source: Sofía Yanjarí)

Every day, 80 tankers transport the highly concentrated brine from the fourth pool directly to a refinery 240 kilometers away, using two arteries connecting the salt flats to the coastal city of Antofagasta that were built by SQM. 

The refinery produces lithium carbonate and lithium hydroxide powders for the cathodes used in batteries. Lithium carbonate is used primarily in lithium iron phosphate batteries, while lithium hydroxide is used in nickel cobalt manganese (NCM, or ternary) batteries that can store more energy. Tesla uses NCM batteries.

(Source: Sofía Yanjarí)

“We haven’t had a day off since 2018 thanks to the growing demand for electric vehicles,” said engineer Carlos Bertoni. Over the past three years, the company’s lithium carbonate capacity has gone from below 50,000 metric tons a year to 200,000 metric tons. A sixth production line is now in the testing stage, and further expansion is planned.

SQM’s revenue from lithium products in 2022 soared 7.7-fold from the previous year, and group profits rose four-fold, largely from the explosion in sales of lithium. About 64 percent of its lithium was exported to China to be turned into cathode materials. 

(Source: Sofía Yanjarí)

China, the United States and European countries are now eagerly anticipating Chile’s white paper on its lithium strategy that was due out in March. Also waiting for the report are business partners with Taiwanese roots, businessman Kevin Peng and overseas Taiwanese Sebastian Yang.

Taiwanese businessmen vs. Chile’s government 

(Source: Chien-Ying Chiu)

They are based in Copiapo, about a seven-hour drive southwest from SQM’s salt flat operation.

The 38-year-old Yang was born in Chile and grew up there, a member of the third generation of a Taiwanese family that emigrated to South America. As he speaks to CommonWealth, he holds a small container of white lithium hydroxide powder that sells for US$1,300. That powder has led countless representatives of electric vehicle brands, battery factories and cathode producers to seek him out over the past year.

The 65-year-old Peng got his start in the scrap metal trading business. He said that in 2009 a Chinese client asked him to go to South America to source lithium, and he eventually made a deal with local interests for the mining rights at the Maricunga salt flats not far from Copiapo with local interests. 

But because of an unresolved dispute with his Chinese customer, he decided to follow through on the business on his own, and has been doing so for more than 10 years.

To find new investors, Peng set up an investment company in Singapore and founded a mining company called Simbalik in Chile. In 2016, those companies joined with Errázuriz, a Chilean group also planning to extract lithium, to form another company called Simco. 

Through the contacts of Errázuriz, Simco also found Japanese partners, including trading company Chori Co. and state resource entity Jogmec. They were the ones who put the tens of millions of U.S. dollars needed to build the company’s pilot plant. 

Yang, a Simco board member, said many enterprises around the world are studying how to directly extract lithium from brine using MRT (molecular recognition technology), and they are all in the testing stage.

(Source: Sofía Yanjarí)

“Many people are waiting to see our results,” he said, and he expected that samples would be provided to three major American and Japanese battery manufacturers to test around the end of March. 

Yang estimated that Simco needed about US$600 million to build a commercial scale factory that could produce about 20,000 metric tons of lithium hydroxide a year. The price of lithium hydroxide has skyrocketed from about US$4,000 a ton 10 years ago to US$65,000 a ton, a price that would earn the factory an annual profit of more than US$1 billion.

If their new MRT technology is viable, it would represent a revolutionary break from the evaporation approach of extracting lithium from brine that takes up to 18 months. High purity lithium could be extracted in a day, and the remaining brine could be returned to the salt flats once the process was completed, preventing the depletion of the area’s water supply.  

Chilean government stepping in?

Gabriel Boric Font, president of Chile (Source: Reuter)

But just as Peng’s business was poised for success, Chile’s national copper mining company Codelco declared it was expropriating the Maricunga salt flats, infuriating him. 

Peng’s dissatisfaction stemmed from how much he had put into the project since obtaining the Maricunga concession in 2011. Just giving up was not an option, so his company took Chile’s government to court.

Pedro Lyon, the veteran mining lawyer hired by Peng and his group, said the concession acquired by Simco actually dates back to the 1930s, and that the authorization to produce lithium granted by Chile’s nuclear energy commission in 2013 based on the concession would stand up to any legal challenge.

According to Lyon, Chile’s Supreme Court affirmed in January 2023 that Simco did have development rights in Maricunga, a decision that was final and could not be appealed by the government. But Simco and Peng were still considering filing for arbitration with the International Centre for Settlement of Investment Disputes headquartered in Washington D.C. 

If Chile’s government insisted on seizing Simco’s lithium development rights, Lyon said, it needed to comply with legal procedures for expropriation. 

“We will ask for US$2.5 billion (NT$75 billion) in damages,” he said. 

(Source: Chien-Ying Chiu)

As of late March, CommonWealth had yet to receive a response from Chile’s government on the case.

Local voices sound off in the big power battle

Rio Grande, about a two-hour drive north of SQM’s Salar de Atacama operation, is home to the region’s Indigenous Atacameños, or Licanantay, who have a love-hate relationship with mining companies.

Pamela Condori (Source: Sofía Yanjarí)

As Pamela Condori, one of the tribe’s leaders, put it: “The mining companies are using our ancestral lands. They are responsible for improving our living conditions.” 

llamas in the local village (Source: Sofía Yanjarí)

And some improvements are evident. The villagers’ kitchens have new gas stoves, replacing the need for wood to cook, and a village meeting place is being built with the financial support of the mining companies.

But the main environmental concern is the massive consumption of water needed to extract lithium in a region as arid as the Atacama Desert, where it never rains for more than three days a year, and UV rays pose a danger year-round. Even though the Salar de Atacama has significantly higher precipitations than the desert itself.

Getting the four kilograms of lithium needed for every electric vehicle lithium-ion battery requires the evaporation of four metric tons of water. Given the severe droughts faced by Chile in recent years, the people living in the region see lithium extraction as an existential threat to their water supply, and, by extension, survival.

SQM’s response has been to build an oasis for Rio Grande.  

It has been very difficult for the locals to grow vegetation there, but two years ago SQM built a water retention pond and irrigation system, and the oasis began to flourish. An automatic sprinkler system has been put in to grow alfalfa, and garlic and beans are also being cultivated.

A left turn? 

The lure of the world’s new hot commodity has tempted Chile’s new leftist government to expand its control over lithium’s extraction and sale, but the market-oriented mining industry has wondered if the “left turn” can be taken right away. Some in Chile’s media worry that cases such as Peng’s will scare off foreign investors, potentially causing the country to miss out on a major development opportunity.
 
Just as oil became a cursed treasure for the Middle East in the 20th century, the lure of lithium could set off long-term competitive rivalries and clashes in this century, with the “Lithium Triangle” a center of attention. The disputes triggered by the precious commodity may be just beginning.

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Translated by Luke Sabatier
Edited by Ian Huang