Chile’s SQM (NYSE: SQM), the world’s second largest lithium producer, will voluntarily cut its use of fresh water and brine from the Atacama desert to mitigate the overall impact of its operations in one of the driest places in the world.
The company, which produces lithium by pumping brine from beneath the desert and concentrating it through evaporation in pools, has committed to reduce its use of “continental” water by 20% from November this year. The goal, it said, is cutting water use by 50% by 2030.
To achieve those goals, the miner will have to improve production processes and increase the use of sea water. It will require an investment of around $40 million in the first phase and $65 million for the second phase.
SQM also vowed to produce carbon-neutral lithium by 2030 as part of a larger, $100 million emissions reduction drive.
The lithium miner said the announced plan should not have an impact on its near- or long-term lithium production.
“There is no trade-off between being cost-competitive and being leaders in sustainability,” chief executive Ricardo Ramos said in the statement. “These are commitments that we assume out of conviction and voluntarily.”
SQM is now producing at record levels of roughly 70,000 tonnes for the year, which has allowed it to build higher levels of inventory ahead of an expected demand boom.
In 2016, Chile’s environmental regulator found that SQM had extracted more brine from the salt flat than permitted. A $25 million compliance plan presented by the company was dismissed by a court in Antofagasta in December.
Despite the company’s appeal, local regulators forced SQM in August to start again from scratch an environmental compliance plan for its operations.
Bone of contention
Water has become a bone of contention for the expansion plans of both SQM and top competitor Albemarle (NYSE: ALB), both of which operate in the Atacama desert, the world’s driest, where more than a third of global lithium carbonate supply is sourced.
The country, however, is working on reversing that situation. It predicts that lithium will soon become its second-largest mining asset, behind copper. The commodity is currently the country’s fourth-biggest export.
SQM’s own expansion plans are on track to be completed by the end of 2021, it said in August.
The company expects to extract more lithium from the same amount of pumped brine by using brine earmarked to produce potash and using higher-grade wells.
SQM estimates that Chile would be able to increase its total lithium production through such methods to 300,000 tonnes of lithium carbonate-equivalent from its current capacity of just over 100,000 tonnes.