Chile says to clamp down on water rights in lithium-rich Salar de Atacama

Wealth Minerals

23/08/2018 23:34

(Repeats to widen distribution)
    By Dave Sherwood  and Fabian Cambero
    SANTIAGO, Aug 23 (Reuters) - Chile is preparing major new
restrictions on the extraction of water from the lithium-rich
Salar de Atacama salt flats, home to top lithium miners
Albemarle  ALB.N  and SQM  SQM_pb.SN   SQM.SN , the head of the
country's water authority told Reuters on Thursday.
    Water authority chief Oscar Cristi said in an exclusive
interview that regulators had stopped issuing new permits to
extract water from the southernmost sector of the Salar's
watershed, known as C2, which is a key water supply for BHP's
 BHP.AX  Escondida copper mine, the world's largest, and
Antofagasta  ANTO.L 's Zaldivar mine.
    Cristi said the government had granted BHP and Antofagasta
permits to pump six times more water from an aquifer at Atacama
than it could sustain, prompting the ban. BHP has since proposed
to cut water extraction from wells in C2 by more than half, but
Cristi said regulators still believed that rate to be
"insufficient."
    "We're evaluating this case and others where
over-exploitation is taking place, to try to work with them to
reach a voluntary agreement, and if not ... to reduce their
extraction," Cristi said, adding that the government planned to
issue new prohibitions in other areas in northern Chile shortly.
    Cristi said the water authority was analyzing a recent
amendment to the Chilean water code that would allow the
regulator to unilaterally reduce extraction rates in areas where
over-exploitation is taking place.
    BHP declined to comment. Instead, the company referred
Reuters to a 2017 sustainability study in which it said it plans
to use only sea water from its two desalination plants on the
Chilean coast to feed its mammoth Escondida copper mine by 2030,
and that it had already begun returning water rights to the
state.
    Antofagasta did not respond to requests for comment.
    
    NEW WATER RESERVE
    Chile's water chief said the agency was also preparing to
create a drinking water reserve nearer the core of the Salar,
adjacent to the operations of SQM and Albemarle.
    "Once we've created the reserve, this water will no longer
be available and that could give us the legal right to establish
a restricted area," Cristi said.
    In a restricted area, only temporary, not permanent, rights
to extract water are granted, and water regulators closely
monitor use. Existing extraction permits would be unaffected,
Cristi said.
    Cristi said the area of the salt flat where the lithium
miners operate was not currently over-drawn, but a spike in
demand for new water rights in the lithium-rich but water-poor
region, as well as over-extraction elsewhere in the watershed,
had prompted the conservative measure.
    Lithium helps to fuel modern life. Lithium-ion batteries
power everything from electric cars and laptops to mobile
phones, and global demand for lithium is expected to quadruple
by 2025. Chile's Salar is home to one of the world's biggest
deposits of the metal, sometimes referred to as "white gold."
    It was not immediately clear what impact, if any, the new
restrictions will have on the two miners' operations.
    Albemarle declined to comment. SQM, which recently signed a
contract with Chilean authorities that authorized it to nearly
triple production capacity by 2021, said it already possessed
all of the water rights it needed for current and future
operations. 
    Jon Hykawy, a battery minerals analyst at Stormcrow Capital,
said new restrictions could impact current supply and add
uncertainty to future development.
    "My projections on future lithium supply anticipates a big
chunk of growth from SQM and Albermarle on Atacama, so if that's
in any way endangered that changes the supply picture
dramatically," he said
     Both fresh- and saltwater are critical to the production of
lithium in the Atacama and have become a sticking point as local
indigenous groups, long-standing producers SQM and Albemarle,
regional copper miners and newcomers to the region all vie for
water in the world's most arid desert.
    Albemarle, the world's top lithium producer, and competitor
SQM together extract 37 percent of the world's lithium from
brine, or saltwater, that is pumped from beneath the parched
surface of the Salar de Atacama. 

 (Reporting by Dave Sherwood and Fabian Cambero
Editing by Ross Colvin)
 ((dave.sherwood@thomsonreuters.com; +56 9 9138 1047, +56 2 2370
4224; Reuters Messaging:
dave.sherwood.thomsonreuters.com@reuters.net))