South America holds two-thirds of the world’s lithium reserves and Chile alone possesses almost half of the world total. Copper is also important to the Chilean economy and accounts for almost half of its export earnings. Many large Chilean copper mines are ageing, however, and the supply of high-grade ore has diminished.
To maintain production, copper producers are increasingly forced to exploit copper sulphide deposits, using a process that is more water-intensive. The Chilean Government is also simultaneously moving to exploit the country’s vast lithium resources, which could further strain water supplies in the resource-rich, but water-poor, Salar de Atacama.
As most of Chile’s lithium is dissolved in briny water drawn from Andean salt flats, it can only be extracted through a lengthy evaporation process. Conversely, Australian lithium reserves are predominantly found in hard rocks. Australia is currently the largest world supplier, despite holding less than ten per cent of the world’s identified lithium resources.
An expected change in lithium demand, from lithium carbonate to lithium hydroxide, is likely to work in Australia’s favour. Converting lithium brine to lithium hydroxide involves an additional processing stage, which is already factored into the cost of hard rock processing, but will raise costs for South American operations.
Estimates from McKinsey, a management consulting firm, suggest that global demand for lithium will increase more than threefold between 2017 and 2025. The countries that make up the “lithium triangle” (Chile, Argentina and Bolivia) are, ostensibly, well placed to take advantage of rising demand.