In the late 1980s, the then Soviet leader, Mikhail
Gorbachev, sought to bring the USSR into the modern age and
reboot its economy following a period of stagnation.
To reform the bloc, he implemented two key policies
– glasnost (openness) and
Today, on the other side of the world, Sociedad de Quimica y
Minera SA (SQM), the Chilean producer of lithium, potash,
nitrates and iodine, is a company under siege.
On one side, the company is alleged to have engaged in the
bribery of politicians. On the other it stands to lose its
leases at the Salar de Atacama amid accusations of underpaying
rent to state development agency Corporacion de Fomento de la
Producción de Chile (CORFO).
But rather than batten down the hatches and shut itself off
from the world, the company is implementing a philosophy change
not dissimilar to Gorbachev’s, with transparency
and a strategic rethink central to its message as it looks to
expand its lithium production capacity.
SQM’s lithium carbonate and hydroxide
production facilities at the Salar del Carmen
in northern Chile.
Telenovelas y escándalos
SQM has been the subject of increasing heavy scrutiny in
Chile over the past two years.
In an ongoing trial, prosecutors argue that false invoices
or boletas were signed off by the company to
facilitate payment to a range of politicians across the
political spectrum in exchange for favourable treatment under a
revision to Chile’s mining code. Patricio
Contesse, SQM’s former CEO, remains at the centre
Separately, an arbitration process between SQM and CORFO has
been active since May 2014, with CORFO alleging that SQM
deliberately sold products at below the market value to reduce
earnings and subsequent retal payments, owing $8.9m in unpaid
The miner originally agreed to lease and manage
CORFO’s 81,920 ha (819.2km2) mineral
claims in the salar in 1993, with rental fees to be calculated
according to revenues accrued from the sale of minerals
SQM has indicated that 39% of its total revenue depends on
exploitation at the salar, while CORFO estimates that this
is really between 60% and 75%.
With court procedures ongoing, Patricio de Solminihac,
SQM’s incumbent CEO, declined to comment on the
former matter to IM.
Regarding the latter, though, he said that the company was
"confident that we have complied with our obligations in the
Open doors, open borders
The fallout from both cases has led to negative domestic and
international media coverage for the organisation, with its
public image not helped by perceived links to the regime of
Augusto Pinochet – its owner and former chairman Julio
Ponce was once the dictator’s son-in-law.
But under De Solminihac, who took charge last year, the
company has become more open in its dealings with the press.
Managers are drilled in media relations and the company has
received journalists from around the world in recent months,
from papers including the Financial Times and the
Economist as well as this publication.
SQM has also changed tack strategically.
It announced in late March that it would for the first time
seek to expand its lithium extraction business beyond the
Chilean border. In a joint venture with mining junior Lithium
Americas Corp., it has taken a 50% stake in Minera Exar SA,
owner of the Cauchari Olaroz project in Salta, Northern
De Solminihac described Cauchari as "a clear complement to
our [current] operations".
"We have the technology, knowhow and experience to develop a
competitive project in Cauchari given the characteristics of
these resources," he added.
Confident that the CORFO arbitration procedure will work out
in its favour , SQM has insisted that the move into Argentina
is an exercise in expansion as opposed to risk management.
"We plan to increase our production with the development of
the project in Argentina. And at the same time, we look forward
to solving differences with CORFO and be able to increase our
production in Salar de Atacama," said de Solminihac.
Others have suggested that the move may represent an attempt
to vary jurisdictional homogeneity, moving away from sole
reliance on the Atacama, given the fact that in a worst case
scenario, there is a chance its existing leases may be
"I think they are making an effort to diversify - just in
case," one senior market observer told IM at
the Lithium in South America conference in Jujuy,
Argentina, in April.
SQM remains confident about its future. The price of lithium
continues to buck the trend of the mining industry generally,
climbing increasingly higher as new supply fails to keep pace
with rising demand, largely from lithium-ion (Li-ion) batteries
for the electric vehicle sector and most notably
While the high prices will not last forever, SQM intends to
take full advantage of the increase in demand.
"We are an important player in the
lithium industry and we plan to continue
to be. We look forward to be able to increase our production
in the Salar de Atacama
and complement it with production in the Salar de Cauchari in
Argentina," said de Solminihac.
An accumulated wealth of knowledge gained through its years
of operation gives SQM a distinct advantage over the would-be
producers seeking to enter the market.
Entering into the JV Cauchari deal with the company, Lithium
Americas cited SQM’s "decades of development and
operating experience" and "strong team of technical and
commercial talent" as being invaluable in advancing the
Awareness of the quirks and particulars of brine operations,
as illustrated by Orocobre Ltd’s delays in
bringing its Olaroz project online are far from a
Experience remains SQM’s key strength as it
looks forward to a more competitive future in the lithium
Lithium: From brine to battery
SQM extracts lithium (alongside potash) from the brines of
the Salar de Atacama, the world’s largest such
resource currently under exploitation.
Over 300 wells across the salar are used to extract the
brine, with quality checks conducted weekly. The positioning of
the wells takes a lot of thought, with the location of each one
affecting the pump efficiency of the next.
Pump rates are carefully monitored by the government, with a
cap of 1,500 litres/second (l/s), aggregated across all
Fresh water is pumped in from nearby mountains, primarily to
clean the equipment, with salt build-up the biggest drain on
efficiency, which constantly needs to be addressed. Devices
known as "pollypigs" or "bullets" are also sent down the piping
at high pressure to clean out blockages.
The brine is then concentrated into salar evaporation ponds,
with a constant process of recycling the material in and out
through various stages.
Lithium is extracted as a byproduct in a process primarily
designed to produce potassium chloride, or muriate of potash
Various products are then precipitated off the brines in a
number of different stages: first, halite is precipitated out
as a waste product; then silvenite is precipitated off and
taken to potash ponds for harvesting; carnalite is
subsequenctly precipitated off for use as a raw material in the
production of nitrate of potassium; and finally the lithium is
precipitated out, ultimately reaching around 6% purity, before
being transported to Antofagasta for processing into lithium
chloride and lithium hydroxide.
The evaporation process takes an average of nine months from
end to end.
SQM’s lithium production process.
"It is a very cost effective process, as most of the energy
is taken from the sun," Enrique Peña, superintendent of
inventory control and and salar resources at SQM’s
Salar de Atacama operations, told IM, during a
site visit in April.
Peña emphasised, however, that the details and
precision of the process requires constant monitoring: "You
will not believe the amount of work involved (…) A lot
of know-how and expertise about how brines behave has been
built up through the years."
The 6% material is transported by truck to a location just
outside the port town of Antofagasta, where SQM’s
Salar del Carmen facility is situated. It is initially stored
here once again in ponds, before being brought through the
process to create lithium carbonate and lithium hydroxide.
The process to create lithium carbonate takes two to three
An initial step, known as the solvent extraction or SX
stage, removes the boron naturally found in the raw materials,
before the product is purified, extracting magnesia.
Treatment with soda ash then forms the lithium carbonate,
with about two tonnes soda ash required for every one tonne
lithium carbonate produced.
When the carbonation is complete, the material is dried and
compacted before being stored in the company’s
onsite warehouse ahead of shipping out of
The process of creating lithium hydroxide takes a further
day.Quicklime is the main addition at this stage, with one part
lithium carbonate and one part quicklime combining to create
one part lithium hydroxide.
The hydroxide conversion process is also carried out onsite
before storing and shipping the product out to customers.
As with the evaporation stage, the processing stage at Salar
del Carmen requires minute attention to detail.
"We need to control every part and closely monitor the
chemical and physical properties at every single step," said
Ronald Contreras, lithium production manager at the
SQM has the capacity to produce 48,000 tpa lithium carbonate
and 6,000 tpa lithium hydroxide.
It sold 39,000 tonnes lithium products in 2015, a level it
means to increase to over 45,000 this year.